Adoption of Cloud CRM Forces Change to Mindset of Over-Customization

There is a story in my book, Lessons Unlearned, about a speech Larry Ellison gave at Oracle OpenWorld in New Orleans in 2001. Oracle was pushing big time into the enterprise applications space with their new CRM offering, and Larry was talking about ‘out of box’ verses customization. To the chagrin of the audience, he said something along the lines of, “Oracle matches your business processes 80% out of box, and you should consider changing your processes to fit ours for the other 20%.” Larry was right of course, though I didn’t necessarily realize it at the time.

In fact, if I were to characterize the first “wave” of CRM, from around 1997 to 2007, I’d say it was “spend millions of dollars on complex software, and then customize the hell out of it because it wasn’t complex enough.” Large companies had CRM projects going on for years, customizing field names, screens, process flows, etc., until the product was practically unusable with dozens…if not hundreds…of required fields, pop up screens and non-intuitive flows.  This of course frustrated the heck out of CRM vendors, who built those vertical-specific screens and processes using ‘best of breed’ process flows from real companies.

I was involved in many CRM implementations during my vendor days, and I have audited many CRM implementations during my analyst days, and usually what I find is consistent: companies were so convinced they were unique that they took packaged applications and rewrote them until they were unusable  Then they started shopping for another CRM platform, and started the process all over again.

Let me be clear: when it comes to CRM, the more customizations, the less successful the implementation. I have seen this over and over and over again, and unfortunately, I still see it happening today. But luckily, a new dynamic is emerging.

Over the last year I’ve seen some of the largest companies in the world decide to implement OnDemand CRM. They recognize that the new cloud platform is far less sophisticated than their existing system and processes, but these companies are on a mission from god to simplify their operations and try to use Salesforce.com–or whatever cloud solution–as ‘out of box’ as possible. This is an unbelievable shift, and definitely a shift for the better. I like to think TSIA has a hand in this shift, because through our benchmarking programs, we show companies that their peers are struggling with the identical challenges, and best practices identified by one company are wholly repeatable within another company. In other words, tech companies are more alike than they are different.

With tightening budgets, shrinking margins, and unstable revenue streams, companies no longer have the luxury of repeating or prolonging mistakes with technology projects. They need to streamline and automate, and they need to do it fast. If that means swallowing your hubris and accepting the Salesforce approach to a process instead of your own, so be it. Those changes are HARD to make, especially for large firms, but I’m seeing it happen.

This is great new for CRM, and for the rest of enterprise applications as well.  I predict that CRM success will become more common, and the usual failure statistics for CRM (50% or higher of CRM projects don’t meet expectations) will begin to fade.

Bottom line: if your CRM implementation takes more than 6 months, you are doing it wrong. Once you remove ego from the equation, you will find those out of box processes are well designed. If you identify an internal process that is radically different from the packaged application, don’t assume your way is better–I’m almost positive it isn’t. If in doubt, talk to the vendor’s product management team about why the process is designed the way it is, and go back to the drawing board and do a real assessment on your approach vs. the industry best practice. And be ready to change.

We are all in this together. Let’s learn from each other, leverage our successes industry wide, and do our best to stamp out over-customization. And thanks as always for reading!

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Storm of the Century: How Did Your Cloud Providers Perform?

Boy oh boy. Hurricane Sandy made a real mess of the East Coast, and the effects will linger on for some time. For some companies, it was a great scapegoat. When my home land line and internet service went down on Tuesday, Verizon told me it was due to storms in New York. I know it was a terrible storm, but was it really responsible for knocking out DSL service for 24 hours in Los Gatos, CA, 3,000 miles away? I doubt it.

Unfortunately, I wasn’t the only one experiencing an unplanned outage. I received this email from a TSIA member at 5:30am PT on Tuesday:

“My cloud PSA solution is completely down today. They made no provision for a backup data center, despite having a week to prepare for the storm. They have not communicated anything about the situation to their customers. It is our quarter end and my core business system is completely unavailable with no word on when it will be restored. If I could move off of this product tomorrow, it would be at least a day too late.”

That stings! Especially for companies that take disaster recovery seriously, finding out your cloud application vendors didn’t prepare a fallback plan is unacceptable. At least for this PSA vendor, I suspect considerable customer churn is right around the corner. I am obligated to pass along this outage information to any members evaluating solutions in the future, so there are impacts to future prospects as well.

I was working for Giga Information Group, an early analyst firm, when September 11th happened. Reeling from shock, we tried to do something useful in the days that followed, and the research organization published immediate reports about disaster recovery planning for every area of technology Giga covered. Hopefully, Hurricane Sandy will similarly force tech firms to create a realistic plan to keep systems running regardless of weather.  In light of the enormous shift to the cloud, it appears that many companies have launched cloud initiatives without much thought to emergency situations.  I have to agree with the above email about the PSA solution–this wasn’t a freak earthquake that no one expected–companies had nearly a full week’s notice that this “storm of a lifetime” was brewing, and any cloud vendor in that vicinity that didn’t immediately plan for a backup server farm on the other side of the country seems downright negligent.

Apparently, someone needs to state the obvious: if you are going to make money by assuming the complexities of your customers’ deployments via cloud hardware and software, you darn well better make sure you have recovery plans for every conceivable emergency…and even some inconceivable emergencies. Your customers have placed their trust in you. When your systems go down…and you don’t even have the common decency to reach out to customers with updates…you probably won’t last long in this marketplace. There are too many competitors who pay attention to the fundamentals.

So if you are being pushed to launch a cloud alternative or a managed service offering this year, I hope you take a lesson from Hurricane Sandy. A single data center isn’t enough. Multiple data centers in a single region isn’t enough. And you better have a plan in place when the unthinkable happens on how to contact customers and keep them updated. Radio silence is not acceptable.

Just my 2 cents.

 

Race to the Cloud: TSIA Members Quickly Adopting Cloud Solutions

If I were to look into my crystal ball and predict which future piece of TSIA research will be the most downloaded article in Q4 2010, my guess is the report my research peer Tim Flannery will publish based on his upcoming session at our Las Vegas Technology Services World (TSW) Conference, “The Cloudprem Checklist: What You Need to Know Before Transitioning from On-Premise to Cloud Service Offerings.” From what I’m hearing, software vendors who have not already made the move to the cloud are being pushed to do so by both customers and prospects. Some are introducing ‘cloud’ pricing for their on-premise tools, which essentially is financing the cost of the deployment over a number of years, with monthly payments similar to OnDemand subscription pricing schemes. Tim has been talking to a lot of companies that have made the move to the cloud, and I’m sure there will be some great lessons on what to do…and what NOT to do.

The report, “Cloudprem: What You Must Know Before Making the Transition from On-premise to Cloud-based (or, On-demand) Services,” which will be published on October 19th to coincide with Tim’s conference presentation, includes an overview of what impacts to expect when moving to the cloud across services sales, services delivery, services operations, services engineering, services marketing and product engineering. I think this one section makes the report a “must read” for members, but there’s more great content in the report, including what questions to ask to assess readiness, and a very comprehensive list of support services functional area considerations.

As a proof point of cloud adoption, I was going back over my 2006 technology survey results, and in the most core of support technologies–incident management–only 13% of members were using an OnDemand/SaaS/Cloud solution. In the 2010 survey, that percent has risen to 25%–almost doubled. And, the top installed incident management product has changed from an OnPremise solution in 2006–Oracle Siebel CRM–to an OnDemand solution in 2010–Salesforce.com.

What impact is this having on technology infrastructures? In my view, it is creating an even more fragmented infrastructure, as IT continues to build out CRM/ERP deployments with OnPremise tools, and business users are bringing in OnDemand point solutions with overlapping functionality without doing the required integration work–handicapping both the CRM deployment AND the OnDemand deployment, impacting time to money for both.

Our TSW conference is just a few short weeks away, and I encourage all companies attending to send someone to Tim’s session, and be sure to download a copy of the report when it is published on the 19th. And as always, thanks for reading!