CRM for SME: What s going to happen in the next 1,000 days? By Jay Curry, Founder crm4sme.com

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1 CRM for SME: What s going to happen in the next 1,000 days? By Jay Curry, Founder crm4sme.com During this time of retrenchment, CRM vendors are taking another look at the market among small and medium-size enterprises SME s for short. And well they might. Because the number of potential users or seats is huge. And Microsoft the 2,000,000 pound software gorilla is gearing up to join the game. But before we get down to the nitty gritty, we need to define what is a small, medium or large enterprise means. There are no globally accepted definitions of a "Small" or "Medium Size" Enterprise. Some countries set boundaries at 10, 50,100 or 250 employees. Others set revenue levels of $50, $100 and $250 million. This article uses the CRM-based definitions developed by the portal for users and vendors of CRM solutions in the SME marketplace: Enterprise: a business organization which is empowered to develop, select, purchase and implement its own CRM policies, processes and technologies. Thus an enterprise could be a one-person consultancy, a local corporation, a large multinational, or each of 100 business units in a large multinational. Small Enterprise: employs from 1 to 10 persons (marketers, sales people, service force, etc.) who now use--or would profit from using a CRM system. Medium Size Enterprise: employs from 11 to 100 persons system (marketers, sales people, service force, call center folks, etc.) who now use--or would profit from using--a CRM system. Large Size Enterprise: employs more than 100 persons system (marketers, sales people, service force, call center folks, etc.) who now use--or would profit from using--a CRM system. Using these definitions, some data from the Small Business Administration and guesstimating the number of (potential) CRM users--we come up with some remarkable market potential numbers for the USA (readers may want to extrapolate to other national situations). -1-

Because the number of potential users or seats is huge. And Microsoft the 2,000,000 pound software gorilla is gearing up to join the game.

2 Nr. of Nr. of Potential Nr. Potential Nr. Employees US Co.s Seats per Co. Seats Small , to , to , to , to , Medium , to , to , to , Total , ,146,441 Small Enterprises have a potential of 20,503,199 seats 339, 552 Medium-size Enterprises have a potential of 11,420,537 seats. In other words, the SME marketplace has a potential of about 30,000,000 users.. and that s a lot of bums on seats! And at, say $700 per seat, were talking $20 billion! But is there real gold in all that statistical glitter? To find out, we need to answer two big questions: 1. Do SME owners and managers really believe CRM systems are worth the upfront investment for licenses and technical implementation, plus the effort required to convert their companies to customer centricity? 2. If so, who s most likely to get that business? To answer that question, we have to do some basic segmentation between Small and Medium-size enterprises. CRM FOR SMALL ENTERPRISES Have you ever tried to sell CRM systems and/or consulting systems to small businesses? If so, you have confronted entrepreneurs and managers who are skeptical cost conscious negotiators with one thought in mind: What s in it for me tomorrow? Fancy figures with ROI calculations, presented by young MBA s who have never met a payroll, don t hit the hot button of people whose primary financial management tool is the bank statement. -2-

735 9,146,441 Small Enterprises have a potential of 20,503,199 seats 339, 552 Medium-size Enterprises have a potential of 11,420,537 seats.

3 But small businesses are willing to invest in CRM systems provided that they are inexpensive and easy to install and operate. Witness ACT! that claims to have sold 3.5 million packages often at a cost of less than $100 a seat. (Which makes one wonder how many of those 3.5 million packages are actually being used.). Front Range (Goldmine) and Maximizer also have sold a lot of plastic to small businesses. Plus hundreds of regional and national vendors, But to date no vendor has yet to come up with a CRM killer app which meets these criteria: Very low cost. Very simple to install, requiring no expensive consultants. Very easy to use. And, perhaps most important, does not require expensive face-to-face selling, which eliminates the profit margin on a deal of 1 to 10 seats. But if our calculations for the small business market for CRM solutions are anywhere nearly accurate, no vendor can afford to ignore a potential of $20 billion. And a 2,000,000-pound gorilla is gearing up to grab a lot of that $20 billion MICROSOFT! According to Microsoft, they will roll out a CRM product in Q Aberdeen Research points out in their Market Viewpoint of November 5 last year that Microsoft is well positioned to dominate the CRM small business market. The company already has Windows on 95% of every computer 100,000,000 desktops. That s 95,000,000 Seats! And many of these 95,000,000 seats with a computer are already equipped with the basic building blocks of CRM functionality: Customer Database (Outlook and Access) Customer Communications (Outlook, Word, Explorer) Customer (Financial) Analytics (Excel) Evidently Microsoft s CRM solution will combines these building blocks. But who knows they may also Or add a CRM module to the next edition of Explorer that will interact with an online CRM capability? Microsoft s.net strategy is designed to make available applications online while avoiding the negative ASP image. (Take, for instance, Windows online help facility it is actually an ASP, but Microsoft is smart enough to not call it that..) To get a preview of Microsoft s nascent CRM online capability, check out the marketing applications of bcentral on MSN.net. -3-

Front Range (Goldmine) and Maximizer also have sold a lot of plastic to small businesses.

4 Microsoft s strategic move was the purchase of Great Plains, the vendor of a popular bookkeeping application. Why? Because every company needs computerized bookkeeping to send out the invoices also to avoid problems with the tax authorities. And customer revenue behavior and profitability is a key element of customer analytics. The Microsoft Small Business Manager application based on a stripped-down version of Great Plains will provide a key building block for the Microsoft CRM solution. Conclusion: There will always be room for vendors of CRM solutions for small businesses. But Microsoft s technical capabilities and low-cost/no-cost sales and distribution channels will change the CRM/small business paradigm. CRM FOR MEDIUM-SIZE ENTERPRISES The CRM market for mid-size companies with 11 to 100 (potential seats, according to our definition) is up for grabs. And there is a lot to grab. According to a report by Jupiter Research, "Midsize companies are showing strong demand for enterprise software,... the bulk of the dollars to drive the market to the next level will come from midsize businesses, which are more likely to invest in CRM and other enterprise-grade software. And Jupiter estimates the SME market for CRM to grow to about $3.4 billion by That s why the SOPS Siebel, Oracle, PeoplSoft and SAP have in the past offered light versions of their enterprise solutions, (without a great deal of success so far.) But as the enterprise solution marketplace becomes saturated, they seem to be again gearing up. There are some CRM vendors focused on that segment. SalesLogix is the leader, with about 3,500 sites and 350,000 users.. Pivotal, Onynx and E.piphany are also in the game, plus hundreds of Others are in the race. Finally, the mid-marketing is particularly interesting because many large enterprises are actually a conglomeration of mid-size companies that are empowered to select their own CRM software and design their own CRM processes. This fact of life enables some low-cost/mid-market players to enter the Large Enterprise market, with features desired by big-company users. Reasonable cost Quick to implement Flexible -4-

And customer revenue behavior and profitability is a key element of customer analytics.

5 For instance SuperOffice, a $600 per seat European player, has more that 1,000 users at insurance giant Aegon. And Commence RM, similar to SuperOffice except US-based, counts business units of Shell Oil, Unilever and Brinks among their clients.* Conclusion: The next 1,000 days in the CRM mid-marketplace promise will be exciting. It s too early to predict the winners, losers and also-rans. * For a report comparing SuperOffice and Commence RM, click to the software section of -5-

clients.* Conclusion: The next 1,000 days in the CRM mid-marketplace promise will be exciting.

Management Alert: Microsoft Will Be a Strong Force in the CRM Market

IGG-02052003-01 E. Thompson, J. Outlaw Article 5 February 2003 Management Alert: Microsoft Will Be a Strong Force in the CRM Market Microsoft is poised to have a major impact on the customer relationship