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CRM is an industry that’s been full of turning points, and I think it is at another. There have been many smaller turns, like the additions of analytics, social media and process flows. However, to get a sense of this point in time, I think you have to go all the way back to the turn of the century and the rise of cloud computing.
The cloud was important as an economic marker in ways that other turning points were not. When software as a service emerged, it represented a long overdue initiation of a commoditization wave in the whole technology market, and CRM was the test case.
Software largely was unaffected by the first cloud wave. Sure, the cost of goods collapsed as we went to multitenant architectures, but the cost of hardware, middleware and labor largely bore the brunt of that transition.
Today, a startup can access the same level of software sophistication — and with it business process intricacy — that much larger competitors can, with the result that in industry after industry, competitive differentiators that relied on things like superior supply chains, deeper financing, and industry longevity largely are muted. On the Internet, everybody is the same.
Platform Is New Differentiator
Now commoditization is hitting the software market directly, thanks to the emergence of software platforms that integrate and generate applications. The platform, as I’ve said more than once, is the new differentiator. It generates virtually error-free code that brings together all of the constituent parts of apps that most businesses would regard as essential today, and it gives any business using the platform an agility we once could only dream of.
All of this is driving down the cost of applications the same way cloud computing drove down the cost of hardware and infrastructure before. You need only look at the free or nearly free apps you can download, or the attractive monthly fees for bundled cloud business applications to see the point. Software is commoditizing — and doing so rapidly.
That leaves the industry in an interesting place. During a commoditization wave, existing vendors typically move up-market to survive, and that’s what we’re seeing. Virtually all of the software vendors I know, especially in CRM, now tout their platforms to one degree or another.
They still primarily promote CRM, but now there’s also a strong message about how you can manipulate the delivered apps to do your bidding in your distinctive market. It’s a powerful message, because the business processes you support represent the new secret sauce of your business.
At the same time, I’m picking up signals that many businesses would rather build their own CRM systems than buy a suite from a vendor, and that tracks with some of my research. Going back 15 years or so, my research indicates that businesses prefer building their CRM over buying suites especially in sophisticated or highly regulated markets. Whether that sentiment is based on reality or not — modern vendor vertical apps offer a lot — it’s the reality I’m seeing.
The reasons are simple. Some in vertical industries just feel they can get closer to CRM application nirvana by rolling their own, and price doesn’t matter given the aforementioned commoditization that’s happening.
Here’s the thing: Most of the offers for tools and technologies that would enable a business to roll their own CRM bring potential users a vision of systems of record, when the industry is set on a course toward systems of intelligence.
The upshot of it all is that if you roll your own with commercially available tools, you’ll likely end up with a very serviceable CRM system suitable to the world of 10 or 15 years ago. So, like it or not, this puts the CRM vendors with good platforms in the catbird seat.
Their CRM apps have swapped place of primacy with their application development platforms, and the apps have become demonstration projects that simply say, “Here’s what we did with it. You can use the same tools now to do something even more advanced.” It doesn’t stop there, of course. If you can build CRM, you can build HR or even ERP if your heart desires it.
I spent part of last week with Zoho at its annual analyst briefing day, during which we all got to geek out. Zoho is by far not the only CRM vendor with a platform, but it has an interesting approach that should make other CRM vendors take notice.
To be clear, Zoho still positions itself as a CRM/ERP vendor — but the customer stories I got, as well as the road map discussions, all seemed to point in the direction of starting with the apps and customizing as much as you like. Time after time, customers told of how they started, and then quickly moved into how they customized using the tools.
Beginning almost 30 years ago, Zoho began building its apps and platform, and it always built its own product at each layer of the stack even if there was a good competitive product available from a supplier. This idea has deep roots, going down to the database, networking and middleware. All of it has been optimized for the needs of CRM and Zoho’s other apps.
The result is a suite of almost 50 apps that can be used out of the box and customized almost infinitely. It also presents a business model and product set with a price point significantly below the market, because Zoho’s built-in-house approach has given it a powerful stack with prices it controls, and that’s the essence of having a low-price model.
My Two Bits
Take nothing away from Salesforce, Microsoft and Oracle in the CRM/CX space. They all have good platforms, and they’ve generated some interesting apps. They’ve also bought a lot of apps and incorporated them. There’s nothing wrong with that, but it leaves seams between the apps and a different cost structure.
I’s hard to beat Zoho’s business model and its determination to be a low-cost/high-value provider in an increasingly tight zero-sum market.
The competition now is centered around what a customer can do to change any app to make it more responsive to the needs of a business. Secondarily, the application development side of the house has a new, and I’d say better, way to build something custom.
So, the move I see emerging isn’t strictly speaking one of building new apps or flavors of CRM on anyone’s platform. The interesting thing is that smart vendors might lead with their apps and a strong story about customization, thanks to their platforms, and that’s significantly different from touting individual apps, platforms or even suites.
The opinions expressed in this article are those of the author and do not necessarily reflect the views of ECT News Network.
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