Industry Research Overview for CRM
& Internet eNabled Call Center
This valuable research overview was provided by Magic Software. Its a large document and I have
attempted to take the scrolling out by providing hyperlinks to the different sections.
Niels Kjellerup, Editor 23 May 2000.
The Linux Market
The CRM Market
Goldman Sachs study: 2B or not 2B
- According to a survey by Evans Marketing Services with more than 600 software
developers in North America, 23% of software developers who do any Internet work are now
spending 50% or more of their time working on corporate Web portals for internal use. This
was more than twice as many as were working on any other category of Internet-related
activities, including Web portals for external use and e-commerce. In addition, the study
found that 56% of all developers expressed interest in a suite of tools and ready-made Web
portal infrastructure for Java. According to Jane Garvin, vice president of Research for
Evans, "the real body of Internet development is taking place right now behind the
scenes as corporations discover how to use the Web to make their own operations more
efficient. Most portals are never seen outside the individual corporate structure."
And now, with many analysts pointing to near-term doom for many e-tailers, optimism
seems to be shifting to B2B e-commerce. According to a study by The Yankee Group,
US B2B is estimated to reach nearly $2,780 billion by 2004, up from $740 billion in 2000.
The Yankee Group foresees steady B2B growth that will reach $1.2 trillion in 2001 and will
double again by 2003.
- According to Computer Economics, only 6 percent of e-commerce will be transacted
in the developing world this year, and this figure will only rise by one percent by 2003.
The slow growth potential for e-commerce in the developing world is attributed to high
access costs and a lack of infrastructure. Analysts say that it will take at least a
decade before e-commerce becomes a truly global phenomenon.
- According to Competitive Media Reporting. Siebel Systems ranked as the 18th
top newspaper advertiser in 1999, spending approximately $5.4 million.
THE LINUX MARKET
The expectation of deploying Linux apps by development and IT managers in large
corporations increased by 75% during the last months of 1999 and the percentage of
companies running Linux increased by 95%.
- When more than 400 IT or development managers at corporations having more than 2000
employees where asked by Evans Marketing Services in May 1999 if they expected to
deploy any Linux apps in the next year, only 16.5 percent said they did; however, 6 months
later, 29% said they did.
- The number of companies running Linux on any of their servers increased from 17.5% in
May 1999 to 34.2% in December 1999 a 95% increase. While this number includes all
companies with any servers running Linux, the number of companies running Linux on more
than 25% of their servers increased from less than 2% in May 1999 to almost 13% in
December. (Source: Evans Marketing Services)
- Although many early adopters have been in education and research labs, IDC notes
that Linux users are most concentrated in the computer/IT industry (particularly ISPs and
software developers) and educational institutions. IDC expects that over time, Linux
servers will pervade all vertical markets.
Linux Server Sites by Industry, 1999
Software Supplier/Developer 17.3%
Systems Hardware Supplier 7.2%
Systems Integrator/Reseller 6.7%
IT Consulting/Other IT Services 6.2%
Engineering Services 5.1%
Professional Services 4.6%
Other Industry 10.3%
(Source: IDC, March 2000)
- Within organizations, IDC finds that Linux servers may be used for almost any,
but not necessarily all, purposes. Most frequently, they handle Internet-related
functions: More than 40% of all spending for Linux servers in 1999 was for applications
driven by the Internet. In contrast, 15% and 19% of spending for Unix and NT servers,
respectively, was Internet-related.
Primary Function of Linux Servers Installed at US Sites, 1999
Web Server 42.1%
File/Print Server 26.0%
Email Server 23.2%
Domain Name Systems 15.3%
Application Development 8.1%
Application Server 6.3%
Systems Management 2.1%
Technical Apps 1.1%
(Source: IDC Linux Survey, September 1999)
- The primary function of Linux in US IT sites are Web, file, print and domain name
systems functions. Online transaction processing, data mining and other compute-intensive
services are not ported to Linux as often in the private sector, but no one should assume
they are immune, according to IDC.
- Given that the most popular Linux uses tend not to be extremely demanding, IDC finds
that a typical Linux server configuration consists of a single, Intel-based CPU, 10GB
disk, less than 500MB memory, and usually costs less than $3,000.
- Based upon a March 2000 research study conducted by Evans Marketing Services consisting
of in-depth interviews with more than 300 Linux developers, it was found that Linux
developers need tools. Of 11 tool categories, only two (compilers and editors) were rated
as adequate by more than 75% of the developers. Judgments on other categories, such as
debuggers, profilers, modeling tools, error detection tools, GUI frameworks, testing tools
and code management tools ranged from slightly less than 50% rating them as adequate all
the way down to only 10%. Over half of the Linux developers are still predominantly using
command line tools and utilities.
- In addition, the study found that 87% of Linux developers did not care if the tools they
used were open source or proprietary. "There is a huge opportunity here for a vendor
to fill this market need," said Janel Garvin, vice president of Research for Evans.
"Linux has shown fast growth up to now, but development tools are enormously
strategic to an operating system, and there is a crying need for tools if Linux is going
- A December 1999 survey of 300 IT managers by InformationWeek Research
found that 26% of respondents use Linux, up from 14% in March 1999. Most use Linux for Web
or intranet servers, but the survey revealed growing use of Linux for database,
e-commerce, and other server-based applications as well.
- In addition, InformationWeek found that Linux is particularly attractive for
small- to medium-size companies because the basic kernel is free and carries no per-user
For Which Applications Are People Using Linux?
Web or intranet server 70-80%
Application development 55-60%
EMail or messaging host 40-45%
Network file and print 35-40%
System management 35-40%
Network management 35-40%
Server farm 30-35%
Ecommerce server 25-30%
Thin servers 25-30%
Enterprise resource planning 15-20%
(Source: InformationWeek survey of 300 IT managers)
- According to Stacey Quandt, an analyst at the Giga Information Group, many
corporate managers, however, are reluctant to use Linux because it appears to lack a
traditional, coherent support structure. Also, Linux currently does not scale beyond 8
processors, does not support databases greater than one terabyte, and has no consistent
GUI for desk-top installation.
- George Weiss, research director at the Gartner Group, says that Linux will evolve
into a more fully functional enterprise operating system by 2001.
THE CRM MARKET
- According to a recent research report from ActivMedia Research, websites focusing
solely on quality, price, convenience and product availability, which are now considered
"givens" online, are missing the boat in terms of building a loyal customer
following. Overall, the Web has become an excellent selling vehicle; however, vendors must
pay attention to high-leverage online opportunities where consumers are not yet well
served by established websites. High-leverage means that if a new entrant or existing
vendor can excel in particular performance dimensions they will stand out against the
field and thus are more likely to be in a position to take market share.
- ActivMedias research goes on to point out that Dell.com is the top e-commerce
revenue generator reaching $5.0 billion. Yahoo.com is at the front of the line with
more than 32 million unique site visitors. And VictoriasSecret.com, one of the most
watched e-commerce launches during 1998, has grown a phenomenal 8900%. However, from this
point forward, success online will depend on success behind the scenes as companies
compete for customer loyalty. As e-businesses are forced to fund operations through
profits instead of venture capital, those that focus on merchandising, customer service,
inventory control, delivery systems, and problem resolution should have a leg up for
Benefits of a CRM Strategy
(Source: Coopers & Lybrand Survey of 800 North American companies)
Benefits % of Respondents Reporting Improvements
- According to Frost & Sullivans latest research, traditional call
centers are evolving into "next generation multimedia contact centers"
amorphous all-in-one centers for lots of different kinds of customer interactions. The new
technologies allow companies to integrate their websites and their call centers, thus
enabling a web-browsing consumer to interact in real time with a customer service
representative. They predict this market will bring in more than one billion dollars in
revenues by 2006, a significant increase from the $111.8 million reached in 1999. However,
they add that companies are likely to delay their purchase of integrated web/call center
combos because they are afraid of significant initial increases in operational costs and
are unsure whether they can rely on IP for customer relationship management apps. They
cite the following industry sectors that currently are leading the market in integrating
these systems: financial services, telecommunications, travel, hospitality and healthcare.
- Frost & Sullivan also have released the results of a recent end-user satisfaction
survey that indicates a distinct lack of product maturity and cost-effectiveness, as well
as general disgruntlement about performance and capability of CRM solutions available.
According to Frost & Sullivan, "as vendors begin to discuss their solutions in
terms of the next wave of eCRM, the market is open for any vendor of sophisticated, yet
sensibly priced offerings." The study emphasized that the current crop of vendors
falls some way short of this. Other highlights of the survey include:
- While end users expressed relative satisfaction with the technology, the pre-sales
consultation and post-sales service they received from their vendor could be improved. One
of the crucial factors in this context was price.
- The consensus among respondents was that CRM products were overpriced. However, CRM is
an explosive market and prices are anticipated to somewhat decline in the mid-term.
- "Expectations have been raised through the high price tags attached to leading CRM
products. Such high prices are not uncommon in emerging markets because the competitive
advantage offered by the product lies in its ownership. When mere ownership of the CRM
solution fails to provide that competitive advantage sought by users, they will look for
complete out-of-the-box systems, improved and wider scopes of functionality, and price
reductions in order to achieve more rapid returns on investments and better services from
vendors. Indeed, users will be looking for all the elements of a competitive market that
are lacking in the vendors of CRM at present," said Frost analyst Andy Tanner Smith.
- The vast majority of respondents that indicated that they were already using a CRM
solution also implied that they were either in the process of expanding their solution or
looking to enhance it in the near future. Most interviewees suggested that they would
return to their current vendor. This means that a fifth of users would consider looking
around for more suitable options, mainly driven by discontent with their current CRM
- Siebel Systems currently has leadership of the overall CRM market and is set to continue
to lead in total sales.
- Products being touted by vendors as complete solutions fail to provide the features that
clients require. Many vendors offer base products rooted in salesforce and marketing
automation or customer service technology and add functionality through third vendors.
- The integration between disparate technologies is of key concern to users and potential
- A recent study by Cahners In-Stat Group estimates that some 252,000
Websites will use eCRM applications by 2004, with eCRM being deployed predominately on
retail business-to-consumer sites. The In-Stat research also reveals:
- The potential eCRM market is huge. Approximately 1,600 out of 95,000 medium to large
business Websites currently are using more than one eCRM application.
- By 2004, the total market for eCRM will reach $1.8 billion.
- Where many on-line businesses were initially enamored with traditional CRM applications,
they are beginning to re-evaluate the efficacy of these technologies to meet their
specific Web-based business needs.
- A small group of vendors whose core business is Web-based customer interaction
technologies are taking the lead in the eCRM market. However, some well-established CRM
heavy-hitters such as Oracle, Quintas and Interactive Intelligence are likely to enter the
eCRM market in the near future.
- The Yankee Group projects that the eCRM market will grow $4.5 billion in 2000.
BIZRATE.COM STUDY OF 12,700 ONLINE BUYERS
- Shoppers contacting customer support are less than satisfied with merchants
customer support efforts.
- Buyers rated 10 key service attributes based both on merchant performance and importance
to the consumer. When merchant performance is compared to buyer importance, customer
support consistently rates as highly important to buyers, but is poorly executed by
10 Key Service Attributes & How They Rate
High Importance, Low Performance
- On-time delivery
- Product information
- Level and quality of customer support
High Importance, High Performance
- Ease of ordering
- Product prices
- Production selection
- Product representation
- Product shipping and handling
Low Importance, Low Performance
- Website navigation and looks
Low Importance, High Performance
- What is not immediately obvious here is what online merchants are not offering. 30% are
not offering live phone support, 65% are not offering online order tracking, and 87% do
not offer 24-hour support.
- Given the benefits of shopping online, including being able to buy at any time of the
day or night, the incorporation of online order tracking and 24-hour customer support will
become major points of differentiation in the near future. Customers expect these types of
offerings on merchant sites. More than half of buyers queried expect e-tailers to offer
online order tracking systems, while almost half expect 24-hour live customer support.
- Buyers who had contacted customer support preferred doing so by phone (52%) rather than
by email (40%). Among those who did not contact customer support, email (50%) would be the
preferred method of contact, followed by phone (39%). Few (10%) of those who did not
contact customer support would actually want to use instant messaging to do so.
- When surveyed about how they would like merchants customer support to respond to
their requests, consumers preferred to receive answers by email (66% for those who did
contact, 74% for those who had not contacted).
- Overall, the main reason for calling customer support was to check on order status.
Also, those who contacted customer support spent 46% more per order on average than those
who did not.
Reason for Contacting Customer Support
Late delivery on order 24%
Get status of backordered items or out
Of stock items 21%
Incorrect, incomplete or damaged orders 16%
Ask question about an item for sale 15%
Get general information or a catalog 13%
Cancel all or part of an order 9%
Provide credit card number or other
Incorrect charges on bill 5%
Get help on using or assembling an order 2%
- Buyers who contacted customer support rated merchants low overall on all
attributes as well as on overall satisfaction.
- Of the 10 service attributes, level and quality of customer support had the highest
correlation to repeat purchase behavior, indicating that it is the most important driver
behind a buyers likelihood to purchase from a merchant again.
- Among those who contacted customer support, 18% are highly unlikely or unlikely to buy
again from that memrchant. If these consumers hold true to this claim, a memrchant stands
to lose 5% of its annual revenues and 4% of its customer base every year not to
mention long-term loss of repeat business.
TECHGUIDE.COM WHITE PAPER ON CRM
A recent white paper discussing CRM from techguide.com provides some interesting
- Service leaders (companies that provide superior service to their customers) enjoy the
following advantages over their low-service competitors:
- They grow twice as fast
- They experience a 6% annual market share growth vs. a 1% share loss (they take customers
away from their competition)
- They can charge 10% more for their products and still take customers away
- Because of this, they enjoy a 12% vs. 1% average return on sales
- The numbers definitely show that the practice of providing superior customer service
increases shareholder value and creates a competitive advantage that is worth the
- Industry statistics show that 68% of customers who walk away from a relationship with a
vendor do so because of poor customer service, and this happens at all levels
- When you look at the costs of sales, there are similar reasons for managing
- Business is sold to new clients after an average of eight to ten calls
- It is sold to repeat business after an average of two to three calls
- When you factor in the amount of time spent on researching the best way to approach new
clients, and preparing account plans, etc., the statistics show that it is anywhere from
five to 15 times more expensive to acquire a new customer than it is to retain an existing
- In financial terms, this means that a 5% increase in customer retention can result in a
25% to 85% increase in profitability
- Retention rates double from 40% to 80% after inception of a CRM program and the amount
spend by each customer per year also increases dramatically
- Looking at a three year time span, starting with year one of the relationship, customers
double spending in year one, triple spending in year two, and spend three and one-half
times as much in year three. For example:
Year One Year Two Year Three
Program $16.00 $32.00 $40.89
Program $35.00 $96.00 $141.53
- The distribution of estimated call management savings for collections call centers is
Cost Area Percentage Call Savings
Toll Savings 41.7%
Reduced Abandons (toll) 3.0%
Staff Savings (reduced agent
Reduced Abandons (staff) 13.5%
Not Recalling Abandons 4.0%
- Staff savings represent the largest portion of the total. The rest is made of toll
savings. This is primarily due to the treatment of callers and the excessive time they
spend in queue, on hold and being transferred. The savings are a graphic illustration of
the tangible benefits associated with automating customer-centric processes and
intelligently managing work across the enterprise, which also will result in dramatically
better treatment for all customers.
- The areas that have the greatest impact on the success or failure of a CRM initiative in
an enterprise include:
- Ability to integrate interaction and fulfillment processes
- Anywhere, anytime, anyhow customer service
- Intelligent work management
- Easy access to information
- Rapid application, design, development and deployment
- Customizable tool kit including process definition tools
- Flexibility and agility
GOLDMAN SACHS STUDY: B2B: 2B OR NOT 2B?
- Survey conducted with CTOs at 41 Fortune 1000 companies. Respondents represent the
Finance/insurance/real estate 30.8%
- Overall, they believe B2B will have enormous economic significance, reaching $1.5
trillion in aggregate revenues in the United States in 2004 (representing about an 11%
- 54% of enterprises are now purchasing on the Web, up from 46% 6 months ago. More than
87% of enterprises indicated that, if they are not currently buying on the Web, they will
within one year, up from 86% six months ago. Only 7% say they will never buy on the Web,
down from 11% six months ago.
- Of those that purchase on the Web, 87% use it for indirect materials (office supplies),
52% for maintenance and repair items, and only 35% for direct materials. In GS view,
more complex technologies are required to capture widescale direct spending, the crown
jewel of B2B.
- Betweem 2000 and 2001, expenditures on Internet-specific projects should increase at
least 25% on average. The total dollar amount expected from revenue, expenses and support
of e-commerce transactions should also increase from 2000 to 2001.
- More than 42% of enterprises will spend more than $500,000 on B2B software in 2000, up
from only 18% 6 months ago. Enterprises are spending less on the simple front-end (Website
and procurement), and more on complex functions (e-markets, supply chain, distribution).
41% of enterprises are increasing B2B spending specifically to accommodate customer
demand, up from 31% 6 months ago.
- 42% of enterprises plan to join e-markets, up from 36% six months ago. Over 50% of
respondents indicated they would develop an e-market internally, up from 53% six months
- Only 48% indicated that B2B had unclear ROI, down from 64% six months ago. The main
constraint for respondents was that they were waiting for a new generation of solutions to
evolve before they embraced B2B.
When do you expect to do any type of corporate purchasing on the Internet?
In 2 to 5 years 4.70%
In 1 to 2 years 2.3%
In 6 months to 1 year 20.9%
In less than 6 months 11.9%
Now/already purchasing 53.5%
In the next 3 to 5 years, approximately what percentage of your organizations
procurement will be spent over the Internet?
Great than 75% 8.6%
Has your organization ever sold or bought a product or service through an e-market
What is the total dollar amount that you estimate your organization will spend on
e-commerce software and services in calendar year 2000?
Less than $100K 34.1%
$100K - $499K 23.7%
$500K - $1M 13.2%
$1M - $3M 15.8%
More than $3M 13.2%
If you do purchasing on the Internet, do you use it for:
Indirect Products (i.e., office supplies)
Maintenance and Repair Items
Percent of IT budget spent on Internet-specific projects in 2000:
Less than 10% 34.1%
Do you expect the total dollars from revenue, expense and support of e-commerce
transactions to increase, decrease or stay the same in 2000 to 2001?
Stay the same 20%
If total dollars increase, by what percent?
Less than 10% 21%
Great than 75% 12%
Percentage of e-commerce budget internet-based in 2000?
Less than 10% 34%
Greater than 75% 15%
The following categories indicate the percent of respondents that expect their
organizations e-commerce spending to INCREASE from their 1999 budget to their 2000
Supply chain 65%
Which one of the following three factors would most influence your firm to increase
your rate of e-commerce spending from 1999 to 2001?
Expand customer base 40.9%
Response to a competitor 20.5%
Gain competitive advantage 46.7%
Do you have an XML-enabled solution in your e-commerce architecture?
When do you expect to deploy an XML-enabled solution?
In the next 3 months 5%
In 3-6 months 30%
In 6-12 months 20%
In over 12 months 40%
Who is your XML vendor?
Web Methods 26.6%
BizTalk (Microsoft) 14.3%
Are you an EDI user today?
Which of the following is your EDI provider?
Sterling Commerce 25.0%
GE Information Systems 12.5%
Harbinger Corporation 20.8%
Do your current plans include partnering with an existing B2B e-market or online
Do your current or future plans include developing your own e-market or online
Do you currently use e-markets for
. Pricing transaction, such as getting quotes, bids or participating in auctions?
. Accounting transactions, such as shipping, payment, purchase orders and involving?
. Catalog management, such as submitting product cross-references on a catalog?
. Customer/supplier management, including credit checks and vendor performance
Constraints preventing you from moving ahead with Internet-enabled solutions?
Unclear return on investment 46%
Constituents do not get it 44%
Complicated tech solutions 33%
Waiting for the next
Generation of solutions 28%
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