CRM Consulting Services

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1 12 May 2003 METAspectrum 21.1 Professional Services Strategies Michael Doane CRM Consulting Services METAspectrum SM Evaluation 100 LEADER 80 Performance CHALLENGER 20 FOLLOWER 12 May Presence META Group is a trademark, and METAspectrum is a service mark, of META Group, Inc.

2 Overview Market Definition The customer relationship management (CRM) consulting services market comprises both commercial businesses and nonprofit organizations seeking to improve client or constituent relations (loyalty/retention) and/or gain new clients or constituents. CRM services usually include strategy formulation, software selection, software implementation, business process improvement, team/end-user training, and deployment. Increasingly, CRM services are combined with enterprise resource planning (ERP) and supply chain management (SCM) services where operational CRM overlaps with these domains. Market Forecast A major market shift occurred from mid-2001 to late 2002, wherein fewer clients invested in enterprisewide CRM endeavors. Instead, they proceeded with smaller, shorter, and more tactical projects, chaining these projects across time echoing the consulting industry message that CRM is a journey, not a project. Market studies indicate that clients have a low level of confidence with regard to CRM service providers, based largely on early CRM stumbles usually associated with enterprisewide projects. Nearly all the firms covered in this METAspectrum have refined their message and methods to leverage field experience and directly address client concerns. We expect more success in CRM projects through 2004 and a parallel maturation of clients understanding of CRM. Thus, clients that deferred CRM evolution in 2001 and 2002 will be more inclined to move ahead, resulting in CRM services growth of 10%-12% in 2003 and 20% in In the near term, it is up to CRM consulting firms to capture and demonstrate business value through CRM not only for the duration of their engagements, but also over time. Key Findings All service providers included in this study have refined their CRM messages from an enterprisewide scale to a more tactical, value-based approach, taking into consideration individual clients maturity levels, short-term needs, and long-term visions. As the CRM consulting services firms mature, the greatest challenge they face is client immaturity, which leads to a higher relative importance of presence criteria (versus performance) as clients seek known quality. The CRM service providers have evolved beyond the notion that CRM excellence can be achieved through software implementation and have focused on value creation through CRM that speaks to client needs and leads to more tactical CRM endeavors. Results show several firms closely clustered, since each has made strides in some areas while lagging in others; therefore, strengths are often canceled out by weaknesses. Although, Consulting, and IBM Business Consulting Services are fairly even overall (and almost identical in terms of performance scores), has a slight edge over in presence, which in turn enjoys somewhat greater presence than Consulting. It is important to note, however, that even firms that are in close proximity in the METAspectrum graphic demonstrate varying strengths and weaknesses, most notably within the industry focus and business drivers criteria areas. Criteria weightings used in this study were derived from a survey of 903 client respondents and refined by META Group. Overall, clients are demanding that vision/strategy and business drivers make up half of the presence weighting, while services and execution account for nearly half of the performance weighting (our evaluation reflects this). Leaders CRM leadership requires an ability to move beyond value measurement and into long-term value capture for clients, while still adhering to time and cost limitations. CRM leaders can identify, define, and articulate tactical CRM strategies that lead to measurable value over time (not limited to their engagements). Consulting,, and combine deep industry focus with sound methodologies and value capture to arrive at CRM success. We expect all these firms to advance along the leadership path as their refined methods and focus play out further in the market and they achieve more visible success. s strengths include its enterprise value creation abilities, gain-sharing focus, and positive field experiences, but the firm needs to address its messaging and continue its evolution around value creation. Challengers Cap Gemini Ernst & Young () has recently revamped its CRM vision and delivery to meet the more tactical needs of clients. displays a strong accent on value capture that must become more market proven. All challengers are strong at software implementation and are gaining in organizational viewpoint. has a focus on the CRM/supply chain relationship, has immense skills at value measurement, and (like these other two) has strong CRM core skills. However, these latter three firms all lack size (geographic reach, point reach) and a full service spectrum. shows great strength in leveraging existing clients toward CRM service extensions, but needs both growth and maturity in its vision/strategy, integration services, and value capture. METAspectrum 21.1 CRM Consulting Services 2

3 Overview Bottom Line Clients that have deferred CRM projects due to a lack of confidence in CRM consulting firms can exploit the rising maturity of CRM consulting. Best-in-class IT organizations understand that CRM excellence is not predicated on software implementations alone. Strategy, integration, deployment, and value measurement are key issues, and our research indicates that clients can have greater success when they tap outside consulting services for these areas. Business Impact: In all business application markets, a first phase of vendor/project maturity is software-based and a second one is business-based. The CRM services market is now in a second phase, in which value capture and operational economies are at the heart of enlightened CRM endeavors. METAspectrum 21.1 CRM Consulting Services 3

4 CRM Consulting Services Presence Evaluation Our market presence evaluation includes a review of each vendor s product and service attributes representing vendors ability to deliver value to customers. The following eight criteria areas provide a summary of our presence analysis. For complete details on how vendors fared with each criterion in our evaluation, visit metagroup.com. Vision/Strategy Channels/Partners /Very /Very /Very / / /Very / / Message/Positioning External, visible communication to the market about vision, views, expectations, priorities, and value of CRM and its position in the IT ecosystem. Customer Life-Cycle Management Demonstrated, tangible ability to explain and execute CRM plans that define technical and/or solution direction, emphasis, and development that best meet customer requirements. Innovation and Articulation Perceived and actual position within the market as a CRM trendsetter, definer of direction, and catalyst of market direction and change. A firm s ability to grasp the CRM customer life cycle, combined with innovation and vision (and the ability to articulate it), is highly valued by clients. Indeed, companies often are confused about the value of CRM and the cost of obtaining it, and have difficulty linking CRM efforts to the rest of their IT and business processes. High marks for innovation and articulation were awarded to and Consulting, while,,, and excel in customer life-cycle management. Applications, Technology, and Staff Alliances Active and complementary relationships with third-party vendors, consultants, systems integrators, and channel partners. Training and Shared Knowledge Articulated partner evaluation criteria, training/retraining programs, and certification enforcement. Quality Assessment Methods Defined methods to ensure the quality, consistency, and value delivered by individual partners. Because most CRM endeavors require application and technology partners, we examined the breadth and depth of those partnerships as well as the underlying shared knowledge and quality assessment methods. and had the strongest array and deployment of such partners, and there were few significant distinctions among the firms covered in the other areas. METAspectrum 21.1 CRM Consulting Services 4

5 CRM Consulting Services Presence Evaluation Awareness/Reputation Geographic Coverage /Very Very /Excellent Very /Very / / / / / Poor/ Mind Share Publicity, sales, marketing, service, and development activities that build positive perception in the market and extend visibility above and beyond the organization s size and/or share. Both overall and CRMspecific mind share are considered. Reputation The measured achievement of visibility as demonstrated by direct and indirect activities, including publications, press engagement/coverage, and analyst/key influencer visibility (CRM only). Customer Perception Measured, relative awareness on the part of existing and potential customers about capabilities, offerings, vision, and focus. In this criteria area, we assessed mind share (thought leadership, brand awareness), reputation, and customer perception. For the first subcriterion, the three second-tier firms (,, and ) understandably did not keep pace, but they held their own in the other two. Customer perception (gleaned from direct feedback to META Group) varied for from exceptional to fair and was strongest for and Consulting, for which clients provided more consistently positive feedback. CRM mind share for is somewhat stifled by its overall branding, which leads clients to associate it with myriad other services. Our research has revealed that peer references are increasingly important to prospects, and we expect reputation to increase in importance during 2003/04. Point Reach Extension of viable fulfillment reach, availability, and delivery via directly controlled entities or partnerships. Global/International Fulfillment Number of regional and geographically dispersed resources to support clients. All but the second-tier firms show strength in geographic coverage, though all three (,, and ) have adequate point reach in North America. We define point reach as the ability to deploy consultants across a geography with agility and without excessive travel costs. Global fulfillment combines geographic presence and support. and are the clear leaders in geographic coverage, with Consulting on the next shelf. will join these three once its new organization (Europe, Asia Pacific, and Latin America) matures, while is projecting consulting force growth that, if realized, would advance its position. METAspectrum 21.1 CRM Consulting Services 5

6 CRM Consulting Services Presence Evaluation Business Drivers Industry Focus /Very /Very /Very /Very /Very / /Very /Very /Very / / / CRM Core Competencies Core CRM business process and technology competencies. Intellectual Property Owned and protected patents, trademarks, copyrights, licenses, or trade secrets that reflect unique ideas, methods, technologies, and processes, and that offer tangible competitive advantage. Culture Internal processes, communication methods, leader-sponsored philosophies, or other dynamics that enable better client centricity, speed, responsiveness, efficiency, or market effectiveness. Value Drivers Ability of the vendor to demonstrate and measure the value (e.g., ROI, time to market) of its offering to customers. A key to this criterion is a service provider s ability to embed continual (not just project-related) value measurement. We rate value drivers as the most important of the four subcriteria. In this area, only provides full value capture (identification, targeting, and measurement of CRM-driven business performance) over time for all engagements. s value driver is a unique mix of CRM and supply chain capabilities. Consulting,, and all possess value drivers, though many projects are measured only through the life of an engagement; lags only in value driver methods and value measurement/capture over time. In terms of culture, varies from excellent to fair depending on client fit, while, Consulting, and demonstrate greater consistency in this regard. Vertical Expertise/Span Breadth of vendor s vertical domain expertise and understanding of related CRM processes. Business Model Support Ability to support multiple business models (direct, indirect, network, B2B). Depth of Expertise Measured, demonstrable tools, techniques, methods, certifications, primary research, tailored approaches, or other analysis and delivery attributes that highlight the relevant skills and expertise brought to a particular market. The merger of IBM Global Services and PwC gives the new an equal footing with. Both excel in the high-end market: through its global channels and by virtue of its deep organizationwide industry focus and breadth. These two are followed by Consulting. has excellent depth of expertise, but in a more limited number of industries, while shows industry breadth but not depth of expertise versus the leaders in this criteria area. lags in this regard primarily due to its later arrival on the CRM consulting scene; we expect it to improve in this regard through METAspectrum 21.1 CRM Consulting Services 6

7 CRM Consulting Services Presence Evaluation Investments Share Very Excellent Very /Very / Poor/ Poor/ Research and Development Investments (external or internal spend) that increase a service provider s ability to add value to a CRM client. Ecosystem Investment Strategy Investments/initiatives that advance the maturation of CRM understanding across the marketplace. Degree of Control Ownership level of investments that determine direction, priorities, and integration with core business activities. Market Share Share of market relative to competitors. Market share is a reflection not only of a firm s market success, but also of its size and range. The larger players such as and thus predominate ( would appear in the list as well if CRM-related outsourcing were included in the scope of this study). Investment is weighted low as a criterion, because clients are more concerned about the fruits of investment (methods/tools, training, industry solutions) than the investment itself. Only very high or low levels of investment over a two- or three-year time period will reflect positively or negatively on a vendor. Because CRM market evolution depends on significant investments for research and development, it is the larger providers that significantly promote this evolution. METAspectrum 21.1 CRM Consulting Services 7

8 CRM Consulting Services Performance Evaluation Our market performance evaluation includes a review of each vendor s product and service attributes representing vendors ability to provide value to customers. The following seven criteria areas provide a summary of our performance analysis. For complete details on how vendors fared with each criterion in our evaluation, visit metagroup.com. Services Technology /Very /Very / / /Very / Poor/ Methods and Tools Vendor s array of methods and tools to support CRM services delivery (accelerators, benefits drivers, and delivery mechanisms). CRM Services Scope Collaborative, analytical, and operational scope of CRM services across sales, service, and marketing. Differentiation Distinguishing features of CRM services that bring tangible value to clients. The second-tier firms (,, and ) lose marks relative to the other organizations in this study for overall CRM services scope, though all provide solid services from strategy through implementation.,, and provide the greatest services scope, due to their superior abilities in post-implementation support. trails here only in depth/scope of services in strategic and systems integration areas, while and Consulting have both made strides in postimplementation support. All vendors methods and tools have been improved, with Consulting (by virtue of its Value Mapping) and (given its bestpractice repositories) holding a slight edge over the others. A special mention goes to for its unique blend of CRM and supply chain project process.,, and have proven methods and tools, but lag in the integration of these to value drivers. Consulting shows superior differentiation through its clarity of purpose and direction linked to value creation, while displays agility and creativity in its services scope. The other major players are somewhat similar to one another in these areas. Vendor Mix and Scope Range and depth of CRM vendor knowledge. Enterprise Integration Capacity Vendor s ability to plan or implement enterprise integration of CRM functionality and business flow across various application configurations. Architecture Support and Services Vendor s capacity to provide architectural consistency, scalability, performance, openness, standards adherence, platform/dbms support, distributed processing, data model, and client deployment options. Nearly all firms have moved from a focus on Siebel implementations to a more diverse portfolio. and are the most diversified, while,,, and provide greater integration and architectural support. Most firms covered have a much greater share of revenues unrelated to software vendors, most notably Consulting, as the market moves to more strategic and tactical endeavors. METAspectrum 21.1 CRM Consulting Services 8

9 CRM Consulting Services Performance Evaluation Pricing Execution /Very / / / / / / / / / Strategies and Models Alternative price models provided to CRM customers that enable flexibility in the purchase and/or use of products and services. Relative Cost The relative cost of a vendor s services within the context of the CRM market. Services from the second-tier firms are less expensive than from the major players, whose costs are generally aligned. More important to a client for overall services costs are the pricing models. All firms will offer fixed price, time/expenses, or a mix of both. The second-tier firms are the most flexible, while stresses gain-sharing and provides related operating economies within its overall package (for existing clients). As value creation and capture methods evolve, we expect more firms to offer gain-sharing on a more frequent basis. Knowledge Transfer Vendor s methods, practices, and demonstrated ability to foster client independence. Time/Budget Management Vendor s ability to adhere to time and budget constraints and provide visible evidence of same. Adherence to Vision/Benefits Balance between time/budget and vision fulfillment. Customer Referenceability Ability of vendor to provide meaningful references for in-production (e.g., live) and past clients. Although clients reported a great need for time and budget management, we put a premium on adherence to vision and benefits. and (both with a high accent on value capture) shine in this regard. Time/budget management remains a sticking point for most providers where clients do not take sufficient ownership of projects. In similar fashion, knowledge transfer remains fair to good, with all players generally on equal footing except, which lags in this regard due a services focus as opposed to an emphasis on consulting. METAspectrum 21.1 CRM Consulting Services 9

10 CRM Consulting Services Performance Evaluation Agility Personnel /Very /Very /Very /Very /Very / /Very / /Very / / / / / Reaction to Scope Change Vendor s ability to rescale an endeavor according to strategic, functional, or economic exigencies. Reaction to Market Change Vendor s ability to predict and react to competitive, economic, cultural, technical, and political change. Partnering/Collaboration Vendor s history, framework, and capacity to work in partnership with like firms at common clients. Consulting,, and took early leads in recasting their CRM practices to meet market needs (consequently scoring high in the reaction to market subcriteria), while all players demonstrate nearly equal agility for client scope changes. excels at partnering, followed in strength by Consulting and. The second-tier players lose points here due only to practice size limitations. Project Leadership Quality and background of vendor s project leaders, including client perceptions of same. Consultant Skills/Depth CRM training, certification, and knowledge about specific technologies, verticals, services, processes, and methods that are transferred into higher-value technologies and solutions, with improved results for the customer. Due in part to the economy, all firms covered have demonstrated consulting force stability. Of the secondtier firms, is distinguished by its project leaders, while among the large players, trails an otherwise excellent and near-equal pack. All provide solid consultant skills and depth of expertise, but clients should balance this (where applicable) with industry focus and industry depth of expertise. METAspectrum 21.1 CRM Consulting Services 10

11 CRM Consulting Services Performance Evaluation Financials Very /Excellent /Very /Very / / Viability Viable operational business model, financial situation, sources of operational funding, and long-term standalone viability. Growth Rate Revenue growth relative to the market and competition, revenue per employee (trending), and future growth prospects. As with share and investments, this criteria area holds little import for clients, and company ratings had little effect on the final METAspectrum. The leaders here display strength in both viability and growth rate in a currently volatile industry. lags in this regard primarily due to concerns over viability, while the three niche players are clearly less well positioned in this regard due to their size. Clients should view financials criteria according to the anticipated duration of the services to be provided, because long-term engagements should be supported by a firm with strong viability. METAspectrum 21.1 CRM Consulting Services 11

12 About METAspectrum SM METAspectrum SM evaluations from META Group (Nasdaq: METG) provide IT professionals with a view into critical market success factors and vendor positioning. METAspectrum, in combination with META Group s SPEX modules which provide detailed technical analysis of product features and capabilities delivers comprehensive evaluations of both technology markets and vendor product offerings. METAspectrum evaluations are a standard component of a META Group retainer service subscription and are updated periodically, depending on the characteristics of individual markets. To view completed market evaluations, or learn more about the METAspectrum methodology, visit metagroup.com/metaspectrum. For more information on META Group s SPEX offerings, visit metagroup.com/spex. About META Group META Group is a leading research and consulting firm, focusing on information technology and business transformation strategies. Delivering objective, consistent, and actionable guidance, META Group enables organizations to innovate more rapidly and effectively. Our unique collaborative models help clients succeed by building speed, agility, and value into their IT and business systems and processes. Connect with metagroup.com for more details. META Group is a trademark, and METAspectrum is a service mark, of META Group, Inc. Reproduction or redistribution of this research in any form without prior written approval is prohibited. METAspectrum is META Group s independent evaluation of a technology market, representing marketplace characteristics at a given time, and is subject to change without notice. META Group s permission to reproduce this evaluation should not be deemed an endorsement of any company or product. META Group research is intended to be one of many information sources; decision makers should not rely solely on the METAspectrum evaluation for making solution choices. META Group expressly disclaims all warranties, express or implied, including but not limited to fitness of this research for a particular purpose or merchantability.