Although it may seem like another IT fad, customer relationship management (CRM) is here to stay. Spending on CRM is forecast to increase by 400% over the next five years as companies seek competitive advantage over their rivals. But, so far, determining any return on investment in this area has been difficult.
IT research company Yankee Group last week published a guide to making sure customer databases deliver the business benefits needed to justify their cost. The first decision businesses should consider is whether to choose a ready-made solution or a "rules-based" application in which the company sets the instructions for routing and processing, together with the behind-the-scenes policies and procedure.
Brian Jones, an analyst at Yankee Group, said although ready-built solutions do not preclude effective
CRM, companies investing in them must be willing to rely mainly on the solution's framework for customer experience and for back-office processes.
"As the penetration of both point and end-to-end CRM solutions continues to increase, so will the prevalence of rules-driven systems for managing customer relationships," he said.
Rules-based solutions allow a much greater degree of customisation, but their success depends on the ability and willingness of the user to develop and maintain the rules.
This is crucial in moving the applications beyond a simple focus on transactions and towards an application that can build a "relationship" with customers, and therefore maximise business benefits and the return on investment.
Capturing and codifying the rules can also be a key opportunity to improve business process as the re-engineering requires an understanding of the best-practices for reusability, ease of maintenance and efficient processing.
The rules should be stored and maintained separately from core application code, said Yankee Group. This ensures changes are not dependent on the timetable for upgrading application code, and that application upgrades do not affect the rules created or modified on site.
Development and maintenance should be handled like software development - with similar standards for design, configuration, testing and documentation.
Training business staff to modify the rules rather than relying on IT or application programmers lets the people with the most direct knowledge and understanding of customers and internal processes become involved in the ongoing improvements.
However, understanding the updating process and knowing how to configure the system to carry them out are two separate competencies, so IT expertise will still be required.
It is important to balance the simple interfaces for use by business users to configure the rules against the tools needed by the specialists for their design, configuration and management.
But the benefits provided by even the best implementation can be lost if the response is inconsistent at different times or channels or, even worse, if the customer is treated as if they have had no previous contact with the company.
Systems need either an integrated or centralised rules repository, but Jones said there are problems with both approaches and this is an area which will need case- by-case consideration.
With increased spending on CRM, companies are demanding a more detailed analysis of the business benefits. Despite the hyperbole of the suppliers, this could lead to difficult presentations for some IT directors.
There is an embarrassing lack of detail in answers to requests to quantify the business benefits and show how they can be measured.
"It is one of the hardest areas in which to measure return on investment because it is difficult to differentiate from marketing, servicing and the general experience of the company," said Antoine Bousquet, technology analyst and author of Datamonitor's Global Personalisation Tech-nologies report.
Even so, he predicted global spending on personalised technologies will increase from $500m (£333m) in 2001 to $2.1bn in 2006.
Demand is being driven by financial services and retail, followed by telecommunications and entertainment, but it is set to widen.
"Although currently limited to the Internet, the development of wireless devices and interactive television will create new needs and boost demands for personalisation software," said Bousquet.
"As the flow of information grows - be it marketing, service or media content - alongside the development of new channels, it will become vital for companies to acquire the means to target information appropriately."