2007; CRM 2.0 Gets Going

OK, neck out wide time. Cut me if I'm wrong. But here's my 2007 forecast interspersed with other 2007 forecasts I've found out there and my comments on their comments.

First Them for 2007....

Forrester Research - Their Forecast: CRM revenues will skyrocket to $74 billion (approximately $21 billion in applications sales, $53 billion in services sales. There will be a serious shortage of CRM skilled workers) My Thinking: While I'm not sure how whether they are calling CRM-related on demand subscriptions a service or an application, I can see strong numbers in 2007 for CRM without a doubt - though how anyone can forecast numbers that specifically is beyond me.

Gartner Group - Their Forecast - They see CRM continuing to grow with Microsoft & salesforce.com dominating the growth. They see blogging to peak at 100 million blogs in 2007 with the millions of others already out there just fading away. My Thinking:

While I certainly see CRM continuing to grow, the last two entries - both Forrester & Gartner make me wonder what they call CRM at this point. The old definitions are pretty much done (see below) and there is a CRM 2.0 that is now getting set to replace the Model T CRM that's been preeminent for so long. That said, if there is an acceptable 2.0 or at least 1.5 component to their thinking (more customer participation, prosumer business focus, etc.), then I would agree again that CRM will grow. Do I see salesforce.com and Microsoft dominating the growth? That's a lot bigger if. Salesforce, I think, will continue on its merry path to the kingdom keys. Microsoft could go either way. The reason I say that is that I don't see a few things that I need to so that I'm comfortable with Microsoft. First, a strategy that says, oops, on demand needs to be the top priority for the company as we move through 2007. Releasing it the 3rd or 4th quarter or whatever hazy release date its given, doesn't cut it. The days of overtaking Word Perfect & Netscape late in the race are over. Salesforce.com, NetSuite and even SAP aren't going to roll that easily. Oracle remains clueless right now, but that isn't necessarily either a permanent or terminal condition for them and they have the resources to make this a race again. However, Microsoft's Live initiative as villified as it has been (not by me though) is a sign that they are getting the idea that service oriented architectures and enterprise productivity from the prosumer's standpoint are dominant features of the 21st century customer's life - whether or not he's B2C or B2B. But that might not be enough.

As far as the 100 million blogs peaking goes - who cares? Tell me the difference between a red hot growth rate to 150 million and a stable 100 million blogs. None of us will ever know. Nor does it matter at this point. Barring something rather odd - like an asteroid strike on the earth - the blogosphere is now an established, credible influence on the thinking of millions of people. Whether there are 100 million or 250 million or 20 million of them. I mean, who REALLY cares about this number and what meaning does it have?

Sheryl Kingstone, Yankee Group - Her Forecast - Sheryl sees failed SFA being more frequently replaced with mobile CRM as costs come down and the market becomes more viable to business. My Thinking: I think that she's dead on, though perhaps a bit too conservative - though she's both smarter than I am and also knows more about the mobile market than I do. What I see in 2007 is a couple of things. Sprint leading a bandwidth charge that can make a huge difference by 2008-2009. First, they've upgraded much of their EVDO network to Rev A. which increases download and upload speeds by an order of magnitude which means that streaming multimedia becomes a stronger possibility. Verizon is following suit. Sprint also announced a $3 billion investment in the 4G-labed WiMax - a wide area network that will provide wireless services over a 30 mile radius, not just a Starbucks table and couch. Whole cities can be WiMax-enabled, meaning any time, any where at WiFi-like and faster speeds becomes a reality in a couple of years. Couple that with the hardware improvements. For example, we've seen the Blackberry enterprise powered for years now, but also Nokia is coming out with the N90- which is a really smartphone with so many both connectivity and prosumer features of quality that I can't list them here in the interests of space - and time. While not a Blackberry, it carries some hefty features - so many that its been labeled a mini-computer by some pundit sorts. We can't forget the lust factor either. We all saw the Blackberry Pearl and the-now-sued-by-RIM Cingular offered Samsung Blackjack (with easily the coolest commercial for any phone on TV)

All in all, a substantial number of vendors like Vaultus, salesforce.com, Microsoft, SAP, and many others are developing or having their partners develop mobile CRM apps. There is a mobile AppExchange from salesforce.com that came with the purchase of Sendia within the last 12-15 months. So the prospects are good. Sheryl Kingstone strikes again.

Denis Pombriant, Beagle Research Group - His Forecast - Dennis sees companies like salesforce.com, NetSuite, NeoCase and Five9 moving big time into overseas markets. He also forecasts the on demand platform starting to replace legacy internal IT infrastructure. My Thinking: I NEVER argue with Denis because its a silly thing to do. He's right too often. My differences with him are probably in nuance and style and he's a little more conservative than I am about the movement of things. But that's about it. I agree with him in spades here especially on the nearly untapped Asian market. The irony is that Asia is more "mobilely" advanced than the U.S. and culturally ready for a mobile CRM so the move by the on demand vendors into a part of the world that is thinking "web dominance" already makes perfect sense.

Steve Raye, EVP eVergance - His Forecast: - I'm going to let it speak for itself (from SearchCRM. There are many others who I also respect like Donna Fluss, but I'm addressing the ones of most interest to me immediately)

Open source business applications will challenge the value proposition of SaaS in the coming year. More affordable on-premise business application software will become available in 2007 in almost every category, but especially CRM. SaaS vendors will continue to customize their platforms. The pendulum may be swinging toward a preference for lower-cost packaged software. The continually developing market could bring a combination of open source and SaaS technologies. Talisma now delivers more applications on-premise than in a SaaS model. SaaS vendors may need to co-opt open source business applications to create offerings that can be deployed either in a hosted model or on-premise -- or some unique combination we haven't thought of yet. Something for companies to keep in mind is that they may want the flexibility to change between hosted and on-premise over time. Companies may think about demanding that option in 2007 and beyond.

My Thinking: This strikes me funny (funny peculiar, not comedic except in a Dantesque vision of Purgatory-sense) especially if you've seen my comment of just a few days ago in SearchCRM or my PGreenblog entry of December 21. I said the same thing in 2006 as he does in the first paragraph and I wasn't right - not entirely wrong - but not right. I don't see ANYTHING on the horizon that the open source business applications are doing that will challenge on demand in 2007 or beyond either. What Mr. Raye may be forgetting is that the pricing models, not just the "open source principle" have to be disruptive enough to change the market - as does the functionality and features and the quality of the application itself. Open source, certainly a challenge when the price of the software is free, is not much of one when their pricing models are traditional and on premise like. SugarCRM set the bar at the primarily traditional models, even with a free version.

Even worse, I'm not sure where he is coming from when he sees the "pendulum swinging toward a preference for lower-cost packaged software" either. The pendulum continues to swing to the on demand platform and will only move more to the web-based versions as the service oriented architectures get better and better. Also, his forecast says that "companies may want the flexibility to change between hosted and on premise over time." True, but that's not a forecast and not something that most companies will really be thinking about. Gartner is predicting a pendulum swing to "best of breed" as an alternative to SAP or Oracle in particular. But even this isn't anything to do with on premise vs. on demand. As Gartner's Sharon Metz says,

60% of all new CRM applications deployed within two years of purchase will be from best-of-breed vendors rather than from Oracle or SAP, according to recent research from Stamford, Conn.-based Gartner Inc. Much of that 60% will be smaller applications installed to enhance CRM deployments, often from SAP or Oracle. These "bolt-on" applications tend to come from smaller, best-of-breed vendors -- which feature a range of Web analytics, mobile computing, vertical-specific, and geographically specific functionality"

Meaning the increasingly individualized or localized or personalized "bolt-ons" that will enhance the platforms. This has little or nothing to do with "open source" at all. I can't say that I agree with Mr. Raye. I don't know him personally, but I wouldn't really think of what he's saying as a forecast, more like a marketing thing, frankly.

Now Me...2007....Look OUT!

Note that you'll see a number in color after the bullet and prior to the text. That's what I think my odds of being right are. (10) means I have total confidence that I'm going to be vindicated when this long trial is...I mean I'm going to be spot on when the year is done. (5) means, I'm right...no, I'm wrong...no, I'm right...no, I'm wrong...I'm.... (1) means I'm taking a really stupid shot here but ain't I brilliant if I turn out to be right? I'm the next Amazing Randy.

• (8) CRM 2.0 will become more than a buzzword in 2007 and the exorable march toward the death of "traditional" a.k.a. "classic" - Coke, okay, CRM in 2008 will continue. This will be done through partnerships and alliances rather than home grown "pure" CRM products. However, there will be a marriage of the "social web" products and services with the CRM technology vendors partnering with the blog producers, wiki wackers and especially social networking softwares/services (or acquiring them) to provide a more useful collaborative experience for customers and partners/suppliers/vendors. The framework for CRM will finally change to the point that the old META definition of operational, collaborative, analytic will be put to rest once and for all. Watch for a new feature-function-business rules-technological architecture CRM 2.0 framework by 4th quarter of 2007.
  
• (5) The customer experience will be the defining characteristic of 2007 corporate strategy and the old CRM formulation of People-Process-Technology will be replaced by a focus around mapping customer interactions and providing the tools to enhance the customer's experience with the company. This is already a work in progress with companies like Disney Destinations changing their approach through changing their acronym from CRM - customer relationship management to CMR - customer managed relationships. However, this doesn't mean that PPT will be entirely replaced. It does mean it will be subsumed to new strategic formulations built around the customer experience and experience mapping and design will be a major component of contemporary corporate activity. That is presuming both the CRM world and the experience design worlds which currently co-exist, can get over their arrogant attitudes to each other. With CRM trying to stuff the experience design/mapping into a convenient CRM pothole and the experience design guys trying to poo-poo CRM entirely. Why don't both of you big babies get over it and just work together (C'mon people now, smile on your brother, everybody get together, try to love one another right now...)
  
• (4) The 6Cs of the new customer will become the new business model that drives the era from 2007 beyond (if it were 2008, I'd make that a (7))
• 1. Collaborative - communities
  2. Contextual - Context driven advertising
  3. Content-driven - user generated content
  4. Connected - mobile & social networking
  5. Conversational - death of the 4Ps in marketing
  6. Creative - Co-creation of value
• What this means is that user generated content, experiential marketing, experiences as commodities and business as an aggregator of experiences that include products and services - among other things - will be more than just experimental but will break into the mainstream of both mindshare and market share. The Proctor & Gambles on the big boy enterprise side and the Threadlesses on the little guy disruptive side will become much more common than they have been. Because the customer is looking for it and wants it that way. AND it makes good business sense.

• (7) As I mentioned earlier, I don't think that open source CRM will be a disruptive element in any way or set any bars. However, I think there will be some impact on the enterprise from the free CRM programs that are entirely web-based. Companies like Zoho who put on social networking tools like ZohoWiki and CRM tools that are functionally pretty decent like ZohoCRM, or Zimbra who have a collaboration suite that can be utilized online or through the salesforce.com AppExchange, will start to make some headway into the small business market since their price is nearly free or free. The reason for their increased access will be the vacating of the SMB market that I think we'll see in 2007 by salesforce.com, NetSuite and several other CRM vendors as they move upmarket and start scaling up to the enterprise level deployments that will put them in league with SAP, Oracle and even Microsoft. I don't think this will be much more than a trickle in the coming year because they don't have the buzz yet nor do they have the functional chops that the companies vacating the space have, but they do have enough value to grab a foothold in the SMB space.

• (7) Companies like Rearden Commerce will begin to show up on the horizon as service oriented architectures begin to blossom more fully and become the foundation of the bulk of the enterprise IT architectures over the next three or four years. 2007 is the year that the companies that provide business/prosumer services attached to their offerings will begin to become a niche unto themselves. Rearden will continue to own the space - especially in light of their deal with American Express. Rearden Commerce itself will have a breakout year as its deal with American Express begins to generate both market share and buzz like crazy. Also, it doesn't hurt that Rearden has the first fully realized SOA on the IT side of the house. First to market is HUGE for Rearden and 2007 is their year.

• (9) Social networking and other forms of 2.0 driven applications and services will be integrated with CRM and enterprise applications. But not as I originally thought - through building or acquiring the companies that make the assets. Instead we'll see partnerships and OEM relationships etc. between the social networking companies and particularly, the on demand vendors to integrate the functionality of social networking and user collaboration, especially with CRM vendors. The on demand vendors like salesforce.com & NetSuite in particular are best positioned to do this but I also see SAP being savvy enough to do this kind of collaboration, though if any one company would build their own, it would be SAP. This may portend something of a revival for Lotus Notes as a collaboration platform and toolset. Though maybe not. That's going to be up to IBM - who have good people at the Lotus helm, but have been terrible about their marketing and positioning of Notes. We all might be surprised - and not unhappily.

• (2) Web 2.0 will finally get another name though 2.0 will remain the buzzword/cliche that drives us all to distraction when it comes to naming new technologies, applications, platform and ANYTHING that smacks of peer to peer. How about "the Social Web?" This works, n'est ce pas? After all, they have a name for Web 3.0 already - The Semantic Web - so why not 2.0? Come ON, papi.

• (7) I said this up top, so look to there for some of the rationale, but mobile CRM will become something to be reckoned with in 2007 with the Blackberry platform leading the way - especially as RIM continues to roll out successful Pearl-looking super-stylish phones that have their already heavy-duty and secure push functionality. Already significant numbers of vendors are developing mobile CRM applications/services and almost all are doing it for at least the Blackberry and then the Treo.

• (9) CRM and social customer related blogs, podcasts, and vlogs will continue to proliferate in 2007 in all kinds of interesting and unique ways that we have yet to "aha" about. This, despite Gartner's prediction that the blogosphere will level at 100,000,000. That's kind of a funny one actually. Because, what does it really matter whether it levels at 100,000,000 or 150,000,000 or 200,000,000? You or anyone you know gonna read most of them? Its a helluva lot of blogs no matter how you cut it and it also indicates the level of influence by sheer weight (not necessarily quality or originality) that the blogs carry. Speaking of which, there is a guy named Jesus Hoyos who runs a blog called "CRM En LatinoAmerica" that has a great listing of current CRM related blogs. Check it out here. This is the best compilation of CRM related blogs I've seen. The site is in Spanish and English but this is a universal set of links.

• (25) I'm not going to predict "consolidation in the industry" since that's a cliche and consolidation in all industries is going to always go on. To predict "continued consolidation" is to predict "the sun will come up - tomorrow. Bet your bottom dollar, that tomorrow, there'll be sun..." So screw it. I rank THAT one 25 on a scale of 10.

The Enterprise 2.0 growth will continue to proliferate as social tools like internal wikis, blogs, etc. will be increasingly adopted as business requirements. There was an absolutely great blog entry on ZDNet by Dion Hinchcliffe. Follow all the links that he refers to in the complete entry. It is just a great explanation of The Enterprise 2.0 Just great....Here's an excerpt:

Enterprise 2.0 year in review by ZDNet's Dion Hinchcliffe -- Though the eponymous title of this blog refers to the application of all aspects of Web 2.0 to the enterprise both large and small, the big story this year has really been about a collaborative subset of Web 2.0, something referred to as Enterprise 2.0. Though the definition has continued to expand in some circles, Enterprise 2.0 describes the use of the latest freeform, emergent, social software tools that hold the promise to significantly improve the ways that we work together and collaborate. As an example, the liberal use of internal blogs and wikis with discoverable content frequently forms the foundation of an Enterprise 2.0 software strategy.....

Okay, enough of this. I'm done for now. I may have another set of forecasts and we'll check back at the end of 2007 to see how bizarre I was on my forecasts.

Technorati : Blackberry Pearl, CRM, CRM 2.0, Denis Pombriant, Forrester, Gartner Group, NetSuite, Rearden Commerce, SaaS, blogs, business model, customer experience, salesforce.com, social networking

Comments

[medieval clothing]

It will give pause to the various companies considering a solution but I think that on premise as a viable solution is going by the boards and will do so almost completely once the on demand vendors figure out both how to scale better technically and how to position their ability to do so in the market. The former they are close on - the latter has a lot of mythology to overcome yet - and that's their hindrance.

[Microsoft CRM Implementation]

You are keen observer of all these marketing research firms... Keep it up!!!

[watch friends online]

this was a great forecast. it looks like you made some great predcitions. i would love to hear more.

[Andrew]

In general I think you are spot on with your CRM 2.0 predictions, except maybe a little ambitious for 2007. Yes, we'll see some deal announcements, but I am not sure that there will be an demonstrable value until 2008 or later - the CRM and Web 2.0 worlds and development philosophies are too far apart. It will take some time to figure it out and unlock the real value. I think this will be driven by your predictions on the 6cs, and I agree, that will be in 08.

Great work on the blog; keep it up!

[Mike Smock]

Hi Paul,

I'm trying to track down the Forrester $74 billion projection. The only thing I can find is from a 2002 report by Bob Chatham here:

http://www.forrester.com/ER/Research/Report/Summary/0,1338,14653,00.html

Do you happen to have the link to the current projection?

Thanks...

[Paul G.]

Steve,
Hi. I'm very glad to hear from you. If you had put it exactly the way that you put it in your comment, I would agree with you almost completely. I still remain skeptical a bit though of hosted packaged software. If you remember, that was the original (take this coming comment as a metaphor, not literally) "on demand" attempt and it failed terribly. While an argument could be made that the business world wasn't ready for it, the on demand model (the literal one) is just so much more effective, there's no really good reason to consider the hosted package solutions. However, the rest of what you're saying above makes sense. It will give pause to the various companies considering a solution but I think that on premise as a viable solution is going by the boards and will do so almost completely once the on demand vendors figure out both how to scale better technically and how to position their ability to do so in the market. The former they are close on - the latter has a lot of mythology to overcome yet - and that's their hindrance.

Thank you for writing and responding. I'm looking forward to getting to know you in 2007.

[Steve Raye]

Hi Paul,

My "forecast" was a last minute contribution to SearchCRM which wasn't a perfect process (not a ding on SearchCRM). Your comments are all well taken. My primary point was intended to reflect what I see in the marketplace (albeit a limited perspective) - mainly that the proliferation of open source business applications are causing companies to think twice before automatically assuming that an on-demand platform is their best or only choice. We'll see what happens, but I do believe that more flexible on-demand toolsets (Apex, SuiteFlex, etc.), OSS, and alternative models for the delivery of packaged software (hosted) are presenting a new set of decision challenges for companies in 2007. I've been witnessing this fishand in the trenches.

I haven't read your blog in the past but look forward to following your writings in the coming year.

Regards,
Steve