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Quocirca's Straight Talking: Tune in to the customer
And watch the revenues roll in...

By Quocirca

Published: Friday 25 June 2004

Is the ERP and CRM space dead? Not a chance. It just looks a bit older and more mature than before. The best way to take advantage of it, says Quocirca's Stewart Nivison, is to listen to the customer.

Over the past 10 years, ERP and CRM customers have learnt pretty much every vendor trick in the book and have a solid understanding of what they want and why. Punter market awareness, coupled with the general slowdown of IT spending in recent years, has resulted in some vendors arguing that the ERP and CRM space is dead.

This is obviously not the case. But it's amazing how many vendors and resellers have failed to 'tune in' to the market changes and are still out there wasting company resources on outdated 'go to market' and delivery models.

These businesses need to accept that today's ERP and CRM market is mature, which means that rather than telling customers what they need, vendors need to listen to what the customers are asking for and act as the translator between what the customer is saying and what they actually need in terms of technology.

For the few ERP and CRM vendors that are tuned in to customers, there is a great opportunity in both existing and new business sales of core products. This does not apply just to players with critical mass in terms of customer base, such SAP, Microsoft, Oracle, PeopleSoft and Siebel. But on the fringes of ERP and CRM, the same opportunity applies to third-party vendors of complementary solutions.

Take this example of a tuned-in reseller. It's a well-established services partner for PeopleSoft, who in 2001, at the lowest ebb of the ERP market slump, decided to sell as well as implement its software in the UK. What the company had going for it was a group of 80 consultants who were at the top of their game and had the necessary time to dedicate to the market. On the flip side, the consultants were all contractors and the company did not have a complete project-implementation reference base.

To find that first bridgehead project, the firm decided to review its core competencies and put a market execution plan together. It developed a set of key market messages and tested those messages on existing customers. The results were shocking because it proved the company was completely off beam. However, the customer feedback enabled it to develop an appropriate 'go to market' model as well as sales and delivery processes, procedures and governance.

This resulted in the reseller finding the maximum amount of planned projects in what was a quiet and mature market, more effectively managing those identified planned projects, winning the software race in the selection process and clearly defining all aspects of the project scope.

How the PeopleSoft reseller achieved this was by realising that these mature customers were second- or, in some cases, third-generation users of enterprise systems and had last embarked on a selection process about five years ago. The customers knew what they wanted and why, but could not easily see the best way of going about it. This was the key. What the customers needed was a road map of how to successfully evaluate and implement enterprise solutions.

As a result, the PeopleSoft reseller designed a sales and delivery process that highlighted the company's consulting expertise, best positioned them to win the software race and ensured they could set up a detailed project-scope definition. They renamed the sales process an 'evaluation process' and ran seminars for those prospective customers who were planning an evaluation within the next 6 months.

By the time the prospective customers' evaluation started, the steps dictated by the customer were, in almost every case, a carbon copy of the PeopleSoft reseller's sales process. By 2002, this company was the top PeopleSoft reseller in the UK, generating 60 per cent of the UK reseller licence revenues.

Let's look at another example, this time of a tuned-in third-party complementary solution vendor. This financial reporting tool company decided in 2002 to break into the PeopleSoft market after researching the customer requirements in this space. The vendor identified a niche in the AS400 legacy user base - Enterprise World customers, specifically for GL enquiry and reporting functionality that the core product could not offer.

At the same time, the customers' CFOs were being told by the board, along with their counterparts in the rest of the market, to get more from their enterprise systems to help drive down operational costs and create strategic differentiation.

Within two years, this financial-reporting tool vendor went from zero to building a customer base of more than 100 companies.

The above examples illustrate that vendors do not need to be major players to enjoy the revenue opportunities available in today's ERP and CRM space, as long as the vendor is prepared to tune in to the customers.

The big question now is: how much will ERP and CRM customers spend on licences in the future?

In a Quocirca research study completed in January, involving a survey of more than 100 European corporate SAP accounts, 50 per cent said they will maintain their spending levels on SAP licences during the next two years and a further 39 per cent said they will increase their spend. Only 6 per cent of SAP users said their licence-spend would decrease.

The bottom line is that the ERP and CRM space is not dead, but alive, older and wiser, with a massive replacement opportunity in the SME space over the next few years. There is also plenty of opportunity around the fringes. For vendors of core or fringe solutions, the key to success will be putting themselves in the customers' shoes.