Ian Moyse, Workbooks.com
by Stuart Wilson, Friday 29 June 2012
Is CRM broadline distribution ready? Ian Moyse, sales director at web-based CRM and business applications supplier Workbooks.com explores how cloud-based CRM solutions could be marketed and sold through the channel.
Is CRM broadline distribution ready?
"Channels are increasingly looking for new margin opportunities. The solution that can deliver greater customer contact and stickiness, differentiate them and enable wrap-around billable services to vendors’ offerings can maximise their value and the margins they retain.
Cloud has muddied these waters. Today, resellers worry about account control, margins, cannibalisation of existing renewals, differentiationand driving services revenues. They want to ensure a focus on the ’V’ (value) in VAR as a opposed to the ’R’ (reseller). Distribution, in turn, is changing from traditional stocking and finance line values, to delivering more wrap-around services.
The IT supply chain we have known for the past 20 years also has to change. More solutions are capable of being delivered over the web, many vendors are pressured with new competition, legacy business processes and cost bases and the customers buying approaches are growing more educated and more fickle.
Cloud CRM is an example of an area that is both growing rapidly and has strong service capabilities for a channel to drive its own value from (Gartner Analysis citing that CRM is ascending rapidly in the priorities of CIOs in 2012, moving from 18th place to eighth place. It was also cited by Gartner that CEOs see CRM as their number one technology-enabled investment in 2012and reports indicate that cloud CRM represented over 34% of worldwide CRM spend in 2011).
In the mass-market SME sector, where the channel has great value to cloud vendors in reach and relationship, we have a sector where both cloud growth and CRM adoption can bring strong business benefits and empowerment. Pierre Audoin Consultants (PAC) recently reported that SMEs spent almost £1.6 billion (US$2.5 billion) on business application software and SaaS in 2011, and that this is set to grow to more than £2.1 billion (US$3.3 billion) by 2015 – faster than the enterprise segment. The analyst also revealed key areas of investment included CRM, analytics, mobility and industry-specific software.
With such a wide breadth of customers to migrate from legacy systems and looking for a beneficial and usable CRM outcome, there is an opportunity for resale partners to benefit from growth in sales and margins for years to come. This involves selling a solution and not a technology by understanding a customer’s business needs and processes, with focus placed on a solutions outcome and not a technical specification or an installation goal.
If you look at a variety of customer reports across the years reporting on data from customers of failed CRM projects there is an average of 46.3% of failures reported in surveys. Industry analysts like Gartner, Forrester and Butler suggest that 50% to 70% of CRM projects are sub-optimal and do not deliver a return on investment (ROI) or fail altogether.
With this in mind it is critical that this growth sector is serviced well. Focus must be put on outcome delivery and not technology sales. Partners must deliver a fully wrapped solution sell and not a product sell which will leave the customer disappointed. CRM is about an outcome involving process and people, not an installation of backend technology. It is a solution that touches the users visibly in their daily work life and with adoption a critical metric, aligning it to deliver true business value is key.
There are already resellers providing CRM to their clients with their own services around them, but look at the number of focused CRM resale partners truly capable of delivering a business aligned solution sell, in comparison to those selling for example security, networking or infrastructure and there are relatively few. This is an opportunity for the channel to embrace both the cloud and a services-led solution where strong margins can be achieved as well as close customer engagement and relationship building, but it does require commitment and investment and not a toe in the water approach.
The question is whether this is a technology that merits broadline distribution or a specialist business sale that needs a more focused approach to retain margins. Putting in place large supply to market channels at face value seems attractive to a vendor, but does it deliver that same value to the reseller channel who invests time in a CRM solution sale to find others around them mass discounting what is a business value based sale? Will a distribution partner be able to on-board a channel where the need is a skillset to sell and deliver a business, not a technology led application nor simply a desire to resell another vendor’s brand in the portfolio.
We have already seen Sugar CRM sign Ingram Micro to distribute its CRM solution in the traditional two-tier model. In comparison, Salesforce sell directly with all services provided by specialist third party consultancies, leaving the traditional channel on the sidelines. There is a place for channel routes to market for CRM, but it is more specialised than traditional solutions and requires, a niche VAD approach, not a direct to channel model.
With a great deal of CRM implementations leaving customers lacking the desired outcome, going broad with a traditional distribution strategy could increase those supplying CRM to customers greatly. However, is this a good thing for those with the investment in skillsets who can deliver a rounded implementation to give customer success? Will margins be eroded in products broadly distributed and will corners be cut by those channel providers not CRM enabled and skilled and yet keen to make a sale? And importantly will those partners signing up through a two tier channel be mentored and trained to deliver a successful CRM outcome for clients?
It can be done, but diligence and work has to be inherent to this model to ensure both the value to the channel, and the value to the customer, which are explicit in the CRM delivery model.
I believe this is a market that is not mature enough for a wide distribution model, but needs careful selection of focused niche value based regional sales and delivery partners, who can expand the customer reach whilst retaining the value and solution based proposition required to make CRM successful."