CRM helps businesses understand customer buying habits and demands by applying various processes to a database of customer information. These include lead generation - finding out which customers are most likely to buy again - and cross-selling, where existing customers can be sold other products and services.
Other processes might include opportunity management, forecasting and quoting, customer support, and customer data management and analytics.
A secondary aim of CRM software is to improve the business's interaction with customers - ultimately to facilitate sales. CRM does this by giving frontline staff - often contact centre agents - access to databases containing detailed customer information, such as personal details, order history, buying preferences, problems and concerns.
CRM is now pervasive in most industry sectors because paper-based systems, or even Excel spreadsheets, are no longer viable ways to store and manage customer data. A CRM system, on the other hand, can automatically link disparate information about customers from various sources in an orderly and efficient way, and deliver customer data quickly to sales and customer service staff.
Another benefit of CRM is that it can help firms to retain customers. With the cost of acquiring a new customer put at up to five times more than getting an existing customer to make a new purchase, retention is an important sales driver.
John Radcliffe, research vice-president at analyst firm Gartner, said, "The creation, maintenance and deployment of accurate, complete and timely customer information and insight are the foundation for CRM.
"Strong customer information strategies give organisations the ability to optimise customer interactions and deliver consistent customer experiences."
CRM used to be the province of large organisations, but now there are more options available to small and medium-sized companies, particularly through "on-demand" services, such as those from Salesforce.com and RightNow Technologies.
These give users access to CRM applications over the internet or a dedicated network, so they can be used and billed much like a utility such as gas or electricity. Small businesses lack the resources available to larger organisations, and the on-demand model allows them to deploy CRM at a lower cost than buying, managing and maintaining their own system.
More suppliers are entering the already packed CRM market given its continued growth. Mary Wardley, IDC's vice-president for enterprise applications and CRM software, said that the trend for businesses to adopt CRM would continue through to 2010.
"IDC research shows intentions among user organisations to increase spending on various functional CRM categories, with a majority claiming continued investment at the same level. Intentions to decrease spending are low," Wardley said.
William Band, principal analyst at Forrester Research, said, "During the past three years, SAP has worked steadily to fill out its CRM offering, resulting in end-to-end process integration support that no longer comes at the expense of missing CRM functionality.
"Meanwhile, Oracle's strategy for Siebel has become clear: to promote the product and brand as the most fully featured system, with a breadth and depth of functionality for many industry verticals."
Although the Oracle and SAP systems carry a hefty price tag, there are also mid-market versions which are more affordable to SMEs. Oracle sells Oracle Siebel On Demand and Oracle Siebel Professional Edition, both for the mid-market.
Band said that Oracle's Siebel CRM product had the most users by far. "The product is best suited for buyers who value advanced functionality tailored for specific industries, customer insight through strong analytics and customer data management, and the ability to support global organisations," he said.
"SAP's CRM suite, on the other hand, is particularly strong in sales, marketing, partner channel management, and analytics but offers less support for customer data management requirements. The product can scale to support global deployments and offers many industry-specific process solutions," said Band.
One suite that covers both the large enterprise and the mid-market is Microsoft's Dynamics CRM. It also integrates with - and shares the same look and feel as - the rest of the Microsoft software stack.
Liz Herbert, senior analyst at Forrester Research, said that the Microsoft brand had helped to sell the company's relatively new CRM suite, and that it had gained more than 7,500 users since its introduction in late 2003.
"Microsoft provides all-round core CRM capabilities in an intuitive, Outlook-style user interface, and leverages other Microsoft technologies like Sharepoint and SQL Server Analysis Services to deliver more advanced capabilities," Herbert said.
For businesses that do not want the relatively higher costs, complexity and longer implementation cycles of installing an on-premises CRM application, on-demand can be a cost-effective alternative.
Oracle, SAP and Microsoft all offer hosted versions of their software, and on-demand software in general has had a very good reception from users, with adoption facilitated by secure broadband networks and the internet.
On-demand CRM service providers let users access the application via a browser, and pay a per-month, per-user set fee for usage. Predictable costs - typical fees are £40 to £50 a month per user - have driven the popularity of on-demand services.
A major proponent of on-demand CRM has been Salesforce.com. Herbert said, "Salesforce.com continues to provide easy-to-use, strong sales force automation functionality and has been expanding its capabilities in areas like customer service, partner relationship management and marketing."
But she warned, "Touting its system as CRM for everyone, Salesforce.com does not offer deep industry-specific editions, which can mean unnecessary work on customers' plates when they have to start with a generic deployment and create their own verticalisation."
RightNow is trying to differentiate its products by offering on-premises as well as on-demand CRM, subscription pricing or traditional licensing regardless of deployment option, and embedding artificial intelligence into the suite, to aid the customer interaction process.
David Norris, associate analyst at Bloor Research, said RightNow offered a high-quality service. "What RightNow provides is an on-demand or in-house CRM offering. But whereas most CRM offerings are huge, bloated affairs designed to cope with eventualities so rare that no one will ever use 70% of the functionality, RightNow has focused on getting the core 100% right.
"This means that when you buy into RightNow you know that the 26 modules will all work, that they will all work together, and that they can be deployed readily. And with the on-demand model you only need to pay for things as you use them."
According to some analysts, one thing that CRM software could still do better is actually managing the customer relationship by aiding each interaction that agents have with customers.
Some of the alternative CRM suppliers are attempting to address this. For example, Entellium has worked on the customer support and usability sides of its suite. And Maximizer Software, which claims over 7,500 enterprise users, provides a full-function CRM suite with customer self-service and automated service capabilities.
Several CRM suites also offer the option to extend their functions through further application development. One example is Onyx, which is aimed at the upper mid-market and small enterprises, particularly in financial services, government and healthcare. The suite has customisation capabilities, although analysts warned that this meant more effort would be required to implement, maintain and upgrade the software.
Another fully extensible CRM application is the open source suite SugarCRM. This gives users free code to manage their basic sales, service and marketing activities, but they also have the freedom to build on that code using their own IT resources or with add-ons available through open source CRM partner and developer communities.
"Open source CRM promises freedom from supplier lock-in, flexibility to tightly map the software to business processes, and extensibility to grow with changing business needs," Herbert said.
But she added, "On the downside, the solution requires a fair amount of IT resource to maintain and is not backed by the deep pockets of a Microsoft or an SAP."
Other CRM suites worthy of evaluation are NetSuite, which has a product that covers enterprise resource planning, accounting, and e-commerce, and is designed for industries that require tight integration between the front and back office, such as distribution, high-tech, online retail and wholesale.
For users looking to dip a toe in the water, analysts agree that on-demand CRM is a good option, because it can offer set fees and comprehensive tools to migrate data on and off the supplier's database.
But for organisations that want all the features, as well as hands-on IT management, existing users will argue that running one of the larger CRM suites on-site is the only way to go.
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