CRM may yet bear fruit in the SMB market

by Seth Fineberg

New York - Once a tough sell to large enterprises due largely to its complexity and a general misunderstanding of the technology’s purpose, customer relationship management may now be ready to flourish in the small and midsized business environment.

Forty-five percent of SMBs are expected to buy into tools like CRM in 2003, which is up from a mid-2002 survey that found less than 20 percent of SMBs surveyed were considering a CRM purchase, according to Forrester Research.

A separate information technology spending study, conducted by business technology publication “CIO Insight” and New York-based Advantage Business Research Inc., noted overall that business spending for packaged e-business applications - particularly CRM -would be up by 12 percent this year. The survey further found that small businesses are increasing their IT budgets, while large ones are cutting back.

Developers of other SMB business applications, particularly accounting applications, have taken notice. Those with CRM products in development or marketing efforts afoot include Microsoft Corp., Best Software, Accpac International, Softline, NetLedger and SAP.

Microsoft’s MS CRM, released in March, has had, by far, the greatest impact on CRM’s push into the SMB space, say industry analysts - and even Microsoft’s competitors.

“We have a huge respect for [Microsoft], and just their presence in CRM will bring a lot of awareness,” said Tim Fargo, general manager of Best Software’s CRM division. The SMB space is “under-penetrated,” he added.

Microsoft’s CRM product is part of a broader effort in which it expects, by 2010, to garner $10 billion in annual revenue from the SMB market, or about one-third of its fiscal 2002 revenue. Microsoft’s SMB portfolio also includes the Great Plains, Solomon, Navision and Axapta financial applications.

MS CRM was officially released in February and it is already gaining interest among users and resellers. By mid-March, the company claimed that over 600 resellers had signed on to sell the product and that several hundred orders were placed.

Andy Vabulas, president of Atlanta-based I.B.I.S, a major Microsoft reseller, noted that demand for MS CRM is indeed on the rise. “We had been running several seminars [about CRM] over the past few years and we couldn’t get people there. And now, we are getting the attendance with qualified pros-pects,” he said.

Microsoft has provided I.B.I.S. and other resellers with an implementation tool kit so that they can train resellers and get to market and deliver rapidly. Vabulas noted that in the past, I.B.I.S. has had to develop such tools itself.

While Version 1.0 may not match its more seasoned and sophisticated competitors, Microsoft is confident in the new product’s many benefits, such as its integration with Outlook and other Microsoft products.

“I would say customers are buying [MS CRM] over any others based on their individual CRM needs, but they also want to know a company is going to be around and committed to this space unlike others that have come and gone,” said Holly Holt, senior product manager of CRM strategies at Microsoft Business Solutions.

However, some who have seen and even plan to sell MS CRM, feel that the new product has some issues to work out.

Rick Spector, president of Cleveland-based CBiz Technologies Inc., the affiliate of accounting industry consolidator Century Business Services Inc., has sold various CRM products for the past three years. He agrees that MS CRM v. 1.0 is simple to use and will be powerful in a few versions, but not as it is now.

“For one, the standard version could be bundled more, but the main challenge I see [with MS CRM v. 1.0] is that it requires a new infrastructure to run on top of Internet Explorer,” said Spector. “You need to run Windows 2000 with Active Directory, and not everyone has that yet.”Holt believes that Micro-soft’s CRM market challenges are no different from its competitors and that now the company simply wants to focus on “working with customers on their strategy.”

Other CRM product vendors are encouraged by Microsoft’s entry, largely due to that software giant’s marketing power.

“Let Microsoft raise awareness for CRM. We just want to deliver a nice, complementary [CRM] product that does what it is supposed to do,” said Steven Cohen, chief operating officer of Softline Ltd., the South African parent of Softline Software. Softline plans to add its Resolve CRM to its BusinessVision midrange accounting product line this spring and make it available with its higher-end accounting line, AccountMate, in September.

Both Pleasanton, Calif.-based Accpac and Best report increased SMB interest in their respective CRM products. While Accpac significantly increased its CRM commitment in the past two years, Best claims that it’s been involved with CRM since the launch of its ACT! product 15 years ago.

Best’s parent, Sage, made a commitment to the CRM market in a big way when it acquired CRM vendor SalesLogix’s developer, Interact Commerce Corp., in 2001, when Best was still mainly known as the owner of the former State of the Art accounting software company. And though a branded CRM division was only recently created, Fargo says that CRM has long been a key product in the company’s overall strategy. “Sage Group were really visionaries when they acquired Best, ACT! and SalesLogix. They understood CRM would be a strong compliment to back office businesses solutions.”

Going forward, Best will try to leverage its ownership of two well-known SMB CRM brands. “We constantly remind ACT! customers that the next step in integrated CRM is moving to SalesLogix,” Fargo said.

To further validate this point, Best recently created a customer migration center designed to support customers as they consider new or different platforms for their businesses, and help them through their decision-making process.

But success has not come easy for any CRM vendor and each realizes that there is much work still to be done.

“Historically, there has been a lot of hype and confusion about CRM and we have used our channel to help overcome that,” said Ivan MacDonald, senior vice president and CRM “evangelist” at Accpac. “Our channel wants real stuff that adds real value at a really good price, better sales forecasting, and to deliver good value propositions. We intend to deliver that.”

Accpac has acquired and formed alliances with other vendors to create and grow its own CRM line. Last year, it acquired developer eWare Ltd., the original developer of the vendor’s eCRM product, which Accpac used to privately label.

MacDonald, eWare’s former president and chief executive, noted that reseller training remains the key to their success. His company has spent up to six months on intensive training with business partners, and Accpac now encourages its resellers to attend weekly “Webinars” to stay abreast of technology changes and selling issues.

Best has also come to rely significantly on its channel partners and acquisitions to move forward in the SMB market. Its strategies include encouraging accountants and VARs to become referral partners for CRM.

However, CRM resellers often hear SMBs question why they need to spend the money to integrate a new system now. Others still just want to know more about how buying a so-called CRM solution won’t actually be more of a problem.

“I can’t stress enough how education and awareness are still very key right now for CRM,” said David Cieslak, principal at Encino, Calif.-based reseller Information Technology Group, which handles products from Best, Accpac and Microsoft.

CRM products do not yet represent a large portion of Cieslak’s sales revenues, but he is hopeful. “Talk to me at the end of the year. It should represent a more meaningful portion [of our business] by then,” he said.

New York-based Net@Work, a reseller for Best and Accpac, has seen its CRM sales increase. But co-owner Ed Solomon admits many businesses aren’t convinced that they need it.

“Sales people [at SMBs] can’t be pushed, they need to have someone leading them and reminding them how good it’s going to be in the long run,” he said. “People need to understand the focus of CRM is increasing revenues. They are excited once they get going on it, but it often takes time to get there.”

Even some analysts agree that SMBs still need some convincing that CRM is for them, particularly among smaller businesses that do not see the need for software to help manage their customer relationships.

“As a small business owner, if you want to grow to be a big business - then, yes, you are going to need CRM software. Beyond that, I question whether CRM is something that is a must-have,” said Josh Greenbaum, an analyst at Daly City, Calif.-based Enterprise Applications Consulting. “Microsoft CRM is probably going to be favored initially [by small businesses] because it is simple, it will integrate well, and it is Microsoft.”

Other analysts are betting that CRM products designed from the ground up will do a better job at serving the SMB market, even over the supposedly simplistic MS CRM, due to their pay-as-you-go model versus the often-hefty license fees that are often associated with the box products.

These so-called Net-native companies primarily include NetLedger (marketer of the Web-based Oracle Small Business Suite), salesforce.com and Upshot.