Enterprise software: A tour of the year ahead

The year 2009 will be critical for providers of customer relationship management, enterprise resource planning, outsourcing, and vendor relationship management.

This was originally posted at ZDNet's Between the Lines.

Despite the recession, 2009 is going to be a critical year for all of those key vendors that best describe their turf in acronyms--CRM, ERP, BPO, and perhaps a relatively new one: VRM.

Those acronyms, which stand for customer relationship management, enterprise resource planning, business process outsourcing, and vendor relationship management, respectively, are going to be more than just jargon in the year ahead. They are going to be critical to businesses, as they ponder upgrades, stand pat, or try to figure out how to revamp.

CRM: Get ready for feedback 3.0 and VRM.
It's a bit surprising how CRM has become such a hot area when it was all but written off for dead just a few years ago. In the end, CRM's resurrection isn't all that surprising. Your customers--mining them and keeping them--is more important than ever. Toss in social networking, and the need for companies to actually listen to customers and their feedback, and you can see how CRM may be your most valuable application.

The revelation that CRM was more than just some space being commoditized by Salesforce.com hit me at Oracle OpenWorld. Since I'm quite familiar with CRM, but far from an expert, I figured that it made more sense to get the guy that wrote the book on CRM, Paul Greenberg. In a series of posts, Greenberg has the rundown on CRM in 2009, including a tour of the key vendors, emerging themes, and forecasts for the year ahead. His work is a must-read for anyone interested in CRM.

Greenberg's focus has been on CRM 2.0, which, in a nutshell, is the coupling of traditional CRM applications with social-networking functionality. He expects the integration between these two sides of the customer equation to accelerate, even if there's a downturn.

Two themes stick out:

  • Feedback 3.0: Today (in Feedback 2.0), companies are listening more to customers to learn, but little conversation is happening. Feedback 3.0 will mean that companies will engage with the customers doing the most yapping.
  • Vendor relationship management: Simply put, a VRM tool would be something customers use to relate and manage multiple vendors. Greenberg thinks that 2009 will be the year in which VRM becomes more than just a concept. What's ironic is that vendors that have the most tentacles into companies (Oracle, for instance) may become players. Just imagine the following: here's a VRM tool from a big vendor so you can better manage it.

ERP: Here comes the dogfight
One of the hardest sells in 2009 will be convincing customers to start new ERP projects. How do I know? SAP is already hitting the infomercial circuit, and 2009 hasn't even started.

What we do know is that big projects are going be tough to get moving in the current economy. There aren't any bigger projects than ERP implementations. You have consultants. Big systems. Customization. Process revamps. And probably a few more consultants, once you've screwed up the customization and process parts of the equation. Dennis Howlett has documented SAP's challenges, as well as the ERP sector.

As for Oracle, we'll know a lot more on Thursday how the company is doing. The good news: Oracle hasn't preannounced its earnings . The bad news: Oracle is likely to feel some pain as customers pull back. However, the company is very diversified and collects a ton of maintenance revenue. Simply put, it has the assets to weather the downturn. Look for an Oracle-SAP bloodbath in 2009, with interesting detours provided by Microsoft and NetSuite.

BPO and IT services: Where we heading?
At the beginning of the great recession of 2008, IT services companies--those that allow you to outsource your infrastructure and processes--were seen as being immune from collapsing IT budgets.

No more.

Citi analyst Ashwin Shirvaikar says in a research note:

Our interactions with industry participants indicate a sharp deterioration in near-term visibility for the IT service providers. Many buyers--especially in the financial-services vertical--seem to be considering IT budgets that are lower year over year by as much as 10 percent to 20 percent. This kind of a decrease is sharply lower than our CIO survey from September, which indicated that IT spend would be down sequentially, but still up 1 percent year over year.

To put this in perspective, we have had overall IT spending at flattish only once before-- in 2002--while all other years, the IT budget has grown. Clearly, the credit crisis and global economic slowdown--especially with sharply negative news flow that coincided with the budget season--is a contributing factor.

Brian Sommer sums up 2009 for IT services providers simply. These services giants--IBM, Hewlett-Packard's EDS, Accenture, and a bevy of Indian players--can either hunker down in the downturn or innovate their way to more business.

IT services giants will make that choice all through 2009. So where's the innovation going to come from? My money is on the Indian outsourcers--Wipro, Infosys, Tata, et al. Sure, these vendors have their troubles--the biggest worry is a heavy reliance on financial-services customers.

However, there's a lot of complexity to smooth out in that industry. Just imagine integrating the systems for the Merrill Lynch-Bank of America merger. Multiply that IT rat's nest by about 50, and you have the financial-services sector. Meanwhile, the financial-services industry is risk-averse. What if the Indian offshoring companies swoop in, assume the IT risks, and say they'll reduce a company's complexity every year. From there, Indian outsourcers have a platform they can take to retail and health care.

That theory is proposed by Ravi Aron of the University of Pennsylvania's Wharton School. According to a Knowledge@Wharton India article:

Although it may take a year or so until the financial-market turbulence dies down, (Aron) expects that offshore-outsourcing firms will move toward offering better business process outsourcing services. He notes that it doesn't make sense for offshore firms to "diversify just for diversification's sake," but he predicts that India's technology giants can find new business from financial-services customers, which are rapidly integrating mergers while shedding noncore businesses. With new offerings created for financial-services firms, offshore-outsourcing firms can target other struggling or inefficient industries, such as retail and health care.

"Financial-services firms are very interested in reducing complexity and minimizing risk," Aron says. "They want to standardize processes, and when finished, they will look at automation. Offshore-outsourcing firms have a great opportunity to offer platform-based business process outsourcing, where they provide the technology and automate what a company does. The future for offshore-outsourcing companies is to take 1,200 systems to 800 to 700, then 500 on down. There will be wrenching change in the back office."

Aron adds that Indian firms will have to hire a lot of United States-based expertise and project managers to make that vision happen. It sounds quite plausible, so watch that back half of 2009.

More for your enterprise applications reading list:

About the author

    Larry Dignan is editor in chief of ZDNet and editorial director of CNET's TechRepublic. He has covered the technology and financial-services industries since 1995.

     

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