Why Social Media will drive adoption of SaaS CRM

By Harish Kotadia, Ph.D. | Published: June 6, 2010

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SaaS CRM (Software as a Service) has been around for a while. Salesforce.com, one of the largest service providers in SaaS CRM space has been around for more than ten years and has been listed on NYSE for almost six years now. I can still recall the day Salesforce.com was listed on NYSE, having seen a giant banner with the letters “CRM” (ticker symbol of Salesforce.com) on NYSE building on that day on my way to work in lower Manhattan, where I was working as a CRM Program Manager for a Fortune Top 10 client (on how many occasions you get to see “CRM” banner on NYSE building!)

Very difficult, if not impossible, for any CRM vendor to incorporate all new channels and feeds “locally” for every installation of CRM system.

But inspite of the fact that SaaS CRM has been around for a decade, it is not as popular or widespread as what some might have expected it to be by now. I think this is about to change. As I noted in my previous post, four independent trends, namely Social Media, Smart Phones, Predictive Analytics and SaaS are now converging to bring about a Paradigm Shift in CRM.

In particular, Social Media will drive adoption of cloud computing/SaaS CRM going forward. Some of the key reasons why I think this is likely to happen are as follows:

Social Media channels (like Twitter and Facebook) generate tremendous volume of user generated content created by millions of users. Not possible for CRM system to import/store the data “locally”. This is unlike “traditional” CRM, where data was generated by few users and stored in “local” database. SaaS Model makes it possible to store information in the “cloud” (shared space) and access it from (Social) CRM application “on-demand”

Social Media space is changing and evolving rapidly. New Social Media channels and tools are being added almost every day. Very difficult, if not impossible, for any CRM vendor to incorporate all new channels and feeds “locally” for every installation of CRM system. Under the SaaS model, it is not difficult to add new Social Media channels/feeds to the “hosted” (Social) CRM application and make it available to users “on-demand”

Service Oriented Architecture and Cloud Computing not only make it easy to integrate applications, but also facilitate “plug and play” modules and add-ons that can dramatically reduce time and cost involved in extending functionality of the application. This can be of great help in Social CRM as Social Media space is changing and evolving rapidly.
“plug and play” modules and add-ons can dramatically reduce time and cost involved in extending functionality of the application.

CRM and Analytics application vendors such as Oracle, SAP and SAS should take note of this trend towards SaaS and should extend their service offerings to include CRM SaaS.

What do you think? Please do share your thoughts and comments on impact of Social Media on SaaS CRM.

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Comments

http://twitter.com/rwang0 R Ray Wang

In the past 6 months, we've sen that overall increase in sales to SaaS. On Siebel, we only saw one deal go on-premise. Friends at Oracle confirm that 90% + of all new deals are going to Siebel OnDemand. The pressure from SFDC is intense. However, it's good to note that the same is not true with Microsoft CRM. In fact, there is still a strong base of users who want this on-premise. We estimate 33 to 41% of deals each quarter move in this direction.

Hope this helps. The logic makes sense. Let's see if customers follow the logic!
http://hkotadia.com/ Harish Kotadia, Ph.D.

Thanks Ray Wang for visiting my blog and for sharing your thoughts. It is great to see expert like you confirm what I have suggested in my post, namely the trend towards SaaS CRM.

Major players like Oracle and SAP must expand their service offerings in the area of SaaS CRM, else Salesforce.com will emerge as a winner because of this shift towards SaaS.

Microsoft CRM caters to a different set of clients (Small and Medium Enterprises or SMEs) and SME space doesn't have any good SaaS CRM player AS OF NOW.

But for SME segment too, things are about to change. In the past few weeks, I have seen demo of sCRM SaaS for SME Segment and I must admit, I am impressed.

These apps are still under development and pre-beta, but once sCRM SaaS for SME is available in the market, they will surely give MSFT run for its money! It is just question of time. I guess we wouldn't have to wait too long to see this happen.

Thanks again for your insightful comment, much appreciated!

Harish Kotadia, Ph.D.
http://twitter.com/manuelmartin Manuel Martin

Hi Harish, these are interesting thoughts but please let me play a contrarian role to test some of your arguments.

- Data volume generated by Social Media channels. Is it really that big? Well, there are millions of users but out of those millions, who is really talking with me (i.e. my company?). With a few exceptional cases (take BP and the oil spill for example) it is hard to believe that today the volume of incoming communications from social channels would surpass the volume of more established channels. On any given day, companies only hear/communicate with a small fraction of their total user base. Granted, there is a lot of 'chatter' going on in social media but not all of it is relevant, as a matter of fact research indicates that the bulk of the communications are started by a minority of influencers. Having said that, I would advise against “importing” all of this chatter into CRM. First option would be to use a 3rd party service to monitor and synthesize the most relevant information. In the case that you choose to implement your own social media processor, you would also query the channel for relevant terms and only import what you deem relevant. Now, let's take a look at what type of information are your customers generating? Well, it is mostly text, maybe only 140 characters at a time. Easy to analyze, easy to compress and easy to store. I don't see this being a high volume and the type of data (highly redundant by the way) is easy to store. Is it cheaper to store in the cloud? Well, maybe but maybe not. Adding to your salesforce storage is not particularly cheap, many companies use AMZN's S3 because it is cheaper and if you use S3 there is no reason why you couldn't access that data from your in-house CRM. Depending on how you want to access the information from that channel, you could opt for affordable file servers or those under utilized servers you bought a year ago.

- Social media is indeed changing fast. Much faster than organizations can react and I think that is a good thing. If you are a $1B retailer the last thing that you want to do is jump and chase the latest technology fad. It takes time to adapt your processes and train your team, you need to understand your customer's competence and expectations with the new channel and reacting accordingly takes time. You certainly don't want to keep up with tools added every day because most of them will not be around next year (due to failure, evolution, consolidation, etc.). Developing connectors to access the social channels is not difficult nor time consuming but your point about taking longer to install in house is well taken, however, choosing the right CRM platform is far more complicated task. For most enterprises, the timing to adopt a new channel is almost never driven by the availability of technical features. Like I said before, implementations of this kind need to follow a disciplined plan driven by a financially justified roadmap and implemented in months or maybe years.

Your last argument seems to contradict the second one. If SOA and cloud computing make it easier, faster and cheaper to add functionality, then why would Oracle, SAP and SAS be at disadvantage? Their applications can make call outs to the cloud and a Service Oriented Architecture can very well exist behind the corporate firewall.

I believe SaaS and CRM will continue to grow but not for the reasons that you mention. I think their adoption will increase because they have an attractive economic model and offer more value at a better price. With or without social media.

What do you think?
http://twitter.com/mailspect Michael Katz

“It is hard to believe that today the volume of incoming communications from social channels would surpass the volume of more established channels”

With all respect I think that there is a huge difference in how we use social media based on our age. Our kids don't use email except to communicate with parents and teachers. This will permeate to business and we already see the rumblings. This is a tidal wave for corporate IT departments, but the bottom line is that the change is inevitable and necessary.
http://twitter.com/mailspect Michael Katz

One more point, Manuel.

your point….

“Having said that, I would advise against “importing” all of this chatter into CRM. First option would be to use a 3rd party service to monitor and synthesize the most relevant information. In the case that you choose to implement your own social media processor, you would also query the channel for relevant terms and only import what you deem relevant.”'

Do we really want all of someones twitter messages in CRM?

How much of social messaging is pure regurgitation or programmatic tweeting vs. real content from real people? In as much as Google doesn't break down ad revenue by accidental or unwitting clicks on valueless landing pages vs. real customers clicking on links from real sites, social messaging sites don't appear to report on the number of programmatic spammy posts vs. real posts, even though it is possible for the networks to differentiate this. Do I really want the PR tweets of my contact in my CRM? Seems like a total waste of CRM, on this I agree.

on your point

” First option would be to use a 3rd party service to monitor and synthesize the most relevant information. In the case that you choose to implement your own social media processor, you would also query the channel for relevant terms and only import what you deem relevant”

My company, Mailspect, has designed a service (connect.mailspect.com) that categorizes and and shares email, as RSS, so categorized streams can be plugged into social apps. The idea is that you work with email however you want, we categorize your teams email, not by keyword, but by information in the CRM system – Salesforce.com as a starter.

I am not necessarily trying to plug connect.mailspect.com but I am saying that I have thought a lot about classification of streams. Classification by keyword or content is quite difficult, expensive and subjective. Our approach is to classify based on connections. In our case a connection is a Salesforce.com Lead or Opportunity, but it can be much more than that. We can tell who our friends, business contacts, customer, leads, etc. are from our CRM system and other social media. Our service can categorize your teams email and share 'business only' email as RSS in any web application. Certainly the same concept can be applied to Social Media.

Our service appealing because while you can view email categorized streams in SaaS CRM, you have the option to store email in the CRM system or simply view the categorized feeds of email w/o ever having to store it. The same logic can be applied to social media and I think it will be more common for social streams to be accessible in CRM, but not a part of CRM.

http://connect.mailspect.com
http://hkotadia.com/ Harish Kotadia, Ph.D.

Thanks @manuelmartin for your insightful comment and thought provoking discussion. Let me try and answer some of the points you have raised:

1) Data Volume – Social Media data volume is not only limited to Twitter, it also includes Facebook postings, You Tube Videos, Flickr & Picasa images etc. And remember, we need to engage the customer in real time. So the issue here is not only storage but the conversation that happens with the customers in real time.

If we try to store them “on-premise” or “local” database, DB size and performance are issues to be resolved. If we want to effectively engage in real-time with customer and collaborate with colleagues, best option is SaaS/cloud, not only from cost perspective but also from tech/DB performance point of view. Any one who has integrated “billing” with traditional CRM system can vouch for the negative impact DB performance can have. Here the volume is much greater (text, images, video etc..)

2) You are correct, “implementations of this kind need to follow a disciplined plan driven by a financially justified roadmap and implemented in months or maybe years”. This is why CRM strategy comes before tools. Define objectives, develop strategy, have the right culture, select tool/technology, deploy, train, repeat!

3) I agree to some extent that “hybrid” solution of “on-premise” CRM/Analytics can be integrated to cloud social media monitoring and reporting. But this is not a seamless solution. As I indicated before, focus is on engagement with customer and collaboration with co-workers to deliver great customer service. For that to happen effectively, CRM solution has to be seamless so that real-time conversations can happen. Remember, Social is not just another channel – it is a whole new way of managing customer relationship (through customer engagement)

As you have pointed out, SaaS will definitely grow because of attractive economic model. I also think that bigger driver will be tech necessity.

Hope this helps. Thanks again for your insightful comment and discussion.

Harish Kotadia, Ph.D.
http://hkotadia.com/ Harish Kotadia, Ph.D.

Thanks @manuelmartin for your insightful comment and thought provoking discussion. Let me try and answer some of the points you have raised:

1) Data Volume – Social Media data volume is not only limited to Twitter, it also includes Facebook postings, You Tube Videos, Flickr & Picasa images etc. And remember, we need to engage the customer in real time. So the issue here is not only storage but the conversation that happens with the customers in real time.

If we try to store them “on-premise” or “local” database, DB size and performance are issues to be resolved. If we want to effectively engage in real-time with customer and collaborate with colleagues, best option is SaaS/cloud, not only from cost perspective but also from tech/DB performance point of view. Any one who has integrated “billing” with traditional CRM system can vouch for the negative impact DB performance can have. Here the volume is much greater (text, images, video etc..)

2) You are correct, “implementations of this kind need to follow a disciplined plan driven by a financially justified roadmap and implemented in months or maybe years”. This is why CRM strategy comes before tools. Define objectives, develop strategy, have the right culture, select tool/technology, deploy, train, repeat!

3) I agree to some extent that “hybrid” solution of “on-premise” CRM/Analytics can be integrated to cloud social media monitoring and reporting. But this is not a seamless solution. As I indicated before, focus is on engagement with customer and collaboration with co-workers to deliver great customer service. For that to happen effectively, CRM solution has to be seamless so that real-time conversations can happen. Remember, Social is not just another channel – it is a whole new way of managing customer relationship (through customer engagement)

As you have pointed out, SaaS will definitely grow because of attractive economic model. I also think that bigger driver will be tech necessity.

Hope this helps. Thanks again for your insightful comment and discussion.

Harish Kotadia, Ph.D.
http://hkotadia.com/ Harish Kotadia, Ph.D.

Thanks Michael for your insightful comments and discussion.

I agree that Classification by keyword or content is quite difficult, expensive and subjective. And your approach of classifying by connections is a good approach. Similarly, we need to develop algorithms to classify and retrieve Social Media info, may not be always in English or may not be even text for that matter. Classifying by connections or context is the way to go!

Thanks again for your comments and discussion. Much appreciated!

Harish Kotadia, Ph.D.
http://hkotadia.com/ Harish Kotadia, Ph.D.

Thanks Michael for your insightful comments and discussion.

I agree that Classification by keyword or content is quite difficult, expensive and subjective. And your approach of classifying by connections is a good approach. Similarly, we need to develop algorithms to classify and retrieve Social Media info, may not be always in English or may not be even text for that matter. Classifying by connections or context is the way to go!

Thanks again for your comments and discussion. Much appreciated!

Harish Kotadia, Ph.D.
http://twitter.com/lebrun Marcel LeBrun

Hi Harish,

There is certainly continued momentum in SaaS deployments versus on-prem for a number of reasons and I find your discussion here (and in the comments) quite interesting about the role that social media will play in advancing this SaaS adoption.

When it comes to social media, however, I believe it is a mistake to see the CRM platform as the primary repository or broker of social conversations. While some initially considered social media as another form of “media” (seeing it as domain of marketing or PR), it is now very clear the social web has become a broad multi-purpose communications medium more akin to the telephone network than to media/advertising channel. I like to use the analogy of the social web as the “social phone”… like the phone, people are having every type of conversation online and every type of participant is involved including customers, influencers, journalists/media, competitors, etc. Also, like the phone, the social web is becoming a fundamental communications tool that is touching every business process in the enterprise. Every professional needs access to the “social phone” whether PR, marketing, customer support, sales, product management or execs, but the applications vary greatly depending on the role/job function.

We are seeing brands adopt the cloud-based listening & engagement platform as the central social communications infrastructure & repository and then integrating it with the tools already in use to support the various business professionals, like CRM. With this approach, as others have discussed in the comments, you direct only the relevant conversations to relevant systems. Customer service issues are identified in the listening platform, routed to CRM/Customer service system to create a case, assign to a rep for response, etc. and synced with the listening platform to give the whole company visibilty. Other employees may have different needs to stay connected to the voice of the customer to listen for product feedback (product manager), perform competitive analysis (PM/sales), identify and engage influencers (PR, etc.), or evaluate the reaction and reach of a campaign (marketing).

We have customers that deal with >10,000 conversations (blog posts, tweets, FB statuses, forums, etc.) per day that specifically mention their brand, plus thousands more that discuss their industry or competitors. Only a fraction of these belong in the CRM system. Having a centralized listening platform enables all of the enterprise systems (and functions, roles) to act on the social conversations according to their needs while letting the listening platform do all the heavy lifting of crawling content, intelligent filtering, spam detection, meta-data and metrics acquisition (for measurement), etc. and ensuring only the right conversations go to the right systems like CRM.

To support your case, such integrations become very simple to deploy when both the listening platform and the CRM platform are SaaS based.

Cheers,
Marcel
CEO, Radian6
http://hkotadia.com/ Harish Kotadia, Ph.D.

Thanks @lebrun for visiting my blog and for your insightful comment. Much appreciated.

I agree with you that social web is a broad multi-purpose communications medium more akin to the telephone network than to media/advertising channel and it is a “social phone” and having a centralized listening platform enables all of the enterprise systems to act on the social conversations according to their needs. This is the reason why in one of my earlier post titled “Social Media: The New Front End of CRM System”, I highlighted the importance of storing all relevant “Social Phone” conversations and deriving value from it by using Predictive Analytics and Knowledge Management tools for effectively engaging customers (for more, please see this post: http://hkotadia.com/archives/2698 )

What is important to note here is that hybrid” solution of “on-premise” CRM and cloud social media monitoring/reporting is not a seamless solution. When the focus is on engagement with customer and collaboration with co-workers, it is important to have a “seamless” solution so that real-time conversations can happen. And this is what will drive adoption of SaaS CRM.

Thanks again for your insightful comment.

Harish Kotadia, Ph.D.
Jon Armour

I am intrigued by the debate; I think we will have to see a hybrid model of CRM and data warehousing part cloud part on-prem for a while yet. At present no cloud vendor can offer the full range of capability that is matched by the on-prem offerings. e.g. siebel loyalty; Until that changes there is no option than to deploy some on-prem. I am also intrigued to see where data analytics will end up and whether cloud based ‘real time’ analytics can cope with the latency demands that will be asked of it.
Anonymous

We completely agree. At Intelestream, we’ve just launched intelesocial as part of our intelecrm 3.0 roll-out. Not only does it feature Facebook, Twitter and Linkedin integrations but also tools such as ping.fm updating, Social Mention monitoring tools, not to mention, collaborative offerings in the shape of Friendfeed and ShareThis. intelesocial tears down barriers by marrying these external social integrations with enterprise 2.0 collaborative tools, to make customer interaction even easier.

Please take a look at our website for more details: http://www.intelestream.net/en/prod-intelecrm/social-crm.html

Comments

About Dr. Harish Kotadia
Dr. Harish Kotadia has more than twelve years’ work experience as a hands-on CRM Program and Project Manager implementing CRM and Analytics solutions for Fortune 500 clients in the US.

He also has about five years’ work experience as a Research Executive in Marketing Research and Consulting industry working for leading MR organizations.

Dr. Harish currently lives in Dallas, Texas, USA and works as Social CRM/CRM and Analytics Consulting Lead for Infosys Technologies. Views and opinion expressed in this blog are his own.
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