CRM Gets More Vertical
With cloud emerging as the dominant deployment model and vendors promoting vertical expertise, CRM is supplanting ERP as an enterprise's most valuable application.
ERP vendors with industry-specific solutions continue to push out unique CRM capabilities, but the market is also well represented by niche CRM vendors addressing vertical markets, particularly in financial services and life sciences. The emphasis on CRM is so pronounced that CRM may be replacing ERP as an organization's most valuable application.
"CRM is not just for sales and marketing anymore," said Rebecca Wettemann, VP research at Nucleus Research. "The data is more actionable and current than on aging ERP apps."
The pressure is on for big players like Oracle, IBM and Microsoft Dynamics to build out - or acquire - more industry-specific CRM capabilities. Aside from takeovers, however, it appears they will have limited impact on niche vendors -- despite their deep pockets.
"Microsoft has been doing a lot of work on the CRM front, but the use-cases are more horizontal and involve things like setting up industry best-practice templates so that customers can focus on what's best for their business," Wettemann said. "To gain share we will continue to see acquisitions, as with IBM's purchase of Silverpop, though that was more around marketing services."
CRM Gets Its Niche On
Niche players like Veeva Systems and Cegedim, both of which specialize in CRM for life sciences, are expected to do well in the years to come. In fact, every industry outside of some core resource-based sectors like agriculture and mining will see enhanced CRM activity by niche vendors.
"Salesforce.com and Microsoft have many hundreds of industry variants built on top of their applications by partners - Veeva being a well-known example," said Gartner analyst Ed Thompson. "Gartner covers perhaps 450 CRM vendors, but we think there are more than 900 - many of which are industry specialists."
Thompson offered the example of Blackbaud, a CRM vendor specific to the not-for-profit sector, and provider of CRM modules that work within applications in utilities, telecom billing and core banking. For CRM, there is a niche opportunity in any industry that has a specific regulatory environment, or that is facing technological or market disruption.
"It is important to remember that there is no one leader in CRM; instead, there is the best solution for every customer," said Wettemann. "Salesforce.com is a leader in functionality, as is Oracle, but there are compelling reasons also to select other core providers."
These include finding CRM applications that address the needs of experts in a given field, and that can facilitate advanced industry-specific engagements. When looking at how functionality dovetails with priorities, it is clear that a one-size-fits-all approach is not the way to derive maximum value, especially in today's ever-changing marketplace.
"All industries are constantly being disrupted by regulations, globalization, changes in the market players and commoditization," said Thompson. "Each of them elicits a tech response with either new startups or the existing players adjusting."
For its part, Gartner expects CRM growth to be moderate into 2014, with CRM software hitting $23.9 billion - and 49 percent of that coming from cloud-based offerings. Next year the firm expects the cloud to pass 50 percent of deployments, a significant development given the level of regulatory sensitivity in financial services and healthcare.
One interesting development in CRM is the value that can be generated when combining verticals. This hybrid approach can unlock unique and unseen opportunities that might be missed in a horizontal approach, or in one that drives deeply into a single industry.
"An exciting opportunity we are looking to move into involves an overlap between our financial services and healthcare offerings," said Paul DeVriendt, senior VP of products at NexJ Systems, a Toronto-headquartered provider of cloud-based CRM solutions. "We are looking to enable wealth client firms to leverage NexJ Connected Wellness to differentiate on service and deepen relationships."
Connected Wellness is NexJ's software for managing chronic conditions. In effect, the company is looking to tie-in its healthcare solution with its high-value financial services clients. Experts expect to see more cross-industry CRM linkages like these as market capabilities expand, and as the cloud emerges as the dominant platform.
"The great news with CRM, particularly with the cloud, is that we will continue to see customer movement," Wettemann said. "It's anyone's game, with companies like NexJ challenged to articulate a clear value proposition, particularly when up against larger vendors with more resources."
Which is to say, a company like NexJ will succeed to the extent it tailors its CRM solutions to specific and often complex customer requirements.
"The ideal market for our software solutions consists of the large financial services, insurance and healthcare enterprises," NexJ's DeVriendt said. "These markets have a strong demand for people-centered information that is best enabled by CRM software. They tend to have complex technology infrastructures that require solutions with flexible integration capabilities."
CRM's Cloud Tipping Point
For CRM vendors, the challenge is to support a large number of users who benefit from scalable solutions, increasingly deployed either in a public or private cloud. Visibility should be across the enterprise, even as it changes, and include such core functionality as the ability to attract and retain employees while driving customer loyalty.
"It will be very interesting to see what happens in the next few quarters," Wettemann said. "Big CRM vendors like Salesforce.com will be investing organically and with partners to increase vertical market expertise, particularly in financial services, which has many overlapping subsectors."
And the cloud will win the day for vertical market CRM - even if that day goes on for some years.
"Those vendors with strong on-premise solutions say that on-premise will be here for years to come, but ultimately those companies are on an old model," Wettemann said. "They will be challenged to compete when it comes to upgrades and industry changes."
In the near term, the biggest spenders in CRM are expected to be financial services, telecommunications, life sciences, consumer goods and IT services.
"Some industries are investing very little, and others enormous amounts," Thompson said. "Usually it's the result of competitive pressures and the opportunity to out-grow the competition, with spending correlating with GDP growth."
There are some exceptions, Thompson added, noting that for now education and some forms of government invest very little in any type of CRM. That could change, however, as line-of-business buyers look to enhance customer self-service while also building cross-channel capabilities.
Short List of Vertical CRM Providers
Companies mentioned in this story that provide CRM solutions for specific verticals:
- Veeva Systems and Cegedim, both of which specialize in CRM solutions for the healthcare sector.
- Blackbaud, which sells CRM solutions for not-for-profit organizations.
- NexJ Systems, which offers CRM solutions for the insurance and financial services sectors.
A graduate of McGill University, Timothy Wilson joined IDC Canada in Toronto as a research analyst in 1997. In 2000, he began T Wilson Associates and continued to consult for research companies, as well as working directly with large vendors such as Microsoft and SAP. Throughout his career he has contributed to the IT, trade and mainstream press. He received a first place CBC Literary Award and a Gold National Magazine Award for his non-fiction writing.