SMBs Must Eliminate Information Silos to Improve the Customer Experience

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1 August 2007 by Sheryl Kingstone, Enterprise Research, Customer-Centric Strategies Director, SMBs Must Eliminate Information Silos to Improve the Customer Experience The Bottom Line: Key Concepts: Who Should Read: SMBs continue to stress business information silos, insufficient staff and outdated business applications as their top IT business application challenges. Business drivers, CRM, e-commerce General manager, line-of-business manager, ISV Practice Leader: Zeus Kerravala, Enterprise Research Senior Vice President, Executive Summary The ultimate goal for all businesses should be to transform to an Anywhere Enterprise TM, where a company can empower employees, customers and partners with the right information at the right time to meet heightened customer expectations, react to fast-changing market dynamics and grow revenue. Another major change is the advent of the Anywhere Consumer, where consumers expectations of quickly getting the right information at the right time continually pushes the limits of businesses current processes, applications and information. The top IT issues identified by the Yankee Group 2006 US Small & Medium Business Applications and Web Survey are information silos, lack of IT staff and outdated business applications (see Exhibit 1). For businesses to be agile and responsive to the Anywhere Consumer, SMBs must address these concerns. To gain and retain customer loyalty, businesses need to create an ongoing, positive experience. If businesses do not eliminate the silos and gain a single view of the customer, it will impede the overall customer experience. Many companies do not create a consistent customer experience across all customer touchpoints in real time. Instead, they provide the customer with a siloed experience where previous interactions do not inform current ones, issues are not completely resolved and the resolution cycle is drawn out. A better experience allows consumers to interact with the company through their chosen channel with a short resolution cycle, laying the foundation for stronger customer loyalty. Copyright Yankee Group Research, Inc. All rights reserved. Yankee Group published this content for the sole use of Yankee Group subscribers. It may not be duplicated, reproduced or retransmitted in whole or in part without the express permission of Yankee Group Prudential Tower, 800 Boylston St. 27th Floor, Boston, MA Phone: (617) Fax: (617) info@yankeegroup.com. All rights reserved. All opinions and estimates herein constitute our judgment as of this date and are subject to change without notice.

2 Exhibit 1. Top SMB IT Concerns Source: Yankee Group 2006 US Small & Medium Business Applications and Web Survey What is the primary technology challenge facing your business? Hard to get work done because unshared business information sits separately in different applications and departments Insufficient IT staff to manage my technology needs My business is outgrowing outdated business applications Outdated IT infrastructure doesn t support my changing business application needs Need to integrate my company web site with other business applications No time or expertise to assess new technologies Want a company web site but don t know how to build and manage one Difficulty in managing marketing to customers via campaigns Want a company online store to sell products/services online Need to integrate my company web site with my point-of-sale system Difficulty in buying and managing online advertising Mid-market business Medium business Small business Very small business Percent of Respondents 2 Copyright Yankee Group Research, Inc. All rights reserved.

3 August 2007 Table of Contents I. The State of Small and Medium Businesses 3 II. SMBs Must Move Beyond Static Productivity Tools to Manage Their Businesses 5 III. Integrated Applications Are a Critical Step to Becoming an Anywhere Enterprise 7 E-Commerce and Online Marketing Are Red Hot for SMBs... 8 The VAR or IT Consultant Can Provide Strategic Guidance... 9 IV. Software as a Service Shows Interest Across All Business Applications 9 V. Conclusions and Recommendations 12 Recommendations for SMBs VI. Background on the Survey 14 VII. Further Reading 15 I. The State of Small and Medium Businesses Yankee Group has been following the needs of SMBs for many years. Respondents to the Yankee Group 2005 Small & Medium Business Applications and Web Survey voiced strong demand for tighter integration of their business applications. More than 45% of respondents stated their top application challenge was to integrate different systems and standalone applications. The Yankee Group 2006 US Small & Medium Business Applications and Web Survey continued to stress business information silos, insufficient staff and outdated business applications as top IT business application challenges. The top SMB business concerns are reacting quickly to market conditions, generating revenue and attracting customers (see Exhibit 2). Companies must become more agile and achieve better and quicker business insight to alleviate these concerns. This will ultimately result in increased revenue and business growth. A challenge for SMBs is using technology as a key differentiator to enable them to compete with their large enterprise counterparts. A business strategy for an SMB has many of the same desired outcomes as a large enterprise, including improved customer selection, acquisition, retention and expansion. Therefore, the key business drivers are similar, specifically: Manage the customer lifecycle from first contact, to contract, to cash and to care. Become a more customer-centric organization. Create seamless processes and open communication among company employees, suppliers, partners and customers for better management and control of information. Copyright Yankee Group Research, Inc. All rights reserved. 3

4 Exhibit 2. Top SMB Business Concerns Source: Yankee Group 2006 US Small & Medium Business Applications and Web Survey What business-related challenges is your company facing? Reacting quickly to fast-changing and unpredictable market conditions Growing revenue to get more income regularly Attracting new customers Succeeding in a highly competitive environment where margin of error is low Keeping prices low to maintain competitive edge Controlling costs/expenses to gain greater profits Attracting and retaining quality talent Optimizing work processes, software or people to be more efficient Organizational development to manage change in business Having to comply with new financial or taxation requirements mandated by local, state or federal government Improving customer relationships Fulfilling customers demand to do business online Having to comply with product, supplier or customer tracking and reporting requirements imposed by local, state or federal government Mid-market business Medium business Small business Very small business Percent of Respondents 4 Copyright Yankee Group Research, Inc. All rights reserved.

5 August 2007 II. SMBs Must Move Beyond Static Productivity Tools to Manage Their Businesses Medium and mid-market businesses have mainly adopted Microsoft Outlook and contact managers such as ACT! as their primary CRM tool to track and manage customer information (see Exhibit 3). Also, the many don t know responses suggest that businesses don t use anything or are using basic Microsoft Excel or Access systems. Because many SMBs differentiate themselves from large corporations by their ability to deliver personalized customer service, the lack of more sophisticated customer management used within these organizations needs to be addressed. Salesforce.com and Microsoft Dynamics (formerly Microsoft CRM) have traction in medium businesses, while mid-market businesses have invested in more enterprise-like solutions such as Siebel and SAP. These solutions are a better alternative to static productivity tools. Exhibit 3. CRM Software Still Underused in SMBs Source: Yankee Group 2006 US Small & Medium Business Applications and Web Survey Which primary CRM application does your business currently use? Microsoft Outlook Don t know Other, please specify Microsoft Outlook with Outlook Business Contact Manager Best Software ACT! Salesforce.com Microsoft CRM FrontRange Solutions GoldMine NetSuite SalesCenter Onyx CRM Best Software SalesLogix Best Software Accpac CRM SugarCRM Siebel CRM OnDemand Siebel SAP All-in-One SAP Business One RightNow Epicor Entellium Mid-market business Medium business Small business Very small business Percent of Respondents Note: Best Software has changed its name to Sage Software. Copyright Yankee Group Research, Inc. All rights reserved. 5

6 Because of static productivity tools and information silos, many companies cannot answer basic business performance questions such as: Who are my most profitable customers, and what have they purchased? What are the current opportunities that our sales team and partner network are working on, and when are they expected to close? Which marketing campaigns generated revenue and why? Are we allocating the right resources to the right opportunities? Is the information necessary to complete the order available efficiently and accurately? What are the past and current service requests from this customer, and do they have an outstanding payment? Exacerbating the situation is that many executives make important business decisions based on batches of uncorrelated information from various departments, such as sales, manufacturing, finance and other sources. This information is usually days if not weeks old. Another major issue is that the majority of an SMBs workforce is mobile, with 42% of very small businesses and 70% of medium market businesses employee base considered mobile. Therefore, SMBs need to empower mobile employees with applications that are untethered to the office. This enables them to enter fresh information, which will begin to increase data quality. Considering that the business world is constantly changing, old information is unacceptable. The resulting operational inefficiency will lead to the inability of businesses to have access to the information required for effective decision-making. Businesses must be adaptable and responsive to the changing demands of the Anywhere Consumer. Strong customer relationships are critical to the success of SMBs, and businesses rarely have a second chance to make a good first impression. Strategic companies need to expand the traditional business processes to the new customer lifecycle from first contact, to contract, to cash, to care. This approach takes into account the complete customer lifecycle from attraction to servicing. The answer is to move toward a more sophisticated Anywhere Enterprise that uses business applications that work together seamlessly anytime and anywhere to help companies keep an eye on their overall operations and business results. The goal is to gain accurate and timely information for quicker decision-making with customers, partners, employees and suppliers. As with any successful IT project, companies use a combination of strategy, technology and people to tackle such issues as shortening the order-to-cash, issueto-resolution and lead-to-order cycle times. 6 Copyright Yankee Group Research, Inc. All rights reserved.

7 August 2007 III. Integrated Applications Are a Critical Step to Becoming an Anywhere Enterprise The Anywhere Enterprise is a simple concept with a simple mission to interconnect the enterprise application ecosystem seamlessly. This includes applications with applications, regardless of where they reside, as well as applications with access devices, regardless of device type or location. An Anywhere Enterprise must also meet the demands of an Anywhere Consumer. The Anywhere Consumer, aided by a revolution in connectivity and computing, will demand a personalized experience anywhere and anytime, with ultra-fast service and response times for the I want it now generation. The most successful companies will be those that facilitate the Anywhere Consumer experience. This experience can only be accomplished by eliminating the silos, providing agility in the business and understanding the customer for revenue growth. However, considering that 85% of businesses use only internal back-office applications, companies must begin to evaluate critical customer-facing front-office applications. These applications, typically known as customer relationship management (CRM) and e-business applications can assist businesses in improving the overall customer experience. Business applications such as sales automation, marketing automation, customer service and support and e-commerce increase sales revenue, improve customer service and enhance marketing campaigns. CRM can do more than just improve customer relationships. It can make marketing more efficient by enriching the data used to design and execute campaigns. It can reduce operational costs by eliminating redundant and or wasteful tasks. If properly executed, CRM can also lead to significant improvements in customer satisfaction and, in the long term, increase revenue and customer loyalty. By achieving a complete view, businesses can shorten sales cycles, improve customer retention and find new opportunities. However, to succeed, businesses need to harness their internal data and applications such as salesforce automation (SFA), customer service, marketing, accounting, ERP and across the extended enterprise and other complementary technologies. Exhibit 4 illustrates how a company can break down the walls and eliminate the silos between applications and business processes. The company should also enable the ability to access relevant applications and information such as sales, ordering, service and office productivity from anywhere, such as a customer site. As a result, companies can improve operations and gain valuable insight. The success hinges on the integration of business-critical applications so that a company can enable: Self-service to enable customers to enter their own orders, check inventory, track shipments, pay invoices and enter support inquiries Suppliers to monitor customer demand, check inventory, order supplies and monitor performance and payment Partners to obtain leads, conduct joint promotions and check available-to-promise data Employees to gain visibility into the business for improved decision-making such as order histories for cross-selling Copyright Yankee Group Research, Inc. All rights reserved. 7

8 Exhibit 4. Access to Information Anywhere and Anytime Is Critical Source: Yankee Group, 2007 Supplier Partner Employee Customer Information Anywhere, Anytime Through Any Device Back Office Front Office Supply Chain Inventory Production Engineering Finance HR Sales Ordering Service Office Productivity Web Presence Marketing Integrated Business Processes and Applications Common Data Repository E-Commerce and Online Marketing Are Red Hot for SMBs E-commerce and online marketing have been a red-hot technology area for SMBs, giving businesses a lot of value for their money. More importantly, they provide SMBs with a new avenue for growth by tapping the global reach of the internet to break out of local and regional geographies that confine many SMBs. They also enable SMBs to better serve a new generation of customers, many of whom prefer to transact business online for efficiency and fast service time. Online marketing, also known as e-marketing, is a more cost-effective way to generate product interest as compared with traditional marketing channels such as direct mail and advertising. When used appropriately, marketing or Google AdWords placements also have a higher close rate or click-through rate. Because of increased data privacy issues along with stronger opt-in compliance regulations, it is essential to gather as much information as possible to target interested parties with relevant offers that drive visitors to the store or web site. However, many challenges still remain in the current systems that SMBs use. Many SMBs are still using standalone, order-taker-type e-commerce solutions that are not integrated with front- or back-office systems. Effective e-marketing and e-commerce solutions must integrate tightly with existing office systems to enable SMBs to realize the benefits of e-business fully. Without integrated insight, purchase history and behavior and attitudinal data, marketing cannot mine patterns for personalized campaigns and cross-sell opportunities. The goal of integration is to provide insight from first contact, to cash, to care. The results will improve customer retention and acquisition. 8 Copyright Yankee Group Research, Inc. All rights reserved.

9 August 2007 The VAR or IT Consultant Can Provide Strategic Guidance The value-added reseller (VAR) or IT consultant is the primary delivery vehicle for IT solutions, and a critical advisor to SMBs. SMBs evaluating solutions and partners must consider the four key pillars that define the crucial aspects common to all SMB technologies: Grow my business. SMBs see technology as a tool to achieve business growth. The focus is on the core business. IT is not strategic, as it is in large enterprises. A good SMB partner must realize this and approach technology from a business point of view. Service providers need to deeply understand the customers business processes and industry quirks and propose solutions that directly solve business problems. Support my business. SMBs have few IT technologists on staff, and those on staff are generalists combining minimal desktop, , server, IT, communications and networking knowledge. When an SMB has specific technology needs, it seeks outside resources and relies on a trusted technology advisor. Trusted partners must deliver the response times and personal relationships of an on-staff IT administrator. Simplify my business. SMBs run multiple applications and rarely have the time or expertise to integrate their technology environment effectively. This lack of integration has both top- and bottom-line impacts on small and medium businesses. The office system of the Anywhere Enterprise, whether on-premises, hosted or a mix of both, must be tightly integrated to meet the high business requirements of today s economy. SMBs must seek service providers with converged expertise, which may span infrastructure, applications, communications and mobility. Implementation must be rapid, and benefits must be realized quickly. The longer a project drags out, the less chance an SMB will see a ROI. Protect my business. Security and disaster recovery are the top infrastructure issues for SMBs. Business protection, whether from malicious hackers, data leakage or infrastructure failures, is increasingly important as threats multiply and computer systems become mission-critical for the business. Most SMBs cannot survive extended disruptions to their business from a disaster. Whether through hosted services or classic on-premises technologies, protection should be inherent in any solution. IV. Software as a Service Shows Interest Across All Business Applications The software industry survived its first three decades with a very limited number of business models: selling customers licenses for software that customers installed at their site, and, less frequently, selling customers licenses for software that was maintained in a remote data center. The late 1990s saw the introduction of a new software delivery model called software as a service (SaaS). SaaS has not only revolutionized the way companies purchase software, but has also fundamentally changed the way software is built, delivered and supported. SaaS is not just for businesses that have not implemented premises-based applications. Many companies are looking to augment or replace existing applications. Current satisfaction levels of premises-based applications are low primarily because of application complexity, high TCO and lack of user adoption. Although many companies recognize the strategic importance of CRM solutions, three roadblocks still exist: time, money and resources that can derail, detour or delay many line-of-business initiatives. SaaS changes the way companies leverage their resources and operating capital. Overwhelmingly, the number-one primary inhibitor to adopting better business applications is price. Many businesses avoid critical business applications because they are viewed as unaffordable. Second to price is the concern associated with maintaining a complex system. Copyright Yankee Group Research, Inc. All rights reserved. 9

10 SaaS eliminates the dependency on IT departments to deploy, manage and maintain applications. In particular, this model offers three distinct value components previously unavailable with more traditional onpremises deployments. Efficiencies of scale: SaaS offers the ability to leverage infrastructure efficiencies of scale and resources in a more scalable environment. SaaS offers the combination of multi-tenancy, which is the ability to leverage the same infrastructure for multiple clients, and the utilization of best practice resources. Financial leverage: SaaS is changing the way SMBs finance new business software and infrastructure purchases. From a financial perspective, the model shifts quite dramatically from capital expenditure to operating expenditure. Software and hardware would previously require companies to allocate millions of dollars for immediate software purchases and implementation services. With SaaS, financing software becomes an operating expenditure, whereas the software is accrued and payable on a monthly basis. Transformational impact: The ability for the solution providers to aggregate user data across multiple clients and to identify competitive and industry best practices using these new service delivery models can have a profound effect on both the design and usability of the application. In addition, it can create strong change agents for organizations in their transformational efforts. While companies such as Salesforce.com and SuccessFactors have paved the way for SaaS application adoption, the data clearly shows a high interest in adopting SaaS applications across many different business applications (see Exhibit 5). Especially hot areas are marketing, web presence and CRM. Although the top drivers for the adoption of SaaS continue to be expected lower TCO and easier enablement of distributed employees, the number-one driver is increased comfort with security of data. This is a complete about-face from 5 years ago. Historically, data security was considered a top inhibitor, indicating that the trust factor among top vendors has considerably increased. 10 Copyright Yankee Group Research, Inc. All rights reserved.

11 August 2007 Exhibit 5. High Interest in Many Different Types of SaaS Applications Source: Yankee Group 2006 US Small & Medium Business Applications and Web Survey Is your company evaluating/interested in adopting any of the following business applications as a hosted software as a service? Expense management Project management Inventory management Marketing applications Accounting/financial Salesforce automation Customer relationship management Web portal/intranet Human resources Time and billing Enterprise resource planning Payroll Merchant services Percent of Respondents Mid-market business Medium business Small business Very small business Copyright Yankee Group Research, Inc. All rights reserved. 11

12 V. Conclusions and Recommendations Without transforming to an Anywhere Enterprise, departments within the organization can t operate effectively, resulting in low customer satisfaction and ultimately reduced overall business success. After all, a sales executive or customer service agent must be able answer critical questions from a customer, such as When is my order going to ship? or Are there other products in inventory that can meet my needs? However, without integration, those employees would either have to access multiple systems or ask another employee for the answer, resulting in inefficiencies and an unsatisfied customer. The ultimate goal is to understand how connected applications and businesses can improve the ability of organizations to manage their customers, partners and internal processes to create a competitive advantage. Recommendations for SMBs Get rid of the spreadsheets. Future success can only be achieved by gaining a comprehensive look at the business through better information management. Although many businesses feel it is fine to continue using antiquated spreadsheets for customer management, it does not empower insightful decision-making and collaboration. Evaluate SaaS vendors such as Salesforce.com, RightNow Technologies and NetSuite. These vendors offer easy-to-use, feature-rich applications for CRM. NetSuite in particular is worthwhile for SMBs needing a broader suite of applications. NetSuite offers not only CRM, but also order management, e-commerce and back-office applications. Salesforce.com offers a strong platform and ecosystem for integrating its CRM into already existing IT investments and is expanding into other application areas with AppExchange. If opposed to SaaS, evaluate premises-based SMB options such as Sage, Microsoft and Consona CRM. Sage offers a pre-integrated suite of back-office and front-office applications along with the options to use SaaS to start a migration toward a premises-based option. Consona CRM (formerly Onyx, KNOVA and Million Handshakes) is a good alternative to the mid- and medium-market businesses. Microsoft Dynamics leverages well-understood Windows infrastructure and tightly integrates with Microsoft Office. Understand the integration requirements as they relate to the process before implementing the software. Ignoring this step will ensure the automation of a bad process. Many companies make two basic mistakes: One is automating existing processes without evaluating the best ways to refine the process. The other is overcomplicating the use of technologies to meet too many corporate objectives. Sometimes, less is more. Convince management that the integrated strategy is critical for long-term viability. Buy-in is critical there is no magic bullet and it is best done on a case-by-case basis, taking into account individual personalities, backgrounds and hot buttons. Deliver results to management, starting with the revenue portion, and show quick results that lead to more sophisticated integrated results such as profitability. 12 Copyright Yankee Group Research, Inc. All rights reserved.

13 August 2007 Manage accounts effectively to enable collaboration and team selling to close the deal. Simple contact managers are not flexible for most businesses because companies do not have strict one-to-one selling relationships. It is important to enable customer-focused teams because most companies have multiple salespeople, employees and partners working with a single customer. Realize partner selection is crucial. The IT consultant will be crucial to the success or failure of the project. A trusted partner will listen carefully to the client to understand the business specific needs and will offer a solution to match instead of forcing a solution on the problem. Pick a partner that not only understands technology, but also how it applies to business process and growth. Also, look for converged expertise because applications are becoming more tightly coupled with infrastructure, communications and mobility. In addition, understand the relationship will be a long-term one that will extend beyond initial implementation because responsive support will be needed as well as perhaps additional modifications as business needs change. Copyright Yankee Group Research, Inc. All rights reserved. 13

14 VI. Background on the Survey This is the fifth year Yankee Group has fielded this survey. The Yankee Group 2006 US Small & Medium Business Applications and Web Survey is a comprehensive study of the challenges and requirements of, the references for and the adoption of business applications and web hosting, marketing and commerce. The survey examines: Key business challenges and spending drivers Current and future application adoption Selection criteria and satisfaction Web site adoption, goals and satisfaction Online marketing adoption and trends E-commerce adoption and trends We surveyed key decision-makers at SMBs with two to 999 employees in the United States through a webbased survey. SMB survey respondents must have been responsible for evaluating and purchasing applications and web-hosting services. We collected the data in October 2006 from a random sample of US SMB and mid-market companies. It encompassed a total of 45 questions from 722 respondents/completed interviews. There were more than 175 respondents/interviews in each of the four segments: Very small businesses (two to 19 employees) Small businesses (20 to 99 employees) Medium businesses (100 to 499 employees) Mid-market businesses (500 to 999 employees) 14 Copyright Yankee Group Research, Inc. All rights reserved.

15 August 2007 VII. Further Reading Yankee Group Link Research Mobile Solutions Spark Interest for Hosted Applications and Managed Mobility Options, Note, June 2007 Demonstrating Business Value Requires Vertical Positioning, Report, April 2007 Big Blue Helps SMBs See Green, Note, April 2007 James Bond and the Importance of Profiling SMB Users, Note, April 2007 How SaaS, Managed Services and BPO Will Affect Every Company, Note, October 2006 Copyright Yankee Group Research, Inc. All rights reserved. 15

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