As we kick off the New Year, many in the CRM space have made their predictions of what the year 2008 has in store for the industry. Perhaps no other pundit appears more frequently on end-of-year wrap up or prediction lists than Denis Pombriant.. Denis is founder and managing principal of Beagle Research, a firm dedicated to the CRM space. He has several years of experience in advising and consulting in the CRM space, and is a featured contributor to leading publications in the space, including CRMBuyer.com, CRM Magazine and his own blog.  For our first Thought Leader interview of 2008, we ask Denis about his thoughts on how the industry has evolved and what's in store for this year.

eStara: You’ve written several reports that have looked at the impact of on-demand software in the contact center environment. What were some of your key findings in this space?

DP: It’s a tough place to make a living. By that I mean the contact center — especially the outgoing contact center. You handle a lot of rejection and it can’t be a lot of fun. Inbound calling might be better since you get to deal with people who initiated the call and therefore want to talk to you, at least in theory. They might not be nice but that’s another story. The contact center is a tough place to make a living because operators need to keep their costs low and their call volume up. One of the nice things that on-demand technology does in the call center is to reduce the costs without putting something on the back of the CSR, so that’s good. Longer term I think we need to rethink the job of the CSR and regard it as an entry level position on the path to better things in the company. We don’t do that right now and to a degree, on-demand technology might make that harder to do because OD enables people to work at home away from the center of the action. I expect OD to continue making in-roads and that the market will figure out some of these issues.

eStara: How well do you think companies are integrating their sales and marketing efforts across channels? What are some of the challenges they face?

DP: It’s a mixed bag largely because some products and services need to be sold face to face and others don’t so there’s a limit to what you can do to integrate the efforts across channels. That said, there are some very nice products out there that leverage the different channels for their strengths and effectively chop up the process into discrete events that can be done on-line even in a direct sales situation. For example, there are lots of emerging companies that offer microsites, landing pages, sales or marketing intelligence all of which can be used in a direct or ecommerce setting depending on how the process is set up. Slowly we’re seeing VPs of sales accept the fact that they and their people need to work smarter and when they accept this, results improve.

eStara: You’ve been covering the CRM space as an analyst for almost a decade, what have been some of the biggest changes in the industry during that time?

DP: Wow! That long and there’s still more to learn. Amazing.

Perhaps the greatest change in the CRM market has been the growth from an era of product innovation to the current era which is more about financial innovation. The product innovation era saw two big changes — the evolution of suites from disparate parts led by companies like Siebel, Onyx, Pivotal, and lots of others. The second product innovation was on-demand technology which, because of its basic promise of better, faster and cheaper, ushered in the financial innovation era.

We’ve been obsessed with the idea of ROI and customer experience ever since and each has directly or indirectly focused on getting the cost out of CRM. Which is why I call it an era of financial innovation. If you look around today just about every company has a message that spins the idea of better, faster, cheaper or more sales. Nothing wrong with that though there is a temptation which is sometimes realized to forget about the customer and focus on finance. Bad idea if you ask me. I think there will be a backlash that will involve what I am calling VRM for vendor relationship management. VRM will need to be some automated wall that protects people from the incessant email and phone calls from vendors. It will be used sort of as a personal shopper to identify and find things that a person has interest in. I expect a company like Google will figure out how to turn Ad Words around to benefit the customer in this situation, but I digress.

eStara: Since this interview will be published early in the New Year, do you have any predictions for what’s in store for 2008?

DP:

We are at a point in the business cycle and in the life cycle of the four decade old technology boom when I expect that customers are getting a little fatigued for multiple reasons. That means it will take more work to achieve the economic results we want. Translated that is the driving force for a resurgence in marketing which I believe is being manifest by the boom in Sales 2.0. As I have noted before, Sales 2.0 is really about taking a different tact with marketing and consequently I am forecasting that marketing will grow in importance even as Sales 2.0 continues to gain traction.

I have also noted the importance of governance, risk and compliance and for the same reasons noted above I think GRC will be a growing issue in the executive suite. GRC is already an $8+ billion market according to John Hagerty of AMR and in the coming years it could easily overshadow CRM. This will continue to manifest itself in CRM in products that do a better job of documenting parts of business processes through business rules, workflow and auditing. A good example of an area that I think will gain in importance in the year ahead is CPQ or configuration, pricing and quotation. These systems are used in sales to do things like segregate the duties of selling and discounting as well as to provide auditability in some aspects of complex sales processes.

Authenticity will replace the idea of customer experience — interestingly, Joe Pine has been one of the leaders in both of those ideas and authenticity is the newest. Briefly, in Pine’s own words, “[Authenticity is about a company] being true to itself, and being what it says it is to others.” Pine’s last idea, the customer experience, remains valid but we seem to have forgotten that an experience is something that is uniquely staged for a customer to provide a transformation in the customer’s life. Today, experience is simply about what happens in an encounter, good or bad, and often that experience is inauthentic in one or more ways. So out with the old experience and in with the new authentic.

The idea of platforms will continue to gain momentum and with that the definition of a platform will suffer the same dilution and defocus as customer experience has over the last five years. Nevertheless, platform has a long way to go before that happens. We’ve seen salesforce.com introduce the concept of a development platform and we will see other companies introduce less grandiose versions of their own platforms. Already, I have seen Microsoft describe its CRM as an ideal development platform for almost any business application and SAP and Oracle all have played riffs on this theme too. Also look for platform to stand for a smaller piece of reality such as “marketing platform” or “BI platform” etc. Those terms are already with us but they are lower case and used as descriptors. Soon I think we’ll see them approach the importance of Brand Names and the word “Platform” will be written with a capitol.

In line with the platform’s growing importance, I think we will see a new emphasis on the business process; in fact I see them going hand-in-hand. The platform will be positioned by its vendor as a solution for the end-to-end process it supports. So rather than sales or marketing we might hear more about the lead to cash process again.

SaaS will continue on its merry way and events like NetSuite’s Dutch auction IPO will shine more light on it. At the same time though, the popularity and success will bring dilution and a certain amount of confusion as large vendors like Oracle and SAP try to put their own spin on what SaaS means. Look for continued discussion of “hybrid” solutions in which vendors attempt to provide a customized solution that inevitably includes on-premise as well as on-demand technology to better fit an individual customer’s needs. Also look for a renewed assault on multi-tenant architecture. Much of this will boil down to vendors selling what they can produce and making a case for it (a.k.a. making lemonade from your lemons). What it means is that if a vendor can’t easily deploy a multi-tenant architecture it will sell garden variety single tenant with a new skin. That’s where the confusion and dilution will come in.