Make the call center a profit center instead of a cost center.

MAKE THE CALL CENTER A PROFIT CENTER INSTEAD OF A COST CENTER.

Marketing and CRM strategists have been screaming that line for at least as long as I've been covering CRM. Probably longer. It doesn't take great insight to point out where this strategy has led to some pretty silly behavior in the call center, such as agents focusing on making an upsell when they haven't actually addressed the problem that caused the customer to call in the first place.

The other day, however, I ran into a real winner. MBNA sent me a new credit card, which like most credit cards nowadays had to be activated through an efficient self-service toll-free phone call. Keep in mind that from my point of view, this was all superfluous to begin with--I only received a new card for branding purposes, as MBNA's promotional partner had pulled out of the card I had. But I didn't mind because activating a credit card takes just a few seconds—because really, how much time does it take a modern server to look up a 16-digit credit card number, a 10-digit phone number, and a 5-digit zipcode?

At least, normally, it only takes a few seconds. This day, however, MBNA decided to toss me a curveball. Instead of the customary 5-second wait, I had to sit through two commercials for third-party products—a telephone concierge service and cell phone insurance, I think. (Synergistic marketing at work... that way I'm covered if someone snatches the phone out of my hand while I'm asking for directions!) Finally, after the commercials had come to an end, then and only then was I assured that my card was activated.

After hanging up, I promptly called a live operator at MBNA, asked them for an unrelated change to my account that I needed, and informed her in cool, measured tones that if MBNA ever wasted my time like that again, I'd be using a different credit card. But even as I said it, I feared deep in my heart that it was an empty threat... that MBNA's clever way of turning the cost (however meager) of delivering self-service activation into profit (however meager) would immediately be cloned by the rest of the industry.

I seethed. I wanted to write about this, but I knew what all the marketing consultants would say. Then I realized that living inside me was an imaginary marketing consultant. He says his name is Mark Ratiere (one of the e's is silent, although Mark won't tell me which.) Since I couldn't get him to leave, I decided to save a phone call and conduct an imaginary interview with myself.

I mean, with Mark.

Maybe I’ve just been staring at it too long, but I’ve noticed a definite back and forth movement in the CRM market over the years.

Initially, the vendors had all the initiative and momentum and they quickly established the customer relationship management niche and the integrated CRM suite. Then as the bubble burst and the economy went into the deep freeze, customers said "enough!" (at least for a while) and they adapted the suite to their need to save on expenses by automating front office processes, especially service. Hosted applications also became popular and the combination of service applications delivered through hosting became a powerful combination.

Over the last few years service automation has become remarkably good at helping companies reduce the need for service personnel while replacing their function with knowledge bases, Web sites, automated e-mail, and other technologies. But now the pendulum is swinging back. One of the strengths of automating service is also its Achilles heel. If you automate the interaction with a customer, you also automate away the opportunity to probe and sell.

The growing importance of using service as a sales tool has been highlighted over the last several years in several books by influential authors and it is worth tracing their line of reasoning to understand what the next move might be in CRM.

One of the common themes of Insights 2004 and 2005 was that Sage wants to open up options for its customers while reducing its own reliance on funding rival Microsoft by opening up access to other technology platforms. CEO Ron Verni made a careful point to mention it in his keynote speech, both years.

Yet Sage's movement in that direction has been extraordinarily puzzling. For starters, consider the company's common desktop and integration platform initiatives, which are eventually supposed to form the basis for essentially all of its enterprise applications. To create this platform, Sage chose to build on Microsoft .Net. You know. The heavily Windows-oriented architecture layer from aforementioned rival Microsoft.

In the SMB space, Microsoft SQL Server has gained a lot of traction. That, of course, is good news and bad news for Sage—it gives them a database platform they can reasonably expect will be within the reach of their customers, but funds that rival again if they support it too diligently. When I heard last year that Sage was looking into expanding database choice for its market, my mind naturally turned to MySQL, the open source database that proves itself day in and day out on literally thousands of ISP and ASP machines, ships as a standard component of many Linux distributions, and so on. But, no, Sage's idea was to build tighter linkages with... IBM DB2, hardly a cost-competitive option for most SMB environments.

There was no sign of MySQL this year, either. There was more emphasis on the common desktop and integration layer. And then there was ACT Premium for Web, demonstrated at a private press session. I had a feeling I knew the answer when I asked the question, but I asked it anyway.

Jim Foster, executive vice-president of Sage's mid-market software unit, opened a keynote that was way longer than it needed to be (I'm guessing it wasn't very rehearsed, particularly not live by the three presenters all at once.)

Foster led off with a meandering anecdote to explain why he was delivering the keynote at all. He told a tale of a friend who for the past 7 years has been unavailable for golf or lunch because of the neverending pressures of his job, since "buffalo chips roll downhill." As the story went on with the same refrain and constant, crushing disappointment, I swear that I thought Foster was going to tell us that his friend finally made a lunch date with him, then dropped dead of a massive coronary, his life having been reduced to nothing but the soulless service of a ruthless, merciless captalist machine and that in his grief he decided there was nothing else he could do but deliver a keynote speech. (Fortunately for Jim and his friend, that wasn't the case—he simply had to give the speech because unit GM Jon Van Duyne resigned last month and Foster learned that "buffalo chips actually roll uphill.")

To hear him tell it, SalesLogix's numbers are good. More resellers closed more deals for more seats than before, and he claims the company has even nabbed over 20 Siebel replacements. Much of his presentation, however, focused on the re-relaunched SageCRM product. I looked up my notes from Insights 2004 and noticed that the company boasted that it could win 70% of deals against Salesforce.com with ACCPAC CRM. In reality, they're still trying to hit that mark, and the company acknowledged that it took more time and energy to build up a proper on-demand business model than they had originally anticipated. (Anybody who watched Interact.com crash and burn under pre-Sage management could have told them that...) In particular, Sage built a new data center to handle the load of what it expects will be a big market availing itself of free trials and a highly aggressive $1000 package that provides 5 users with a year's worth of service.

Don't mistake this relaunch for any sort of capitulation out of the packaged software market for Sage. In fact, one of the new wrinkles this year is that instead of simply promoting that SageCRM/ACCPAC CRM can be delivered as either a hosted or an on-premise product, Sage is now aggressively encouraging the transition by offering "rent to own" credits of 50% of the first-year hosting fee if companies decide to buy the server and bring the application in-house. In effect, Sage is counting on companies taking a look at the constant payment stream of the on-demand application and deciding to take a relatively painless bailout to bring it in-house. I'm intrigued to see how that plays out.

Whew. To sum up, that thinking’s out the window, it’s Sage all day, every day, all the time, from now on. (Until someone decides to change it again because customers ask if Sage software will run on 110 volt computers.)

Sage kicked off its channel-focused Insights conference in Dallas today with an executive keynote from Best/Sage US CEO Ron Verni. Verni outlined the company’s ongoing vertical strategy (something which suits it fairly well, both from natural growth and its penchant for buying up software providers with a stranglehold on a specific line of business), which is being built into the Sage delivery model as far down as the cheap-and-cheerful Peachtree product line.

Verni took a few opportunities to refer to ASP/on-demand applications, which have been carving out slices of Sage’s niches for some time now. Each time, he classified the world into two camps—those who want to buy traditional packaged software, and those who want to “buy” ASP-style delivery. “Separated at birth”, he called it. Yet a quick shuffle through my mental inventory of recent case studies I have performed tells me that Verni and I see the world rather differently, because I am never the least bit surprised to hear of a company considering both an in-house software system (or upgrade) as well as an on-demand model. While losing business to the on-demand providers undoubtedly stings, I’m reluctant to accept that companies making that choice are hard-wired into it—or hard-wired against it, for that matter.

The key question isn't whether Tom Siebel is going to be more involved in the leadership of the company, or whether Shaheen has a better sales and marketing strategy than Lawrie (who, it can be said, launched a Siebel mid-market initiative at least as good as all the other mid-market initiatives Siebel keeps launching!) No, the question is—has Tom Siebel bought anything big lately? Like a cruise liner, or an island, or an asteroid in nearby orbit or something like that.

When David Duffield, the first CEO of PeopleSoft, returned to became the last CEO of the independent PeopleSoft, I had an inkling it was all over but for the shouting. Not because Duffield's demeanor would be more conducive to closing the bitter buyout chapter with Oracle, or because he would be able to better preserve shareholder value than Craig Conway, who was scorching the earth. It was because earlier that week, Duffield had closed on his purchase of TV's famous Ponderosa ranch.

As any woman will tell you, men are a lot like boys. And when boys get a new toy, they want to play with it. A ranch is certainly a big-boy toy, but it's a toy nonetheless, and it seemed highly unlikely that Duffield would be walking away from that toy to lead PeopleSoft into a new golden age. Being a grown-up, he was simply able to put it back in the wrapper for a little while, knowing it would be there when he got back.

So it comes down to boys and their toys. If Tom Siebel, or maybe even Shaheen, buys a big toy sometime soon, I'd start numbering Siebel's days.

The subtext of the apparent dismissal of Lawrie is intriguing, as the former IBM exec represented an even greater proximity between Siebel and Big Blue, its best buddy over the past couple of years. (When is the last time you've seen a Siebel ad campaign that WASN'T IBM co-branded?) I suspect that the relationship is sufficiently valuable that it is greater than any one man, even in the top executive spot at Siebel, but I'm guessing that trying to tie the companies together at that level of association didn't pan out the way they expected. Maybe IBM will take the direct approach next time. But, mark my words, it won't happen before Tom Siebel buys something fun to play with. Like the NHL. I hear nobody's playing with it these days.)

Let me just say it straight up: the concept of "mid-market software" is an artificial construct that vendors developed as a means to simplify how they differentiated various target markets. Though there are no hard and fast size boundaries, most vendors would agree that a mid-market (or SMB, for "small to medium-sized business") is an organization with revenue under $500M and fewer than 350 employees. Personally, I don’t get the connection between organizational size (a simple market demographic) and similarity of requirements.

Arguably, organizational size has little to do with business type or business process complexity. Indeed a division of a large enterprise (clearly not an SMB) may have similar process requirements as a $250 million, 100 person business. And if we buy the vendors’ notion that a mid-market solution is ‘simpler’ than its enterprise big sister, we already have a mismatch. As the inherent contradictions of the SMB market become increasingly apparent, a more meaningful way of identifying commonality among this audience must be developed.

As it turns out, these organizations are bound not so much by a similar set of needs, but rather by a similar set of constraints: limited resources. Following this line of thinking, the "resource-constrained organization" (RCO) is a better way to characterize this market, and as such vendors can design closer-fit products and users will find improved total cost of ownership (TCO). Understanding why this is will help organizations make better choices in selecting 'best fit' CRM software.

#1: CRM Vendors Want Their Relationship, Too

Not since the dawn of the IBM XT has an enterprise software acquisition been less of a one-time event and one-time expense. Through a clever blend of support end-of-life policies, restrictive licensing terms, on-demand delivery models and, yes, planned obsolescence, the technology involved in your CRM project is going to represent a long-term investment, in more ways than one. Market forces have been attempting to drive down the add-on implementation and integration costs above and beyond the software license, but the fact remains that the ongoing relationship, the service and support, care and maintenance and feeding of the systems powering your customer intelligence are likely to carry a long-term price tag.

This doesn't mean that the license cost should be considered an unimportant mirage, but it rarely represents the true technology cost. When working on any CRM technology plan, conduct research, preferably involving a poll of peers, to uncover some of the ongoing expenditures that may not be as clearly spelled out in the vendor's license agreement as you might wish.

On-demand software (Salesforce.com, Entellium, etc.) was supposed to create predictable costs for enterprise, but without service levels and pricing spelled out in a long-term contract, adopters are rather at the mercy of the provider when it comes to increases months or years down the road. In the early going, competition is brisk enough to prevent price shocks, but times, they do change...

Of course, with lots and lots of software companies announcing earnings trouble this month, vendors may start monkeying with their revenue models again—or giving up altogether in favor of consolidation.

(And while I'm on the subject, I would just like to say how truly distressing it is to have to think, "Remember when IBM made desktop computers?")

There is a growing sense that as IT has become institutionalized and, through the chief information officer, positively boardroom and bottom-line, much of the innovation has been driven out of the calling. So say the champions of the "good old days", the past decade or so has turned IT into a systematic compliance-and-enablement engine, given little time, budget, or purview to do anything except maintain existing systems, introduce the bare minimum of new technology, and focus largely on certification and compliance issues, be it the ISO flavor of the month, Y2K, or Sarbanes-Oxley.

Meanwhile, in our little CRM neck of the woods, it seemed for a while that it was all anybody and everybody could do to encourage companies to keep IT as far away from CRM as possible. Not only the third-party integrators, who of course had their own agenda, but vendors and analysts as well were quick to point out how IT couldn't, wouldn't, and shouldn't understand the nuances and business agendas connected with a serious CRM project and were best left—at best—in the maintenance and plumbing.

Now, however—perhaps because companies are understanding the wisdom of the old "give a man a fish versus teaching him to fish" parable—IT is being spoken of more often as an integrator and CRM consultancy of first resort. Although I certainly sympathize with the number of compliance challenges facing IT, becoming a diversified and trusted consultant is a wise move for the CIO's office.

#1: Basic Rules For Avoiding Bamboozlement

A CRM integrator should be prepared to help a client make tangible, meaningful improvements to the business (and, by the way, materially improve the customer experience as well, keeping that "C" in CRM.) Too often, integrators are eager to sell a fancy package of services around a "methodology" that doesn't speak directly to how it will identify and ameliorate shortcomings in the company's customer processes.

Use a common-sense guideline as a test. If it takes a spreadsheet or a flowchart that spans more than one page to describe a business diagnostic, crank the BS meter up a notch. If you cannot read through the methodology aloud and find that it makes sense coming from your own lips, strongly consider an alternative vendor. Don't get befuddled into a major business investment.

Distributed contact centers have a lot of momentum. Siebel is just the newest company making noise—Siebel bought Ineto last year to get this capability and compete with the likes of Contactual, not to mention companies including Cisco, Avaya, and Siemens, who along with many of the other conventional hardware players in the space are working out their own solutions. Telecom costs are dropping and the virtualization technology is improving to the point where, operationally, the difference between an on-site cubicle and a spare bedroom is vanishing. Broadband and voice over IP comfortably solve the problem of multiple phone lines, and the better virtualization systems treat any node with any type of phone equally. PCs have enough horsepower to play the role of "softphone" with room to spare, so discrete equipment costs are remarkably low—one company-managed PC and a headset will do.

Arguably, even the entry-level virtual contact centers offer more features and functionality than a conventional call center, depending on the age and sophistication of the network, simply because the cost to add "one more feature" for control, monitoring, or data collection over the IP network is so low. Why am I not fully convinced that virtual contact centers are going to sweep the world, then?

The world has become much more complex with the growing demand for always-on customer service and the heightened expectations that come with the Internet: on-demand order status, knowledge bases, and the like. I appreciate all this. But none of the above excuses the distressing behavior that has been brewing since the late 1990s—hiding important contact channels from customers, through a variety of sneaky and ultimately self-defeating methods including unpublished and unadvertised phone numbers as well as delaying or outright denying a live audience for customers who do manage to dial in.

That said, it's nice to know there are other people out there who have the resources to do a competent business and technological analysis of software solutions and pick some winners.

CRM consultancy ISM has published details of the 2005 edition of its Guide to CRM Automation, highlighting not only a total of 32 recipients of its Top 15 award for excellence in SMB or enterprise-class CRM (or both), but also sketching out a laundry list of business and technology trends that the organization believes are driving the next wave of customer relationship management strategy and software.

Since the uptick in interest was unlikely to go away any time soon, Webroot needed to make a fast change in its support process. "We needed a way to be more proactive and preventative with our support. We needed to have a knowledge base, one that could be updated several times a day, and a ticketing system so we could control the information coming in," Richardson says.

The company opted to adopt a support system from Parature. "Because we're an external help desk, the support tool needed to be very simple to operate. We can't take time to train people how to use the tool—it needed to be very easy to use and very professional," she says.

But with so many people (whether for pay, as a hobby, or both) in all forms of media constantly looking to break news of new product and service developments, the "new product" side of the house isn't the same game anymore. As for spinning the quality and suitability of a product or service for a given customer, that's still important—but again, that omnipresent media is ever more saturated by customer advocates looking to give their opinions and evaluations of those same products. We already know that Crest helps fight cavities, that milk provides calcium, and that Dell will sell you a PC and then answer the phone when you call about it. We get it.

Advertisers of the world, I implore you and urge you: try to tell us something we don't know. Because I'm seeing a distressing trend, and it's at best not terribly convincing and at worst uncompelling and insulting.

Basement Systems is not your garden-variety, "We've used CRM for two weeks and we love it!" type of customer profile. Under the flag of its Connecticut Basement Systems brand, which provides retail and scheduled maintenance to customers in the Connecticut/Massachusetts/New York area, the company refined a GoldMine implementation that was originally implemented in back in 1996, only years later getting it to really create strong value for the business process.

"We got all of our customers into a database, because the idea was that we needed something that could keep better customer information, but we didn't know what we wanted to do with it at the time," says Mark Daconto, vice president of Basement Systems. GoldMine did some record-keeping, but didn't make many changes for the better. After about five years, the company engaged a new integrator to come in and turn the raw materials of its CRM system into a business productivity tool.