Enterprise Apps

It’s Time to Re-Evaluate Your CRM Vendor’s Viability

With the CRM vendor landscape going through so many changes today, it’s an excellent time to check up and see what your vendor’s viability is, what their future prospects look like, and especially for the best-of-breed vendors, what their exit strategy is, if they have one.

I have compiled some quick tips for completing a viability assessment and discerning the truth about what’s really going on. You could, for example, take these factors and create a short scorecard to evaluate your various vendors with.

What You Need to Know

  • Dun & Bradstreet is your friend. —Get your accounting, finance or purchasing department to run a D&B Report on your CRM vendors that you think are at risk. These reports can tell you the fundamentals of how your best-of-breed vendors’ financial health is today, their payment history on key accounts and can either reinforce your faith in them or give you insights into where their problems are. If you see danger signs, bring them up to the vendor’s senior management and get customized code protected.
  • Recently added new customers. — Beware of vendors recycling customer wins through the slow summer months. The truth is that sales cycles do slow down significantly during the summer due to many factors. If your smaller vendors are continually delivering new customer wins throughout the summer months, that’s a good sign that their pipelines are active. Beware, however, of the recycled references; this happens when wins from months or years ago are just now getting press.
  • Churn, Churn, Churn. — If you spoke with a vendor’s references before purchasing their software, go back and try to connect with these customer references again. While there could be a multitude of reasons why a previous reference is no longer a customer (and your vendor’s sales team will do their best to spin that for you) it’s best to talk directly to references you initially spoke with to see how things are going. Customer churn is common in vendors who have been stretched too thin, and instead of relying on the spin of this once you discover it, go find out for yourself.
  • How many sales reps does it take to finish a sales cycle? — This is a very good measure of how your vendors’ sales force scales. How many sales reps you’ve had in the last year is a good indicator of the vendor’s pipeline. In vendors with sustained pipelines, sales reps stay around to earn more. When you’re getting a new rep every few months that’s a sure sign the pipeline is running thin.
  • Ask for an updated roadmap presentation and delivery dates. — When a software vendor starts to struggle, there is a tendency to cut back drastically on development. Ask for a roadmap presentation, even via the Web, of what’s new and what the next launch dates are. Probe into which customers are driving the roadmap and why.
  • Drop-ins welcome. — If you happen to be close to your vendors’ sales offices while traveling or even near their headquarters, press for a short visit to their offices to catch up on what’s new. You can tell a lot about what’s really going on by just walking through a company’s offices. The telltale signs of a growing business complete with the hum of activity is a welcome sign, while conversely, rows of empty cubicles once used say it all. Visiting with engineering is a great idea to review any bug fixes you may have as well.
  • Time to spill the SaaS — Software-as-a-Service (SaaS) is fundamentally changing the economics of how enterprise software gets sold, and while Salesforce.com is credited with starting the revolution, it’s now pervasive through many other sectors of enterprise software. Scott Bolick, George Gilbert and Rahul Sood of Tech Strategy Partners have authored an excellent article on the new economics of selling software and the influence of SaaS. Their article is a must-read for anyone interested in pushing beyond the cursory fact that SaaS has completely changed the size and scope of software deals, and has put sales VPs in control of how software gets delivered to their organizations so they can attain their goals.

    SaaS is so pervasive in CRM, and, for that matter, in customer-facing applications, that your current vendors need to at least have an alliance strategy in place, if not a roadmap specific to this platform. Some readers may counter with the fact they may never move to SaaS. Yet its undeniable that the majority of new business is coming from this platform today, and, in that fact, is a new perspective to view your vendor: as an investor and not just a customer. Put it this way, if you are investing your maintenance dollars in this vendor, and their future included SaaS, there’s a better chance of their ability to grow. Conversely, if there’s nothing on the horizon for capitalizing on the major shift in how companies are buying CRM applications, that’s cause for concern. Think like an investor and not like a customer on this point.

Bottom line: Completing a viability assessment of your CRM vendors now can save you the time of having to potentially replace them in the future.

Louis Columbus, a CRM Buyer columnist, is a former senior analyst with AMR Research. He has worked with enterprise clients on defining solutions to their channel management, order management and service lifecycle management strategies. Mr. Columbus also teaches graduate-level international business and marketing courses at Webster-Loyola Marymount University and University of California, Irvine. He is the author of fifteen books on technology and two books on analyst relations. His book, Getting Results from your Analyst Relations Strategies, can be downloaded for free.

1 Comment

  • I work for a fast growing CRM vendor and I think you make some great points in the article. There is, however, on point that I take exception to…You mention that the number of sales reps that you have can be a sign of the viability of the company (i.e. more reps equals more turnover). While this may often be the case, the flipside of this is that as companies experience rapid growth, sales territories shrink and additional reps (not replacements) are hired. This can cause an almost continuous tweaking of territories causing many customers to have several reps over the course of a year as a direct result of the company’s success.

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