Customer Relationship Management in SMBs

Jim Zimmerman

We are pleased to be partnering with Analyst Perspectives and offering an excerpt of their high valued content. Click here to download the full report.

Large enterprises have recognized the benefits of CRM and have been using CRM software and solutions for the last 10 years. SMBs have also realized the importance of CRM, and are increasingly considering investing in it. Analysts are unanimous that SMBs require CRM as much as their larger counterparts do. In fact, some analysts believe that SMBs require better CRM, as their customers expect higher levels of service from them.

Although CRM has entered the consideration set of many SMB IT decision makers, there are several challenges that need to be overcome. Key challenges include cost, as well as issues regarding user awareness and evaluation of available CRM options.

There has been considerable debate in the industry regarding the cost factor. It is agreed that SMBs are not in a position to invest much in a CRM solution. Some industry watchers automatically associate this with a proportionate stripping down of some non-essential product features from an existing CRM solution and presenting it to the SMB market as a low-cost alternative. However, some analysts disagree, believing that SMBs do prefer additional features in their CRM software and that a simple user interface is paramount in their decision to invest in the technology.

Another trend in the SMB CRM market, which stems directly from the cost factor, is the increasing preference for hosted CRM solutions. On-demand CRM, or CRM through the SaaS model, does not require SMBs to invest considerably on their CRM initiatives, naturally making it a better option than on-premise deployment. The SaaS CRM market is gaining traction all over the world, especially in Asia. Experts believe that this is mainly due to the fact that SMBs in Asia are not burdened with the legacy of on-premise CRM solutions, leaving them open to hosted applications. Analysts predict that the next big thing in the Asian SaaS CRM market will be mobility.

SMBs' growing interest in CRM has opened up a new market for CRM vendors - both traditional CRM vendors and newer SMB-focused ones. Competition is heating up in the market with established CRM vendors such as SAP, Oracle, and Amdocs making a beeline for SMB dollars through customized offerings. Vendors are trying to outcompete each others with additional features such as Business Intelligence (BI), Web 2.0 tools, mobility, and search engine marketing; all integrated into their CRM offerings. SAP launched its offering for mid-market customers - BusinessByDesign - in September 2007. Microsoft also joined with Dynamics CRM Live.

Hosted CRM is a hot favourite among SMBs. However, there are still some concerns. For instance, the large number of SaaS CRM vendors operating in today's market, is likely to confuse SMB decision makers. Also, there are concerns around data security and vendor ability to support a possible future migration to on-site CRM as the organization grows in size. With big IT brands entering the hosted CRM space, especially for SMBs, we believe that some of the doubts associated with hosted CRM will be successfully dispelled.

On the whole, we believe that there is considerable future potential for the CRM market catering to SMBs. We believe that as the market matures, the small SMB-focused vendors are more likely to win than the established ones. Small vendors will not face the challenge of having to tweak an existing CRM solution for the mid-market - they can start with a clean slate and the results are likely to be more appealing to customers. Large vendors will, of course, play their role in defining and structuring the market and spreading awareness about CRM in SMBs, thanks to their strong marketing muscle.

Customer Relationship Management (CRM) helps firms drive growth, profitability, and a better customer experience.

Although Fortune 500 companies have been using CRM for about a decade, small- and medium-sized businesses (SMBs) are only now realizing its importance and this is fuelling global demand for CRM software and solutions. Vendors have also realized the potential of this new market and are trying to understand the CRM requirement of SMBs in terms of product features, pricing, packaging, and deployment. Affordability and ease of deployment are the two key factors that vendors need to keep in mind while designing CRM solutions for SMBs.

The challenges that SMBs face in implementing CRM solutions include software complexity, high total cost of ownership, and lack of strategic support for CRM installations. However, the global CRM software market is predicted to grow significantly due to increasing deployment of CRM solutions in new vertical sectors.

Our partners at Analysts Perspectives present an overview of the CRM market for the SMB sector based on analyst observations, opinions, and predictions.

Some key findings include the global CRM software market was worth USD 3.6 billion in 2006 in license revenues alone and the market is expected to grow at a compound annual growth rate (CAGR) of 10.5 percent between 2006 and 2012, nearly doubling in size to USD 6.6 billion by 2010; currently, the global on-demand CRM market is estimated to be USD 1 billion; and according to estimates, SMBs made up one-third of all CRM licenses sold in 2007. This sector is expected to account for more than 42 percent of the CRM market by 2012.

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