Market Overview According to Gartner
According to Gartner ®:
CRM implementation services continue to be in high demand and integrate many competencies, including CRM software, analytics, business consulting, mobility and social. The Magic Quadrant positions CRM service providers and assists enterprises in identifying providers that best fit their needs.
Over the past 10 years, CRM-related services have focused on the strategy and deployment of CRM software to support the sales and marketing operations of enterprises. Services to plan, customize, integrate and deploy these solutions were large, time-consuming and expensive initiatives. Typically the cost of consulting, implementation and management services was three to six times the cost of the software licenses, and Gartner has occasionally observed projects being as large as 10 times the cost of software. In addition to the services for initial deployment, there are also software maintenance fees (typically 16% to 22% of license fee) as well as ongoing application management services, with multiyear contracts being similar to the initial deployment fees. Thus, the total service fees over the life of the software have often been 10 to 15 times the initial license fees for the software. This investment has also had limited flexibility due to the level of customization of the implemented solution, along with the complexity of the business and technical environments.
Business executives have become the primary drivers for CRM solutions, and they have become less tolerant of large-scale software implementations and are also looking to CRM solutions to drive revenue growth. There has been a shift from the focus on large-scale CRM software deployments to a holistic view of the customer from an enterprise perspective. This focus shifted the consulting and system integration efforts related to CRM from software deployment to how the information related to the customers is integrated into the operational fabric of the enterprise.
The CRM services market is estimated to be $30 billion, with robust growth forecast for enterprise application services from 2010 through 2015 (7.1% compound annual growth rate), which is significantly higher than most other application services (for more information, see "Forecast Analysis: Application Solution Services, Worldwide, 2010-2015"). During the past one to two years, disruptive forces — such as social CRM, mobility and cloud computing — are catalysts to force organizations to rearchitect their CRM strategy and integrate the sales and marketing components in a more holistic way that redefines the front-office operations and also integrates these with the existing back-office processes and systems. This requires an increased emphasis on enterprise architectures and information architectures that integrate the CRM applications into the business operations and with other operational systems (that is, ERP, supply chain management and electronic commerce). The architectures and integration will be different for each vertical and each enterprise, so this shift also requires much more of a business-centric consultative approach, with some level of vertical expertise, technology consulting, design and system integration efforts than stand-alone CRM software deployments. This shift encompasses data warehouse, analytics and BI competencies to derive maximum usage of the CRM analytics as part of sales performance improvements, customer service and enhanced marketing campaigns.
SaaS-based CRM and customer analytics are now part of most CRM solutions, and early leaders have found great return on these multidimensional initiatives that increase the richness and pervasiveness of the customer experience. Led by salesforce.com, SaaS now accounts for 31% of the CRM software market and is growing at 36% annually, which is three times the rate of on-premises CRM solutions. This rapid shift from large on-premises CRM to SaaS is having a dramatic impact on application services. Service providers are faced with maintaining the revenue streams from large on-premises CRM as the transition to the new multidimensional CRM solutions are taking place. Therefore, while traditional on-premises CRM solutions will still be the core for most CRM service providers, to compete effectively, providers must also offer multidimensional solutions that involve SaaS, mobile, business process management (BPM), social CRM and customer analytics that are integrated around CRM information. A more detailed discussion and marketplace implications can be found in "Competitive Landscape: CRM Service Providers, North America and Western Europe" and "Competitive Landscape: CRM Service Providers, Asia/Pacific."
How to Use This Magic Quadrant
Selecting the right CRM service provider requires focused and deliberate evaluation. The market for CRM services is maturing, but the ability to address complexity from business perspectives as well as achieve complex technology integration will be highly differentiating for the next few years. These factors have led providers to re-establish their CRM strategic focus, market strategies and competitive aims, forcing new approaches to differentiation and, thus, leading to changes in positions of providers included in the 2012 results. This year's Magic Quadrant saw notable shifts in the positioning of vendors, including:
- The first offshore heritage provider positioned in the Leaders quadrant
- Realignment of the Leaders
- Separation of "India-centric" providers
- Emergence of consultancies as CRM visionaries
While positions are helpful to understand the relative strengths and weaknesses, this research reflects providers whose focus on CRM produces scalable breadth and depth for this blend of business and technology skills. Use this Magic Quadrant to help inform your thinking, recognizing, however, that Leaders — as indicated by position — may not be the right fit for your business simply because of that positioning. Gartner offers an array of IT sourcing life cycle research, insight, tools and templates to assist your decision making for simple or complex project needs.
Following is the infamous Magic Quadrant for CRM Service Providers, Worldwide:
Gartner ® EVALUATION CRITERIA DEFINITIONS
Ability to Execute
Product/Service: Core goods and services offered by the vendor that compete in/serve the defined market. This includes current product/service capabilities, quality, feature sets, skills, etc., whether offered natively or through OEM agreements/partnerships as defined in the market definition and detailed in the sub-criteria.
Overall Viability (Business Unit, Financial, Strategy, Organization): Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood of the individual business unit to continue investing in the product, to continue offering the product and to advance the state of the art within the organization's portfolio of products.
Sales Execution/Pricing: The vendor's capabilities in all pre-sales activities and the structure that supports them . This includes deal management, pricing and negotiation, pre-sales support and the overall effectiveness of the sales channel.
Market Responsiveness and Track Record: Ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, custom er needs evolve and market dynamics change. This criterion also considers the vendor's history of responsiveness.
Marketing Execution: The clarity, quality, creativity and efficacy of program s designed to deliver the organization's message in order to influence the market, promote the brand and business, increase awareness of the products, and establish a positive identification with the product/brand and organization in the minds of buyers. This "mind share" can be driven by a combination of publicity, promotional, thought leadership, word-of-mouth and sales activities.
Customer Experience: Relationships, products and services/program s that enable clients to be successful with the products evaluated. Specifically, this includes the ways customers receive technical support or account support. This can also include ancillary tools, custom er support program s (and the quality thereof), availability of user groups, service-level agreements, etc.
Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure including skills, experiences, program s, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis.
Completeness of Vision
Market Understanding: Ability of the vendor to understand buyers' wants and needs and to translate those into products and services. Vendors that show the highest degree of vision listen and understand buyers' wants and needs, and can shape or enhance those with their added vision.
Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and externalized through the website, advertising, custom er programs and positioning statements.
Sales Strategy: The strategy for selling product that uses the appropriate network of direct and indirect sales, marketing, service and communication affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the custom er base.
Offering (Product) Strategy: The vendor's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature set as they map to current and future requirements.
Business Model: The soundness and logic of the vendor's underlying business proposition.
Vertical/Industry Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of individual market segments, including verticals.
Innovation: Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation, defensive or preemptive purposes.
Geographic Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of geographies outside the "home" or native geography, either directly or through partners, channels and subsidiaries as appropriate for that geography and market.
My position is that the new fate of CRM is "CRM Plus"
Gartner ® in my opinion has either failed to realize the invaluable "Plus" component or has included that in aforementioned evaluation criterion such as Strategy, Innovation or Product/Service.
It has been noticed in multiple industries (healthcare, supply chain, banking and financial services) that seamless integration with existing business processes and enterprise assets is what F500 clients are looking for - is what they really need. Out of the box customization and mere knowledge of application of product development skill-sets are no longer sufficient - infact relying solely on those is most often or not proving to be a major disastrous (CRM) engagement.
The demand is a purely personalized CRM implementation by:
(a) Leveraging commercial out-of-the-box products (like Oracle, Microsoft, SalesForce, etc. or even Zoho for that matter), and
(b) Designing and building a scalable enterprise wide CRM platform that integrates into existing business processes and IT assets without compromising performance, quality and security - three NFRs that are not only domain but also organization specific.
That is what I call "CRM Plus".
- Gartner ® publication: "Magic Quadrant for CRM Service Providers, Worldwide", 20 September 2012, ID:G00238208
- Gartner ® Analysts: Patrick J. Sullivan, Ed Thompson
- Gartner is a registered trademark of Gartner ®
Table 1. Ability to Execute Evaluation Criteria
Overall Viability (Business Unit, Financial, Strategy, Organization)
Market Responsiveness and Track Record
Table 2. Completeness of Vision Evaluation Criteria
Offering (Product) Strategy
Leaders are performing well today, gaining traction and mind share in the market; they have a clear vision of market direction and are actively building competencies to sustain their leadership position in the market.
Challengers execute well today for the portfolio of work selected, but they have a less-defined view of market direction. Consequently, these service providers may be the "up and comers" of the future, or they may not be aggressive and proactive enough in preparing for the future.
Visionaries articulate important market trends and direction. However, they may not be in a position to fully deliver and consistently execute. They may need to improve their optimization of service delivery.
Niche Players focus on a particular segment of the market as defined by such characteristics as functional area (that is, sales, marketing or service), vertical industry, client size or project complexity. Their ability to execute is limited to those focus areas and, therefore, is assessed accordingly. Their ability to innovate may be affected by this narrow focus.
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