CRM and Data Warehousing

The New Dynamic Duo, or Terrible Twosome

A range of customer relationship management (CRM) solutions have surfaced recently in the data warehouse-intensive AS/400 market, from large CRM and ERP vendors to Lotus business partners. The budding relationship between data warehouses and CRM may be tenuous, however, as AS/400 sites seek to leverage their rapidly expanding data stores.

Both technologies have seemingly been immune to the recent Y2K lockdown. Investments in data warehouses have been growing by 46 percent per year, and investments in CRM have grown by 25 percent per year. Nevertheless, the Year 2000 is projected to be a huge spending year for both new CRM and data warehousing initiatives, analysts concur.

Data warehousing and CRM can't survive and prosper without each other. CRM--which covers profitability analysis, customer contact, customer profiling, loyalty, performance, campaigns and sales applications--requires access to customer data from multiple channels, including e-commerce, call centers, direct mail and face-to-face sales. At this point, large companies are each investing an average of close to $4 million a year in CRM systems, from which it will be difficult to demonstrate hard returns on investment, says Aaron Zornes, executive VP with Meta Group (Stamford, Conn.). "There's a lot of money invested in systems that have no ROI at all. Every CFO will gag when they look at these numbers."

"To effectively manage customer relationships and achieve strong e-business outcomes, you have to get that wealth of information stored and managed in back-office applications and data warehouses," says Liz Malis, research director of Benchmarking Partners (Cambridge, Mass.). "That depth of integration provides the information needed to customize sales, marketing and support efforts to best serve each customer. Full integration to the back office is essential for automating the sales force and streamlining customer-oriented processes."

Vendors in the AS/400 market have recently been plunging headfirst into CRM. Lawson Software (Minneapolis) has unveiled a suite of CRM offerings that tightly integrates with its ERP and HR applications. The first module to be available as part of Lawson's Insight II CRM suite is a sales force automation application. This provides another component to Lawson's "relationship management" systems, says Richard Lawson, CEO of Lawson. "Components include customer relationship management, supplier relationship management, vendor relationship management, partners, and even employee relationship management."

In December, SAP AG (Media, Pa.), unveiled six new components of its mySAP.com CRM suite, which support Internet sales, Internet customer self-service, collaboration and sales. J.D. Edwards & Company (Denver) also has jumped into the fray, launching a CRM suite called Customer Service Management System, integrated with its OneWorld ERP system. J.D. Edwards also announced integration with Siebel Sales Enterprise from Siebel Systems (San Mateo, Calif.), the leading vendor in the CRM space.

IBM has been busy promoting CRM solutions in the AS/400 space as well. The computer giant recently announced an agreement with Siebel to jointly market and sell Siebel CRM applications, which support IBM's DB2 Universal Database and are optimized for AS/400, RS/6000, S/390, and NetFinity servers. IBM also recently announced a partnership with Clear Technologies, offering a CRM solution bundled with IBM's AS/400e Dedicated Server for Domino. Clear Technologies' DSD Engage enables companies to share sales information and improve customer focus. The system also interfaces with SAP, Lawson and other ERP vendors.

IBM's CRM subsidiary--Corepoint Technologies--was launched in early 1999 to focus on call centers and customer service operations. While Corepoint's applications have been largely built around the financial services industry, the company plans to offer solutions to any business seeking integrated customer service solutions. For instance, Corepoint has developed and integrated a Java version of IBM's Visual Banker--intended for front-office environments--with back-end data warehouses and marts. Data collected at the front end is integrated into the data warehouse to develop information such as customer loyalty status or other information. The solution uses common components that can also support other channels such as call centers.

Another AS/400-based CRM application announced earlier in 1999 is Prevail Professional for the AS/400, a CRM application developed by Synergistics Inc. (Cincinnati). Lotus and Synergistics have bundled Prevail Professional with Domino Release 5 on the AS/400e. The Prevail Product Suite includes contact management, activity scheduling, opportunity and forecast management, competitive and customer knowledge management.

A long-standing customer contact system--actionware.com--an outgrowth of ActionWare/400, is a Web-based CRM package offered by ActionWare of Emeryville, Calif. Actionware is the same product as its predecessor, only it’s browser-enabled and can be used with or without Internet access.

Some analysts are skeptical about the power of CRM to help a business compete in the e-business marketplace. "Companies have a long history of throwing technologies at problems that can be solved only by changing hearts and minds," says Martin Butler, chairman of Butler Group (Arlington, Mass.). "Many businesses are just not customer-oriented, and installing a CRM system will provide them with little advantage." Plus, the growing commodization of products may make CRM irrelevant, he adds. "Customers will go for the best deal, no matter how much you try to CRM your relationship with them."

One of the key components of CRM is the ability to perform analytics, beyond simply "pulling reports out of a data mart," says Henry Morris, VP of data warehousing and data access at IDC (Framingham, Mass.). "Today's ERP systems automate business processes, but they don't provide the means for businesses to have ongoing improvement." Such analytical capabilities will help provide differentiation from the multitude of companies implementing the same packaged software, he notes. "CRM enables businesses to collect information about customers, track results, analyze the most valuable customers, and build models to analyze marketing campaigns."

Analysts brand these analytical capabilities as business performance management (BPM). "Data warehouse and BPM are basic investments for building and operating a customer-centric business," Zornes points out.

While average large-company investments in data warehouses and marts have jumped to almost $2.5 million a year, it appears the bugs in these systems have been worked out. A survey from Cutter Consortium (Arlington, Mass.) finds that 78 percent of companies surveyed report some success with their data warehousing efforts, while only 4 percent report that their data warehousing efforts were unsuccessful. Analysts point out that the main obstacle to successful data warehouse design results from lack of clear understanding of the decision-support applications--such as CRM--that are supported by data warehouses.

While companies seem to have a handle on data warehouse construction, CRM initiatives are risky propositions. About 50 percent to 70 percent of all CRM implementations--particularly in sales automation--fail, adds Zornes. In fact, Meta Group brands most large companies' current CRM initiatives as being in "serious risk of failure." Most enterprises do not have adequate CRM business plans in place and are severely under spending on the CRM projects. Of the three essential components of a comprehensive CRM ecosystem, major firms demonstrated material progress in the deployment of operational technologies. These include customer-facing applications integrated among front, back, and mobile offices. By contrast, major firms demonstrated weakness in customer collaborative applications, which facilitate post-transaction, relationship building between customers and organizations.

One of the greatest obstacles to CRM successes are cultural, adds Zornes. "It's not a technology issue, but a business issue." As they automate the customer lifecycle from marketing to shipping products, they "fail to capture gaps based on tribal knowledge," he says. In addition, the success of CRM extends to the data warehouse, in terms of companies' capabilities to integrate, cleanse and rationalize data from various applications, says Zornes. The great technical challenge to the process, he notes, is data quality, or the implementation of tools to clean up and rationalize data in disparate data warehouses or marts, such as names and addresses. He reports he has found “little evidence of data quality efforts.” In addition, "data quality vendors are not making a slew of money."