Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises [1 ed.] 9783836617598, 9783836667593

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Henrik Vogt

Open Source Customer Relationship Management Solutions

Copyright © 2008. Diplomica Verlag. All rights reserved.

Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises

Diplom.de Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

Henrik Vogt Open Source Customer Relationship Management Solutions Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises ISBN: 978-3-8366-1759-8 Herstellung: Diplomica® Verlag GmbH, Hamburg, 2008

Copyright © 2008. Diplomica Verlag. All rights reserved.

Dieses Werk ist urheberrechtlich geschützt. Die dadurch begründeten Rechte, insbesondere die der Übersetzung, des Nachdrucks, des Vortrags, der Entnahme von Abbildungen und Tabellen, der Funksendung, der Mikroverfilmung oder der Vervielfältigung auf anderen Wegen und der Speicherung in Datenverarbeitungsanlagen, bleiben, auch bei nur auszugsweiser Verwertung, vorbehalten. Eine Vervielfältigung dieses Werkes oder von Teilen dieses Werkes ist auch im Einzelfall nur in den Grenzen der gesetzlichen Bestimmungen des Urheberrechtsgesetzes der Bundesrepublik Deutschland in der jeweils geltenden Fassung zulässig. Sie ist grundsätzlich vergütungspflichtig. Zuwiderhandlungen unterliegen den Strafbestimmungen des Urheberrechtes. Die Wiedergabe von Gebrauchsnamen, Handelsnamen, Warenbezeichnungen usw. in diesem Werk berechtigt auch ohne besondere Kennzeichnung nicht zu der Annahme, dass solche Namen im Sinne der Warenzeichen- und Markenschutz-Gesetzgebung als frei zu betrachten wären und daher von jedermann benutzt werden dürften. Die Informationen in diesem Werk wurden mit Sorgfalt erarbeitet. Dennoch können Fehler nicht vollständig ausgeschlossen werden und der Verlag, die Autoren oder Übersetzer übernehmen keine juristische Verantwortung oder irgendeine Haftung für evtl. verbliebene fehlerhafte Angaben und deren Folgen. © Diplomica Verlag GmbH http://www.diplomica.de, Hamburg 2008

Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

Preface

This book is based on my experiences as founder and owner of my IT consulting company PC-Con. In the year 2006 I founded my first small business offering IT services, internet and network installations, and consulting services to private individuals as well as to microand small organizations. After a while of doing business, I was able to get an understanding of the importance and the opportunities of customer satisfaction and was able to measure customer satisfaction in form of increased revenue and an increased demand.

Based on my experiences and the theoretical background gained in my studies at the Cologne Business School, I was looking for specific software systems which could help me to manage and analyze my customers in order to get an increased understanding of their requests and requirements.

Confronted with the specific requirements of a small company, I was able to realize the difficulty of performing an efficient customer relationship management. Based on the question how to organize customer relationship management and how to depict my activities into a specific CRM software, the research question of this book was created.

Henrik Vogt

Copyright © 2008. Diplomica Verlag. All rights reserved.

Cologne, April, 2008

Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

Table of Contents

List of Figures………………………………………………………………………………............

III

List of Tables………………………………………………………………………………………...

III

List of Abbreviations………………………………………………………………………………..

IV

1

Introduction………………………………………………………………………………....

1

2

Importance of CRM for Small and Medium-Sized Enterprises…………………….

2

Customer Relationship Management……………………………………………………...

3

2.1

2.1.1

Definition………………………………………………………………………………..

3

2.1.2

Reasons for Using a CRM………………………………………………………........

6

2.1.3

Opportunities and Risks of CRM……………………………………………………..

9

2.2

Small and Medium-Sized Enterprises…………………………………………………......

2.2.1

Definition………………………………………………………………………………..

14

2.2.2

CRM for Small and Medium-Sized Enterprises…………………………………….

17

Requirements of Customer Relationship Management……………………………..

19

Criteria Based Requirements of CRM……………………………………………….…....

19

3 3.1

3.1.1

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14

Basic Components of a CRM System……………………………………………….

19

3.1.1.1

Analytical CRM……………………………………………………………………

21

3.1.1.2

Operational CRM……………………………………………………………….....

23

3.1.1.3

Collaborative CRM………………………………………………………………..

25

3.1.2

Main Features of a CRM System…………………………………………………….

26

3.1.3

Special Requirements of Small and Medium-Sized Enterprises………………….

29

I

 

Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

3.2

4 4.1

Requirements of a Successful Implementation of a CRM System…………………..... 3.2.1

Prerequisites for Implementing a CRM System………………………………..

32

3.2.2

How to Ensure a Successful Implementation……………………………….....

34

Open Source CRM Solutions…………………………………………………………….

37

Open Source………………………………………………………………………………....

37

4.1.1

Definition…………………………………………………………………………..........

37

4.1.2

Why to use Open Source Software…………………………………………………..

39

4.1.3

Open Source CRM Solutions…………………………………………………………

41

4.1.3.1

Sugar CRM………………………………………………………………………………...

42

4.1.3.2

vTiger……………………………………………………………………………………….

45

4.1.3.3

OpenCRX……………………………………………………………………………….....

46

4.1.4 4.2

Comparison of the three Open Source CRM Solutions……………………………

47

Could Open Source CRM Solutions Fulfill the Requirements…………………………..

51

4.2.1

Basic Components……………………………………………………………………..

51

4.2.2

Main Features…………………………………………………………………………..

54

4.2.3

Special Requirements of Small and Medium-Sized Enterprises………………….

62

Conclusion………………………………………………………………………………......

63

Bibliography………………………………………………………………………………………......

66

Internet Sources……………………………………………………………………………………...

71

Appendix………………………………………………………………………………………….......

73

5

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31

II

 

Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

List of Figures Figure 1: The Transition from Traditional to Relationship Marketing………………...

7

Figure 2: The Four Steps in Managing and Creating Customer Value……………...

10

Figure 3: The Definition of Small and Medium-Sized Enterprises…………………...

15

Figure 4: The Thresholds of Small and Medium-Sized Enterprises………………....

16

Figure 5: Components of a CRM Information System………………………………...

20

Figure 6: Decision-Making for a CRM System…………………………………………

33

Figure 7: The Different Sugar CRM Editions…………………………………………...

43

             

List of Tables 49

Table 2: Advantages and Disadvantages of vTiger……………………………………

50

Table 3: Advantages and Disadvantages of OpenCRX………………………………

50

Table 4: Functional Comparison of Sugar CRM, vTiger, and OpenCRX……………

54

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Table 1: Advantages and Disadvantages of Sugar CRM……………………………..

III

 

Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

List of Abbreviations Annual Work Units

BSD

Berkeley Software Distribution

CEO

Chief Executive Officer

CRA

Customer Relationship Anatomy

CRM

Customer Relationship Management

CTI

Computer Technology Integration

ERP

Enterprise Resource Planning

FAQ

Frequently Asked Question

GPL

General Public License

GUI

Graphical User Interface

LGPL

Lesser General Public License

OLAP

Online Analytical Processing

PHP

Hypertext Preprocessor

ROI

Return On Investment

SME

Small and Medium-Sized Enterprise

UMS

Unified Messaging

VAT

Value Added Tax

VoIP

Voice over Internet Protocol

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AWU

IV

 

Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

1.

Introduction

In order to stay ahead of the competition companies are more and more forced to turn their attention to their real assets: their customers. Both, the value of the individual customer and the development of personalized relationships with them have made customer relationship management as one of the emerging topics in the last years. Faced with the increased knowledge of the customers about existing product- and service offerings on the market, companies are more than ever required to develop specific customer knowledge in order to adapt their products and services according to the requirements of the customer. Customer relationship management is no longer something that only huge leading enterprises use in order to gain a competitive advantage. In the increased competitive landscape, it is now a necessity for survival even for small and medium-sized enterprises. Customer relationship management is a complex and difficult way of doing business. CRM means more than just installing a software or automating customer touch points. It is about the reinvention of a customer-oriented organization. According to the special requirements of small and medium-sized businesses, the degree of difficulty of the CRM approach even increased.

The following chapters reveal the overall importance of a customer relationship management system especially for small and medium-sized enterprises. In addition to the topic of CRM, the increasing importance and possibilities of open source software is revealed. The main research question consists of the idea if open source customer relationship management systems are able to fulfill the requirements of a CRM software. In order to be able to answer this question, the following analysis made use of the

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literature available on the topics CRM, special requirements of small and medium-sized enterprises, and the topic of open source software. By revealing what a CRM have to fulfill in order to be classified as customer relationship management system according to the findings in the literature, various requirements are identified.

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Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

In the next step, the three most popular open source CRM software systems Sugar CRM, vTiger, and OpenCRX are scrutinized under the criteria if they are able to fulfill the requirements defined in the previous steps. The conclusion discusses the previous findings and outlines the chances and limits of open source customer relationship management solutions for small and medium-sized enterprises. In addition to this, the requirements of a successful implementation of a CRM system are revealed and the concept of seeing CRM as a corporate strategy is concretized.

The aim of this book is to outline the holistic approach of CRM and to examine the research question if open source CRM solutions are able to fulfill the requirements previously defined according to the underlying literature.

2.

Importance of CRM for Small and Medium-Sized Enterprises

The following chapter reveals the overall importance of customer relationship management with special focus on small and medium-sized enterprises. After defining the term customer relationship management in general, the chapter depicts the reasons for using a customer relationship management and introduces the term customer lifetime value and the importance of customer knowledge. Before concentrating on small and medium-sized enterprises, the opportunities and risks by the implementation of a customer relationship management will be qualified and compared with each other. In the second sub-aspect the connection between the topic customer relationship management and small and medium-sized enterprises will be drawn by revealing the specialties when implementing a customer relationship management system into a

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small and medium-sized enterprise.

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Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

2.1

Customer Relationship Management

2.1.1

Definition

Historically the origins of CRM can be traced back to the beginning of the eighties of the last century, where criticism about the dominating “4P” (products, price, promotion and place) marketing paradigm emerged (Kotler et al. 2001: 105-110). One of the first authors who emphasized the importance of relationships in the industrial marketing was Hakansson (1982: 19). After the introduction of the relationship model, Berry (1983: 236-245) was one of the first who used the term relationship marketing and gained wide recognition. In parallel to the advances in the marketing science, new software systems were made possible through new hardware and software offerings. Since the mid-nineties, the term relationship marketing evolved into customer relationship marketing and many IT vendors started to market their products as CRM systems. In spite of the progress which has been made, there still remains some confusion about the meaning of CRM. Depending on the origin, the main focus, and the intention the definition and meaning of customer relationship management could vary according to the different view points from science, research and practice (Wiedmann and Greilich 2002: 283). Reasons for this could be found in the fact that CRM affects many groups and therefore every department in the company has his own view on the topic CRM. In addition, it could be stated that the concept of CRM is relevant for a lot of different areas like ITManagement, controlling, organization, marketing, and communication and should therefore be seen as a corporate strategy (Wolf 2002: 68). It affects the organization as a whole and should therefore provide direction to each department or employee that stays in contact with the customer. According to the concept of seeing CRM as part of the business strategy, the definition

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of the Gartner Group could be regarded as helpful: “CRM is a customer-focused business strategy designed to optimize profitability, revenue and customer satisfaction.” (Gartner Group, 2002).

According to Shaw (2001: 23) customer relationship management also involves: •

“Measuring both inputs across all features including marketing, sales and service costs and outputs in terms of customer revenue, profit and value.

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Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

•

Acquiring and continuously updating knowledge about customer needs, motivation and behavior over the lifetime of the relationship

•

Applying customer knowledge to continuously improve performance through a process of learning from success and failures

•

Integrating the activities of marketing, sales and service to achieve a common goal

•

The implementation of appropriate systems to support customer knowledge, acquisition, sharing, and the measurement of CRM effectiveness

•

Constantly flexing the balance between marketing, sales, and service inputs against changing customer needs to maximize profits.”

In contrast to these complex definitons of the term customer relationship managament, the definition of Garret (2000: 3) should be also quoted: “CRM means different things to many people, but at its heart it means becoming a customer-focused organization.” Garret clearly reduces CRM to a customer-oriented corporate governance without considering the other dimensions of CRM.

Especially software and IT companies tend to define customer relationship management with a focus on technical dimensions. They often only concentrate on the technical information systems which are essential for a successful CRM, but are not the only requirements for creating a successful customer relationship management. An example for this kind of defintion could be the following: “CRM is a technology-driven solution to sales and marketing department. It focuses primarily on managing the information flow between the buyer and the seller, such as lead management and telemarketing support, seeking efficiencies in sales-force costs.” (Schultz 2000: 11).

In order to find an appropriate definition which could serve for the purpose of the book it is required to unify all the above mentioned dimensions without being to extensive or

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to narrow. A definition with a narrow focus would exclude some important aspects; a definition with an extensive focus would not be suitable in order to be able to draw a conclusion concerning the election of a CRM information system.

The Gartner Group identified three CRM segments which identify all the dimensions of customer relationship management: operational, analytical, and collaborative.

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Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

The operational CRM is the horizontal segment of a CRM and includes all the sales, marketing, and suport features which are required by a CRM. “Operational CRM covers customer-facing transactions from the internal company. Typical business features involving customer service, order management, invoice/billing, or sales and marketing automation and management are all part of this bandwidth on the spectrum.” (Greenberg 2004: 49). The analytical CRM is the „capture, storage, extraction, processing, interpretation, and reporting of customer data to a user” (Greenberg 2004: 49). Companies can capture customer data from different sources and can interpret/analyze the data as needed. They are able to personalize the data in order to be able to treat their customers as individual as possible. The third segment of CRM is called collaborative CRM and includes the communication centre to the customer. This could be a customer relationship program, a customer interaction centre in which communication channels such as the internet, e-mail or other channels are used to establish and maintain the contact with the customer. In other words, it is any CRM function that provides a point of interaction between the customer and the company itself.

One of the most suitable definition is proposed by Liz Roche, the Vice President and Director of the Gartner Group in the year 2003: “Customer relationship management is not simply a technology tool or business process to ‘delight the customer’ or show how the organization ‘loves its customers’. CRM is ultimately about driving bottom-line revenue through proactive management of the customer life cycle. It is about applying the right CRM treatments to the right customer segment at the right time to produce business results. The difficulty is in determing what the right CRM treatments are and to what segments they should be applied. […] Each treatment, described as a threelayered CRM pattern called a “customer relationship anatomy” (CRA), will be differentiated based not just on what the customer wants […], but also on what the

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organization determines to be appropriate (based on the customer’s current period and future predicted value). And we note that value is defined as more than just profitability, as unprofitable current period customers may turn to be very profitable in the future.” (Greenberg 2004: 50). In addition to the above mentioned definition of Liz Roche, I want to add a German defintion by Bartmann (2003: 7) which expresses all dimensions of customer relationship management.

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Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

“CRM ist ein ganzheitlicher strategischer Ansatz der kundenorientierten Ausrichtung von Unternehmen. Wesentliche Komponenten sind neben der Strategiedefinition im CRM die daraus resultierende Ausgestaltung der Kundenbeziehungen, die Konzeption von Organisation/Prozessen und der Einsatz von IT-Systemen/Technologien“ 1 (Bartmann 2003: 7). This definition is very close to the above required consideration of all dimensions of CRM.

2.1.2

Reasons for Using a CRM

In order to understand the evolution of customer relationship management it is required to take a look at the principles of relationship marketing where CRM stems from. As industries have matured, changes in the market demand and competitive intensity occured that have led to a shift from transaction marketing to relationship marketing (Payne 2006: 6). As mentioned in 2.1.1, frameworks such as the marketing mix were developed in the 1950s in order to exploit market demand. The famous 4P model helped the company, if applied appropriately, to increased demand of the company’s products or services. The objective of this “transactional” approach to marketing was to develop strategies that optimize the marketing mix in order to maximize sales. Especially in the last years of the twentieth century this marketing principles were increasingly being questioned. The market was extremely different from that of the 1950s and 1960s. Increased competition and matured markets have led to the fact that growth was low or non-existent which results in an increased pressure on corporate profitability. Many customers were less responsive to the traditional marketing activities. The

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beginning of the globalization of markets, new sources of competition, and the emergence of new media and channels lead to a greater customer choice. Especially in this time, an innovative business thinking and behavior were asked to meet the challenges of this new competitive environment (Peelen 2005: 8).                                                              1

CRM is a holisitic strategic approach to a customer-oriented enterprise. Main components are next to the definition of the CRM strategy, the resulting design of customer reltationships, the conception of processes, and the implementation of appropriate IT-systems and technologies. (Translated from the German into the English language by the author)

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Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

In the early 1990s Philip Kotler proposed a new view of organizational performance and success based on relationships. “The traditional marketing understanding – based on the marketing mix and the 4Ps – is not replaced; it is repositioned in order to outline the importance of the relationship approach” (Payne 2006: 7):

“The consensus in […] business is growing: if […] companies are to compete successfully in domestic and global markets, they must engineer stronger bonds with their stakeholders, including customers, distributors, suppliers, employees, unions, governments and other critical players in the environment. Common practices such as whipsawing suppliers for better prices, dictating terms to distributors and treating employees as a cost rather than asset, must end. Companies must move from a shortterm transaction-orientated goal to a long-term relationship-building goal“ (Kotler 1992: 45).

In many large industrial organizations, even today, marketing is still to be considered as a set of related but compartmentalized activities that are separate from another (Payne 2006: 8). With the introduction of the relationship marketing concept this perspective seems to change and even influenced the role of marketing in business. “In effect, marketing is given lead (but not sole) responsibility for strengthening the firm’s market performance” (Payne, 2006: 8).

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Figure 1: The Transition from Traditional to Relationship Marketing

Source: Payne 2006: 8 

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Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

The role of functionally based marketing is increasingly replaced by cross-functionally based marketing which means that marketing is seen as a cross-functional responsibility and not only as concern of the marketing department. Customer acquisition means paying attention in order to acquire new customers and extend the “lifetime value” of the customer through special strategies in order to assure the future flow of net profit. The term market domains is in Payne’s sense defined as stakeholders which have to be taken into consideration in order to be able to develop relationships and to achieve long-term success in the final marketplace (Payne, 2006: 8). It is required to mention that you can only establish and optimize relationships with customers if you understand and manage relationships with other relevant stakeholders. Most businesses understand this and include their employees, which are responsible for their customers, in the stakeholder approach. However, there are other stakeholders which may also play an important role.

The increased importance of relationship marketing also led to an increasing demand for an efficient customer relationship management. For many years, organizations have invested a lot of effort in order to understand the customers that buy their products. Despite this, many organizations, failed to understand their customers at even a basic level. According to Das (2007: 8) an organization should be able to answer questions such as: •

“What product did the customer last buy?

•

When did they last phone?

•

How did they undertake their last transaction? Website? E-Mail? Phone call? Fax?”

Das (2007: 9) stated that in reality many organizations do not even know who their

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customers are or, at least, how many they could call as their customers. The task of finding out who your customers are, what they exactly want and providing it seems to be a task with difficulties. In today’s business environment the providing of the product or service to the customer is not sufficient; the understanding and management of customer expectations is rather a key to success in order to be able to create satisfied customers.

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Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

In order to be able to reach this ultimate goal it is required to highlight the concept of customer knowledge. Customer knowledge involves using the information which the organization has about the customer in order to develop a customer relationship. In order to be able to manage and create customer knowledge, the utilization of a customer relationship management system is essential.

2.1.3

Opportunities and Risks of CRM

The challenge of today is to combine information on customers which stems from different sources: Market research, databases and experiences from front and backoffice employees have to be compiled in order to create an accurate, up-to-date, and consistent image of the customer (Peelen 2005: 93). Incomplete, inaccurate, and outdated data will no help the organization to understand the customer.

According to Peelen (2005: 94) the quality of the customer database is expressed through the following formula:

“Quality customer database = Current x Complete x Correct x Unique •

Current: to what extent does the database depict a representation of the current reality?

•

Complete: the completeness of the data concerns the availability of a value as well as the completeness thereof. When the customer database is designed, each item of data must be examined to determine to what extent it is necessary, strongly desired, or just ‘nice to have’. The last category is not essential for the

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business process especially if it later appears that this field is hardly ever filled in or maintained. •

Correct: the data is correct and, if applicable meet the standard or is valid within a collection of possible values.

•

Unique: in principle, each customer should only appear once in the customer database.”

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Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

In some studies, the aspect of accessibility of the customer data is added to this list. The opportunities of customer relationship management depend to a great extent on the quality of the customer data which builds the base for successful customer knowledge. However, some companies underestimate the wealth of customer knowledge. Many organizations store their customer knowledge in different databases but are not able to get the information together in order to create individual relationships and determine the lifetime value of the customers (Das 2007: 9). Integrating the customer knowledge into a customer relationship management could be difficult but it can also provide valuable insight into the customer’s behavioral patterns. Advanced data analysis techniques can produce statistically grounded behavioral models about the customers and could help the company to determine the following interesting aspects: •

The likelihood of purchase of specific product or service,

•

The best next offer

•

The probability of losing the customer

An intelligent data analysis with the use of an efficient customer relationship management could create the benefit of creating customer value and enhance the customer lifetime value. The four steps in managing and creating customer value are illustrated in the following figure.

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Figure 2: The four Steps in Managing and Creating Customer Value

State 1: Define your Customer Actions

State 2: Determine your Customers‘ Expectations

State 3: Design the Customer Value Model

State 4: Deliver Customer Value Model

Customers Source: Das 2007: 12 

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Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

Stage 1: Define your Customers’ Actions The first stage in creating customer value is to understand your customers. With the help of analyzing the existing data you can obtain information about segmentation, behavioral characteristics and profitability of your customers. The aim of the first step is to create a basic understanding of your customers.

Stage 2: Determine your Customers’ Expectations Expectations of the customers, which could not be fulfilled by the company, are often the main cause that results in the loss of the customer. Understanding the needs and wants of your customers is essential for enduring relationships.

Stage 3: Design the Customer Value Model The combined understanding of customers’ behavior, needs, and wants is essential in order to be able to design the customer value model. The customer value model helps the company to identify and estimate the customer lifetime value which is defined as the net present value of future cash flows associated with a customer.

Stage 4: Deliver Customer Value Model The delivering of customer value model is performed through the help of a customer relationship management system. The integration of the system, processes, service providers, technology, and infrastructure as well as the creation of measurement systems should be performed in this stage in order to assure the delivery of the customer value model.

The description of the customer value model and the concept of customer lifetime value shows, that customer relationship management does not only mean to manage your customers. The opportunities of CRM are far broader – even after accepting that CRM is wider than sales, many organizations are still unaware of its full impact across

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the organization. Understanding the idea of customer value and of customer lifetime value as well as the importance of customer knowledge which results from a quality customer database is essential in order to be able to discover the whole opportunities of customer relationship management.

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Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

The resulting opportunities of a successful implemented and elaborated CRM solution could be determined according Schnauffer and Jung (2004: 7) into: •

Increased efficiency due to a better organization of the customer interfaces

•

Improvement of the customer knowledge

•

Winning of new customers due to an increased understanding of the customers’ requirements

•

Image improvement through customer satisfaction

The implementation of a customer relationship management system could help the company to increase its performance; however, it is not a guarantee for increased business results. The introduction and usage of a customer relationship management system is often also accompanied by a certain level of risk. Thereby, the reasons of a potential failure of a CRM implementation could be due to various reasons. According to an IBM Global CRM Survey (IBM 2004: 1) 85 percent of the companies in America, Europe, and Asia are not feeling fully successful with CRM. “Most importantly, CRM continues to hold great promise for companies, with over 50 percent of companies surveyed believing CRM is relevant to increasing performance from a shareholder value perspective, and 65 to 75 percent looking to CRM as important in delivering revenue growth through improved customer experiences, retaining and growing existing customer bases, increasing customer acquisition rates and influencing development of new product and services (IBM 2004: 1).”

CRM can deliver great value and improve the companies’ performance. However, in order to be able to fully realize this value companies have to improve the success, implementation phase, and have to avoid the main risk which could occur by introducing a CRM system.

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One of the main risks when talking about CRM in general is the lack of the holistic of CRM. Many companies consider CRM as the sole responsibility of the marketing department (IBM 2004: 4). The lack of understanding of creating customer value and seeing CRM as a corporate business strategy often leads to the problem that the organization could not make full use out of the implemented CRM system.

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Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

According to Lüngen (2006: 29) do good solutions to a problem not guarantee a successful implementation. The Change Effectiveness Equation Q x A = E (Quality x Acceptance = Efficiency) does outline this in detail. If the employees are not willing to accept the change, the organization is not able to achieve its efficiency level. Especially in the CRM industry many service providers are praising their CRM solutions as the best technology without considering the “real use” of the different systems. The new implemented technology makes things work faster but often at the expense of usage and integration. The transformation of the companies’ process into a CRM technology is the most challenging task when talking about the risk by the implementation of a customer relationship management system. The technology is just technology – CRM is all about dealing with the technology in order to be able to get customer knowledge and use it to increase the companies’ performance. CRM technology cannot deal with these issues itself - it needs help. Companies have to think and decide how they want to deal with such issues and what processes have to be put in place in order to ensure that problems are dealt efficient,

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effective, and successful (Longbottom 2007: 3).

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Open Source Customer Relationship Management Solutions : Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises, Diplomica Verlag,

2.2

Small and Medium-Sized Enterprises

2.2.1

Definition

Micro, small, and medium-sized enterprises play a central role in the worldwide economy. They are a major source of entrepreneurial skills, innovation and employment. In the enlarged European Union of 25 countries, some 23 million SMEs provide around 75 million jobs and represent 99% of all enterprises (European Commission 2003: 42). The European Commission established in the year 1996 a first common definition of small and medium-sized enterprises. On May 6, 2003 the Commission adopted a new recommendation of the definition in order to take account of economic developments since 1996. This definition entered into force legally on 1 January 2005 and will also apply to all the policies, programs and measures that the Commission operates for SMEs. According to the legal recognition of the definition of the European Commission the definition will be applied according to the purpose of this book. The European Commission (2003: 49) stated that companies are classified according to the following three criteria: •

Staff headcount,

•

Annual turnover,

•

Annual balance sheet.

On the basis of these three criteria, a company could be determined whether it is a

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micro, small or medium-sized enterprise.

                 

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Figure 3: The Definition of Small and Medium-Sized Enterprises

Source: European Commission 2003: 13

The European Commission (2003: 12-28) proposes the following classification in order to determine whether the company is medium-sized, small or micro.

Micro enterprises are defined as enterprises which employ fewer than 10 persons and whose annual turnover or annual balance sheet total is limited to 2 million euro. Small enterprises are defined as enterprises which employ fewer than 50 persons and whose annual turnover or annual balance sheet total does not exceed 10 million euro. Medium-sized enterprises are according to Figure 4 limited to 250 employees and 50 million euro annual turnover or fewer than 43 million euro annual balance sheet amount.

Thereby, the staff headcount covers full-time, part-time and seasonal staff and includes

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the following: •

Employees

•

Persons working for the enterprise being subordinated to it and considered to be employees under national law

•

Partners engaged in a regular activity in the enterprise and benefiting from financial advantages from the company.

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Apprentices or students engaged in vocational training are not included in the headcount as well as maternity or parental leave. The staff headcount is expressed, according to the definition of the European Commission (2003: 52), in annual work units (AWU). Anyone who worked full-time during the entire year counts as one unit. Part-time staff, seasonal workers and those who did not work the full year are treated as fractions of one unit.

The annual turnover is determined by calculating the income that the enterprise received during the last year from it sales and services after any rebates that have been paid out. The European Commission states that turnover should not include value added tax (VAT) or other indirect taxes. The annual balance sheet total refers to the total value of the company’s main assets (European Commission 2003: 42-61).

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Figure 4: The Thresholds of Small and Medium-Sized Enterprises

Source: European Commission 2003: 14 16

 

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2.2.2

CRM for Small and Medium-Sized Enterprises

Especially the CRM market for small and medium-sized enterprises is classified through a great variety of service providers. Their offer includes numerous niche products which are developed especially for small and medium-sized enterprises (Brendel 2002: 29). The benefits of the latest technologies are not anymore reserved for only huge enterprises. Especially small to medium-sized enterprises require specific business strategies and procedures which should be reproduce able in the CRM software. Small and medium-sized enterprises require a well-thought CRM strategy and technology that installs quickly with few technical resources. In addition, it should be easy to use and should offer possibilities of integration with existing applications. Scalability and reliability are essential; ideally combined with a low total cost of ownership. According to Brendel (2002: 26) does a complete CRM solution have many advantages in comparison with different individual solutions which are often used by small and medium-sized enterprises according to financial reasons. Individual solutions like a customer database and a product database do have the advantage that they are easy to handle and do not imply a great amount of implementation work. However, is the implementation of a CRM system not only reserved to huge enterprises. Especially the requirements of the new challenging relationship marketing require small and medium-sized businesses to understand and implement the concept of customer relationship management in their business philosophy (Brendel 2002: 26).

The IBM research study “Doing CRM right: What it takes to be successful with CRM” (IBM 2004: 1) reveals that in America, Europe, and Asia 85 percent of small and medium-sized companies are not feeling fully successful with their implemented CRM

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solution. The IBM Global CRM Survey in the year 2004 asked 370 companies across industries to depict their experiences. Especially small and medium-sized enterprises are far more attached by this problem. By now, many CEOs of SMEs fear the challenge of introducing and implementing a CRM solution. They experience the great amount of work and capital expenditures which are included in the introduction of a CRM and are in doubt about the amortization (Brendel 2002: 28).

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Especially small and medium-sized enterprises are far more attached by the fear of threatening their existence by introducing a CRM than the global players. In addition to this it could be also observed that the increasing technology based view on CRM by different service providers increased the fear of small and medium-sized enterprises to implement a CRM solution (Longbottom, C. 2007: 1). They are simply not able to invest in the best and newest technology in order to promote their innovative business philosophy. Apart from the huge amount of costs, they are not focused on the image gain by implementing the new technology but rather on the cost-benefit ratio (Brendel 2002: 28). The result is crucial, the elegancy and modernity of the applied technology is far less important.

This special reaction on the topic CRM of small and medium-sized enterprises could be observed in many different industries. According to Brendel (2002: 29) are many small and medium-sized enterprises not aware of the possibilities of CRM or are simply afraid of introducing an expensive CRM solution. Brendel proposes especially for SMEs that CRM service provider do not change the whole process of the business by the implementation of a CRM. Primarily, two things should be established: the creation of a central customer database and the innovation of the sales department with special regard to mobile solutions in order to enhance efficiency. This statement of Brendel (2002: 29) stands in contrast to the in 2.1.1 conducted approach of seeing CRM as a corporate strategy (Wolf 2002: 68). When following the advice of Brendel, do SMEs only apply the idea of contact management and computersupported sales and do not imply all the dimensions of CRM outlined in 2.1.1. However, does the idea of an improved customer-oriented organization due to integrated databases and modern technology attract many small and medium-sized enterprises. But often is the implementation of a CRM system into a small- or medium sized enterprise limited according to the financial and human resources possibilities of the

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organization. Therefore, especially in small and medium-sized enterprises the implementation of new processes and new technology should be done carefully and step by step. Brendel proposes to start with the marketing and service department and to expand the activities when the implementation in the first phase is completed successfully (Brendel 200: 30).

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3.

Requirements of Customer Relationship Management

The explanations in 2.2.2 highlight that the implementation and the requirements of a CRM system for a small and medium-sized enterprise differ in a way from that of a huge organization. The following parts will reveal in detail what general requirements a CRM should fulfill and outline what are the basic components in order to be able to classify the system as “real” customer relationship management software. In the next step, the findings outlined in 2.2.2 will be picked up and it will be revealed what special features and characteristics a CRM for small and medium-sized enterprises should fulfill. In the second part of this chapter, the requirements of a successful implementation of a customer relationship management system will be outlined. Special attention will be paid to the prerequisites for the implementation process and the steps necessary in order to ensure a successful implementation.

3.1

Criteria Based Requirements of CRM

3.1.1

Basic Components of a CRM System

In many situations the achievement of an efficient customer relationship management is to a extent dependent on the IT system. The system has to make it possible to develop customer knowledge in an efficient manner and to implement the idea and philosophy of the relationship marketing process outlined in 2.1.2.

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In addition, it is very useful that the CRM system is able to be easy modified according to the different needs of a company. Especially as soon as relationships have to be maintained with a larger group of customers, the use of IT becomes inevitable. This importance has also increased because the customer often prefers to communicate with the supplier through modern communication channels (Peelen 2005: 10).

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In order to be able to depict a holistic approach of the different components of a customer relationship management architecture, we have to divide CRM into three different areas: analytical, operational and collaborative CRM (Zisper 2001: 36). The following figure depicts these three areas in an illustrative manner:

Figure 5: Components of a CRM Information System

Source: Hippner and Wilde 2006: 48

The figure above illustrates the holistic understanding of customer relationship management. A distinction is made between the analytical, operational, and collaborative CRM. Copyright © 2008. Diplomica Verlag. All rights reserved.

The following sub-chapters explain the analytical, operational, and collaborative component of CRM in detail.

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3.1.1.1 Analytical CRM

In order to be able to accomplish a successful and efficient customer relationship management, extensive customer information is required. Information systems which are collecting, saving, and analyzing these data are called analytical information systems or analytical CRM. The basic function of analytical information systems is the transformation of data into information (Chamoni and Gluchowski 1998: 14). Databases or data warehouses build the basis for every analytical CRM information system. The main goal of data warehouse is to gather all the customer information from various sources and to provide them in a unique database in order to provide the necessary information to the operational and collaborative component of the CRM system. One can state, that the fundamental idea of providing information to the management is one of the objects of data warehouse. Data warehouse is defined as “a subject-oriented, integrated, non-volatile, time-variant collection of data organized to support management needs” (Kerner 2002: 122). In the analytical component of CRM, data warehouse play the main part. In this step, data is turned into systematized information which leads to a better comprehension of business events and in the end to an increased customer knowledge (Rajola 2003: 26). The data which is collected in the data warehouse could be also extracted and exported to various other software systems like the ERP-system or other external sources where the information could be used for other purposes. Using business intelligence tools in the data analysis process, enables the company to divide the customers into homogeneous groups, building up profiles, and creating behavior models through evaluating a number of parameters such as loyalty, profitability, solvency, and measure the sensitivity to particular marketing actions. With the information out of the analytical CRM, these marketing actions could be effectively

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planned and monitored (Rajola 2003: 27). In addition to the function of data warehouse, OLAP and data mining are playing a major role in the analytical CRM and serve as a function to analyze the customer data stored and collected in the data warehouse. Online Analytical Processing (OLAP) is an advanced data reporting tool with graphical interfaces. The typical applications of OLAP are in business reporting for sales, marketing, management reporting, budgeting, forecasting, and financial reporting

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(Payne 2006: 254). OLAP and data mining tools are important elements of any technology solution used by the marketing department in order to analyze customers either as individuals or in product-based segments (Payne 2006: 238). The difference between OLAP and data mining could be best characterized when looking at the objectives: The objective of data mining is more forward looking which means that with the help of data mining, the company is provided insights into the best ways to manage different customer groups. In contrast do OLAP reports have a more historical focus which means that they are summarizing the past data in order to draw conclusions from them. An OLAP analysis scrutinizes for example the sales performance of the last year and highlights trends. Another objective of OLAP is the function of visualizing the results of previous performed data mining analysis. It provides an easy-to-understand insight into data analysis and makes it accessible to a much wider range of people within the organization, helping them to identify trends, forecasts or even budget inefficiencies (Payne 2006: 255). Generally spoken, do all analytical tools mentioned above perform the following: They are sorting data and extracting a meaning out of them in order to guide the development of management strategies and provide the management with the required information. They segment and predict the data and enable the organization to identify new customer groups and to facilitate in the end the exchange of information and

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knowledge between the organization and the customer (Rajola 2003: 28).

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3.1.1.2 Operational CRM

Nearly all customer relationship management systems on the market are providing a huge amount of various features in order to depict the CRM processes and to perform the tasks of a CRM. These features of the operational CRM could be classified into the subareas of marketing, sales, and service. Figure 5 also called them marketing automation, sales automation, and service automation. The goal of marketing automation according to Hippner and Wilde (2006: 420) is the control and support of the marketing activities and the holistic organization of the customer data. The campaign management module builds the centre of marketing automation and identifies, through multi channel integration, all possible sales channels (Schmid, Bach & Österle 2000: 39). In specific, marketing automation means: Performing the right offer to the right customer at the right time, in the right communication style, and through the right communication channel. The required information in order to be able to perform an efficient campaign management derives from the previously performed analysis of the customer data. Insofar, does the realization of a successful campaign management depend to a great extent on the results achieved in the analytical CRM. In addition, the features of the collaborative part of the CRM are needed which importance will be revealed in the next chapter (Zisper 2001: 49). A typical marketing campaign begins with the identification of appropriate customers which could be addressed by direct mailings with for example specified brochures about one special new product the company developed. After a certain amount of time, the company starts follow-up calls and invites the customers, who are interested, to the presentation or sends them additional information material. After giving the customer another certain amount of time for studying the additional information, further follow-up calls or direct mailings could be done with the

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overall goal to create a specified offer to the individual customer or the identified customer group (Dommershausen, Korb & Stahl 1999: 30). Especially this approach ensures a successful and efficient administration and supply in form of a developed archive where all the information are saved and stored. Through the help of the analytical CRM all information about products, advertising material, telephone calls, emails, fax or other communication activities are provided in an efficient manner in the information system.

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This specified information could be delivered directly to the employee who requires the information in order to perform their next step in the acquisition process. The use of sales automation in the selling process is another sub-are of the organizational customer relationship management. In the preparation phase, those customers are analyzed and selected who should be contacted in the future. In addition, special targets were defined which should be achieved by the contacting approach. The features of the CRM should help the company to make an efficient planning of the meetings in form of a shared calendar. Like already mentioned in the marketing automation, does also the sales automation part require the information from the analytical CRM component. With the use of analytical CRM it could for example be analyzed why a special offer did not match the requirements of the customer in the past and how the new offering should be adapted in order to achieve the desired result. The term service automation describes the service area of the company and includes employees in the office work (call center etc.) as well as in the sales force. Especially this service area is responsible for the achievement of customer satisfaction. Therefore, service automation is implemented in the operational CRM and has the task to assure an increased provision of the customers which in the end should lead to the overall goal of an increased customer satisfaction (Hippner and Wilde 2006: 421).

In conclusion, it could be stated that the overall goal of operational customer relationship management is defined in the improvement of the processes between the organization and the customer (Knöpp and Helling 2006: 20). Operational areas are, next to the campaign management, the customer service and the complaints management service. In order to enhance customer satisfaction and to increase the service level of the

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organization, the operational part of the holistic CRM approach is indispensable.

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3.1.1.3 Collaborative CRM

The definition of collaborative CRM is discussed in various different approaches in the literature. According to Knöpp and Helling (2006: 25) does collaborative CRM just mean “a frictionless and consistent interaction between the company and the customer through various communication channels”. However, this definition does not reveal the holistic approach of collaborative CRM but defines its main goal. In addition to the definition of Knöpp and Helling (2006: 25), some professionals state that also the communication between the partners and suppliers is depicted in the collaborative part of CRM. The communication channels used in this concept could be for example: telephone, e-mail, letter, personal contact, fax, etc. (Rajola 2003: 28). The goal of collaborative CRM is the efficient handling of the communication activities and the systematic transmission and allocation of consistent information to the customer. Insofar does collaborative CRM also include the technical requirements in order to establish and assure the communication process between the company and the customer. This communication process is defined as the integration and interaction of the CRM software with the call center. In the literature this is defined as Computer Technology Integration (CTI). With the help of CTI, it is for example possible to display all relevant information of the customer to the employee when he/she phones and asks for a specific service (Schmieder and Nowotny 2002: 56-58). Next to the CTI, Unified Messaging (UMS) is the next technological approach in order to establish a holistic communication platform in the collaborative CRM part. Unified Messaging is defined as the function of integrating different communication channels like telephone, fax, e-mail, and classical letters into one communication platform (Schmieder and Nowotny 2002: 62). All these inquiries were collected in the communication platform and worked off in an

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equal manner in a universal queue (Schmieder and Nowotny 2002: 58).

According to the outlines above, it can be stated that an efficient customer relationship management consists out of three different phases which were described according to the three different CRM areas explained above.

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First, it is about the identification of profitable and unprofitable customer groups through various analyses which were performed in the analytical as well as in the operational part. In the second step, CRM involves actions in order to win the target customer which has been identified through the analysis. These steps are mainly performed in the operational part with the help of the campaign management tool. After identifying and winning the target customer, ties should be developed in order to keep the customer. Ideally, this is performed through the goal of achieving customer satisfaction and customer retention. Especially the operational and collaborative part are responsible for performing this task of CRM. However, it has to be stated that customer retention has to be understood as a product of customer satisfaction and the whole CRM approach have to be implemented as a business philosophy in order to be able to exploit the whole opportunities of the holistic CRM understanding (Kracklauer, Mills & Seifert 2008: 26).

3.1.2

Main Features of a CRM System

Concerning the CRM software market, it can be clearly stated that the market does not seem to provide products or product suites that are able to cover all the CRM areas and features required by each specific organization. In the majority of the cases specific required CRM features have to be developed for the specific organization or the specific industry (Rajola 2003: 33). However, this chapter will reveal the main functional and technological requirements a CRM generally should fulfill in order to be classified as a CRM solution. A successfully implemented CRM system allows seamless integration with the existing software systems and results in an increase in productivity. In addition, it supports and

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monitors the business performance and enhances reliability. Generally spoken should a CRM system help the company to understand their key customer behaviors, plan effective marketing campaigns/strategies, and increase in the end the business growth rate (Rajola 2003: 34). In order to achieve these basic goals, the CRM software system is forced to depict the following specific features.

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According to Lin (2003: 3-5) a CRM system consists out of the following four software modules: •

Sales automation module

•

Marketing automation module

•

Customer service & support module

•

Reporting and analysis tools

Some CRM service provider (compare 4.2.2) also state that a collaboration module could be added to the four main modules. Features of a collaboration module would be for example an integrated e-mail client, a project management module as well as integrated mobile solutions for the employees. Like already mentioned above does the sales, marketing, and service and support module belong to the operational part of CRM.

The sales automation module is designed to perform the following tasks: •

Sales opportunity management

•

Forecast sales trends and revenues

•

Quotes and invoicing

•

Inventory management

•

Product management

•

Sales analytics

Especially in the last years, the sales automation part of the CRM software has the task to help both: The sales representatives as well as the management in order to increase their productivity and efficiency. Therefore, some analysts state that this part of CRM

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has to be expanded by the following features (Rajola 2003: 34-36): •

Supervision of sales representatives

•

Access and analyze the product portfolio

•

Product presentation and demonstration feature

•

Possibility of depicting possible price negotiations with the customer

•

Competitor analysis

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The marketing automation module is designed to perform tasks such as the followings (Lin 2003: 8-10): •

Marketing campaign management

•

Contact management

•

Lead management

•

Marketing analysis

The customer service and support module is designed to document and manage all customer information and activities with the goal to build up a strong, long, and lasting customer relationship. Main features in the customer support part of CRM are according to Starling (2004: 610): •

Case management

•

Knowledgebase

•

E-mail management

•

Call-center interface (compare 3.1.1.3)

•

Customer satisfaction measurement

The reporting and analysis tool is part of the analytical CRM and it enables the company to have a complete view on the sales, marketing, and customer service activities and information that is stored in the data warehouse and which serves for analytic reporting and further analysis (Lin 2003: 3-5). The features of the reporting part of CRM should be according to Lin (2003: 9-11) the

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following ones: •

Measuring the effectiveness of marketing campaigns

•

Identifying sales trends

•

Providing special case reports in order to support the management in the decision process

•

Identifying customer profiles

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In order to get a better understanding of the functions mentioned above, please refer to 4.2.2 where the features are explained. .

In conclusion, it can be stated that in order to be able to create an effective and efficient CRM strategy, the mainstream features of CRM must be integrated in all company activities. This means that in every situation the response of the organization should be personalized and consistent and should demonstrate that the company is familiar with the customer. Only when understanding the holistic approach of CRM, the features of the CRM software could be leveraged in order to create a long and lasting customer relationship.

3.1.3

Special Requirements of Small and Medium-Sized Enterprises

Like already mentioned in 2.2.2 does the IBM research study “Doing CRM right: What it takes to be successful with CRM” (IBM 2004: 1) reveal that in America, Europe, and Asia 85 percent of the companies are not feeling fully successful with their implemented CRM solution. The outlines in 2.2.2 reveal the difficulties, small and medium-sized enterprises are faced with when implementing a customer relationship management system. This chapter will extract the special requirements of small and medium-sized enterprises and gives recommendations on the topic how to implement a CRM system into a small and medium-sized enterprise.

The main difference when comparing the implementation and usage of customer relationship management in huge organizations and small and medium-sized enterprises is the availability of financial and technical resources (Brendel 2002: 24).

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Therefore, special attention should be paid to the possibility of depicting the company’s process into the functioning and features of the CRM system. In order to create an efficient customer orientation approach and to assure an economic benefit out of it, it is more required than just the acquisition of a CRM system. The processes and structures have to be analyzed and scrutinized in order to be able to find an efficient possibility to transfer these processes into the processes of the CRM software.

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According to Hubschneider and Sibold (2006: 43-45) this procedure is especially important for small and medium-sized enterprises in order to be able to meet the financial budget. The outlines of Brendel (2002: 29) revealed in 2.2.2 to start with the implementation of a CRM system in the marketing and service department and expand it slowly to the other department could also be found in other literature which focuses on the implementation of a CRM system into small and medium-sized enterprises. Hubschneider and Sibold (2006: 90) reveal that it is better to start with a 50 % covering CRM system than to avoid the CRM approach. However, the difficulty especially in small and medium-sized enterprises is to realize the step to adapt the whole company processes according to the requirements of the customers. Especially in small and medium-sized enterprises there exists according to Hubschneider and Sibold (2002: 44) an increased in-transparency and inefficiency of the operational sequences which results in an increased requirement of coordination. Insofar does the special requirement of small and medium-sized enterprises result in the task to clarify these operational sequences, to reduce the coordination requirement, and to avoid redundant work. The first step when implementing a CRM system into a small and medium-sized enterprise should therefore be to scrutinize the operational sequences in detail in order to be able to adapt the CRM system according to these sequences.

In addition to the financial restrictions many small and medium-sized enterprises are faced with a lack of qualified personnel and a restricted time available for the planning process. In huge organizations the implementation of a CRM system is accompanied by a project team consisting of various IT- and business experts. However, a specific project team which “only” has the task of planning the CRM implementation is simply not available in most of the small and medium-sized enterprises.

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Therefore, special experts have to be hired from outside which results in higher costs. The task concerning small and medium-sized enterprises is to find a way in order to meet the financial budget without losing the functionality and professional procedure in order to ensure a successful implementation of a CRM system (Brendel 2002: 26-29).

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Concerning the main features outlined in 3.1.2 it can be stated that also for small and medium-sized enterprises, the requirements according to the features of the CRM system are in a way similar to those of huge enterprises. This reason is founded in the fact that a successful CRM strategy consists out of the three components: Analytical, operational, and collaborative CRM (compare 3.1.1). In order achieve the required customer-focused company strategy, all components are required and out of these the main features outlined in 3.1.2 are required. However, it can be stated that a CRM in a small and medium-sized enterprise does not require the same technical infrastructure as it does in a huge company. This advantage is simply justified in the fact that in a small and medium-sized enterprise the amount of employees using the CRM is in most of the cases far less than in a huge multinational organization (Bevier 2006: 1-3).

3.2

Requirements of a Successful Implementation of a CRM System

The following chapter gives information about the general requirements which decide about the success or the failure of the implementation of a customer relationship management system. While in 3.2.1 the prerequisites for implementing a customer relationship management system are outlined, 3.2.2 reveals the specific approach for introducing a CRM and

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explains how to ensure a successful implementation.

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3.2.1

Prerequisites for Implementing a CRM System

CRM is a business strategy and more than a functional strategy to gain new customers. As described in 2.1 and 2.1.3 does CRM affect the whole organization as a whole: marketing, IT, service, logistics, finance, production, research and development, human resources, etc. The CRM strategy will therefore have to provide direction to each department or employee that stands in contact with the customer (Peelen 2005: 6). For many companies, introducing customer relationship management requires a cultural shift from product-orientation to customer-orientation. The greater the extent of the shift, the more difficult it will be for an executive to lead the shift. Therefore, when introducing a CRM, the company should also take into consideration to embrace the new way of thinking and to create new incentives and structures at all levels to support the new customer-oriented culture (IBM 2004: 16).

The special requirement which is founded out of these facts outlined above is the conviction and the understanding of what it means to introduce CRM and to shift to a customer-oriented organization. According to the IBM Business Consulting Service study about “Doing right CRM: What it takes to be successful with CRM” companies often start strong but then fall quickly back into the old way of doing things. Mostly, it is recommendable to implement a CRM top-down. This means, it should be the first item on the agenda of the senior management and need to be seen as corporate goal and corporate strategy. After this understanding, the idea of the holistic CRM approach should be pushed down. If employees do not see how CRM fits into the big picture of the company, they will not use it. If the senior management of the company do not believe and communicate that CRM enhances the company’s overall value proposition, they will not be able to communicate it and the approach of seeing and introducing it as a corporate business

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strategy will fail (IBM 2004: 14-29).

According to the results of Göbel, Schulz-Klein & Stender (2003: 87) in their performed study about CRM implementation practices in Europe the decision for a CRM system is in most cases a management decision like depicted in the following figure.

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Figure 6: Decision-Making for a CRM System

Source: Göbel, Schulz-Klein & Stender (2003: 87) 

Especially in small and medium-sized enterprises the decision is done by the management. However, even after a successful implementation there remains the task to communicate and to establish conviction within the company in order to drive the company toward a customer-oriented culture. The fact that building lasting relationships better meet customers’ need and having a more intelligent information and analysis possibility to understand and deliver those needs, has to be understood by the management and ideally by all other employees who stand in direct contact with the customer (IBM 2004: 17).

In addition to the above outlined holistic understanding of customer relationship management, the availability and the quality of the data within the organization is

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essential and decides about success or failure of a CRM implementation. In order to be able to introduce a CRM, information about potential and existing customers is required. Therefore, before introducing a CRM it is required to determine which customer information the organization requires in order to establish a holistic customer relationship management (Stengl, Sommer & Ematinger 2001: 68-71).

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Regarding the technical requirements for implementing a customer relationship management system, various authors reveal that it is indispensable to scrutinize the business strategy thoroughly when implementing a CRM system. Even after an identification of what features have to be depicted in the software, an efficient segmentation process of the different CRM software systems is possible (Stadelmann et al. 2003: 84-86).

3.2.2

How to Ensure a Successful Implementation

In order to minimize the risk of failure when introducing a CRM, it is required to consider the following concept. The concept is according to Schulze (2002: 118-125) based on five phases which include various techniques in order to ensure a successful implementation of a CRM system.

Planning In the planning phase, the company is identifying the basic requirements for the implementation of the CRM system. In the planning process, the overall goal is defined, the creation of a project team and additional project members is done, the allocation and identification of the required resources is performed, and the definition of milestones is set. In addition, a special project-control board should be established in order to guarantee that the milestones are performed according to the established time schedule. It is remarkable that also in the CRM approach the overall goal of the implementation should be smart: Specific, measurable, achievable, realizable, and time-bounded. The overall goal of improving customer satisfaction is for example not specific.

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Preliminary study In the preliminary study, the organization’s business processes are scrutinized and analyzed. After identifying the business processes within the organization, the CRM system is analyzed according to the question of how to implement best the required features in order to depict the business process within the CRM software system. The strategy always comes first and technology is always ranked on the second place. Especially in the last years, CRM software vendors try to persuade their customers with

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the best technology of their system while disregarding any other important aspect when evaluating CRM software (Brendel 2002: 28). In addition, in the preliminary study questions should be answered like: How will data be imported into the CRM system? Which hierarchy has to be depicted in the CRM? Which report features should the CRM fulfill? Which data will be imported into CRM? Who is allowed to access them? The preliminary study should help the company to deepen the identified requirements in the planning process in order to be able to turn to the conception phase (Hippner and Wilde 2006: 19-21).

Conception phase The main phase in the implementation process is the conception phase. Based on the identified business processes, the CRM processes are developed and the technological requirements are fulfilled. In addition, specific goals are concretized and identified in numbers (Stengl, Sommer & Ematinger 2001: 40). In the conception phase, the company and specifically the employees should be motivated with the help of specific incentive systems in order to adapt to the CRM system. Eventually, specific processes within the CRM system have to be customized and the final catalog of specifications of the future CRM system is developed in order to elaborate which CRM system should be chosen. A roadmap is identified how to perform the actual technical integration.

Implementation phase In the implementation phase the technical environment is created and the CRM system is integrated. Based on the conception phase, specific sub-projects are identified which allow a step-by-step implementation (Hippner and Wilde 2006: 21). Specific technical experts are hired who encompass the technical integration process and avoid a data

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crash within the organization (Stengl, Sommer & Ematinger 2001: 41).

Utilization After the successful implementation, the utilization phase begins. However, it has to be clearly communicated that after the implementation, the CRM project is not completed. The concept of seeing CRM as business strategy is more than just implementing a CRM solution (compare 3.2.1).

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The five phases outlined above are revealing roughly the strategy how to proceed in order to ensure a successful implementation. The available literature outlines this topic in detail and provides a lot of other factors which should be considered when implementing a CRM system. However, this study is not mainly focused on the implementation topic so the explanations are limited to the main issues in order to be able to draw a holistic picture

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of CRM.

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4.

Open Source CRM Solutions

4.1

Open Source

Especially in the last years, the term open source has emerged increasingly. The following two chapters will first define and explain in general what open source means and will then turn to the question why it is useful and even a competitive advantage to use open source software. In order to understand the later executed comparison of the three open source CRM solutions, the general understanding of the open source approach is essential.

4.1.1

Definition

In order to be able to answer the question of defining open source it is required to get a basic understanding of how computers work. Computer programs are a series of yes/no decisions, combined with actions which follow after these yes/no decisions. For any of these actions which are performed several hundred million times a second, the computer is doing the same thing – making a yes/no decision. In order create this yes/no decisions there exist many different computer languages which all have one thing in common – they are developed for people and not for computers. Computers only understand and interpret the machine language. All software programs need to be translated from the human language into the native machine language. These computer languages are what computer programmers use in order to write software programs. What they actually write is the source code of a software program. There are two different ways in which computer languages are divided into. A program

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called interpreter can interpret the source code and translate it into machine language. A program called a compiler can translate the human language into machine language. Interpreted languages are easier to learn, because you can “play” with them and get immediate results (Locke 2004: 4-8). However, most of the serious development is done with compiled languages, because they end up being much faster.

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In order to define open source in a greater sense, the definition of Locke (2004: 7) was chosen: “Software that freely distributes the source code along with the object code, so that any programmer familiar with the language can tweak, improve, modify, or customize it without needing to ask anyone for permission or wait for a vendor to do it for them.”

The opposite of open source software is proprietary software. Proprietary software is usually developed by a commercial software company that is focused on selling the developed software. However, open source software is developed in order to reach technical excellence. The motivation of commercial software companies is to make money with their software. This fundamental motivation also illustrates the primary difference between proprietary or commercial software and open source software. Commercial software is in most of the cases only distributed in executable form which means that only its developers know the source code of the software and are able to modify the software, to distribute them or to authorize others to do those things. Especially for commercial software developers the source code of their software is regarded as the “crown jewels” of the company which have to be protected against the competition. Open source software is distinguished from commercial software by providing to all users the possibility to modify and redistribute its binary and its source code (Davidson and Kumagai 2008: 1-2). Before the widespread of the Internet, a lot of money and effort was required in order to bring programmers together in order to be able to develop a large and powerful software system. With the advantage of a cheap communication and powerful collaboration tools in the internet, this has changed dramatically in the last decade. Transaction costs have gone almost to zero and thousands of developers and programmers can work easily together on an open source project without having the

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overhead costs of a company and its management (Möller 2006: 20-22).

In order to understand the meaning of open source in detail, we have to take a look at the licensing module of open source and have to compare them with the licensing schemes of the commercial software developers. Commercial software developers use licensing schemes in order to create enough revenue to pay their research, development, marketing and support costs and leave something left over for profit. They also often limit the scope of use, limit warranties and

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limit liability. The fundamental economics of commercial software licensing is that each party gets an anticipated benefit at an anticipated cost (Davidson and Kumagai 2008: 1-2). However, open source does not necessarily mean that everybody can do whatever he/she wants to do with the software. When scrutinizing various different open source software projects, one can find licensing models that permit free use, modification, and redistribution of the software. The most frequently encountered examples are the Free Software Foundation’s General Public License (GPL) and the Lesser General Public License (LGPL), which permits modification, free use but prohibits the redistribution of the software as a completely new software project (Gordon and West 2008: 44). The Linux operating system is a good example of open source software distributed under the GPL (Brooks 2006: 18). “It is the GPL that has received the most attention and has caused the most sleepless nights among commercial software developers, investors, and those involved in mergers and acquisitions of software companies” (Davidson and Kumagai 2008: 3).

4.1.2

Why to Use Open Source Software

The rise of free and open source software as an alternative to the traditional commercial software products offers the possibility to cost savings and performance increases for many companies (McGhee 2007: 5). Especially for this reason, outlined by McGhee, open source software is very useful for small and medium sized businesses which are not able to afford the high licensing fees of most of the commercial software developers. Computers are nowadays able to increase the business performance and the efficiency in a way which many of the CEOs have not even thought of.

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However, special attention should be paid to the efficient implementation and the idea that the best software program does not increase the efficiency until the employees are not willing to use it (Lüngen 2006: 29). Until recently, only expensive proprietary software packages could be used to solve the needs of the companies and mostly only large enterprises could afford these solutions. With the latest open source software, you suddenly have access to high quality, stable and excellent software at a mostly affordable price (Locke 2004: 20).

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However, it can be clearly stated that all software costs money. You either have to pay somebody to implement and maintain the server systems, or you take the time by yourself by implementing it yourself. In order to be able to consider the real costs of software, it is important to refer to the total cost of ownership. It is important to have in mind such things as the cost of modifying, maintaining, and supporting the software as well as the cost of quality assurance testing, costs of customization, implementation, defect correction, ongoing development, and dealing with security issues.

The advantage of open source software consists of the fact, that these above mentioned costs are mostly your only costs – so you can avoid a huge amount of licensing costs of proprietary software. Another reason for using open source software is that it tends to be more secure. As mentioned above, one goal of open source software is to reach technical excellence; and technical excellence stands in direct correlation with an improved security. In addition does open source software support many old hardware and does not require the newest hardware in order to be able to provide the required features to the user or the company (Locke 2004: 20). Most proprietary software companies only support one or two previous generations of hardware – anything older is not supported anymore. According to Locke (2004: 20-22) and Möller (2006: 31-33) the main advantage of open source software is, that you can tailor the software exactly to your needs instead of trying to find the perfect one-size-fits-all product for your requirements. This advantage is justified by the fact revealed in the definition of open source that states that “any programmer familiar with the language can tweak, improve, modify, or customize it without needing to ask anyone for permission or wait for a vendor to do it for them” (Locke 2004: 7).

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More and more companies understood the advantage of paying someone to install free software that already exists and to develop specific customizations for their particular needs instead of paying a huge amount of license fees for a one-size-fits-all-product.

Therefore, many companies in today’s IT and internet economy realized this market niche and have built businesses around open source. None of these companies are software companies per se – they do not sell the software. Instead of selling, they sell

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the support, implementation, and modification for the software they are familiar with which characterize them as a service company. “Open source businesses are thriving, because instead of selling a big fancy product, they focus on solving the problem of the customer” (Locke 2004: 20). According to Locke (2004: 20) especially in this case, the difference between open source service companies and proprietary software companies could be discovered.

4.1.3

Open Source CRM Solutions

Especially in the last years, an increase in open source solutions for enterprise software could be detected. According to a report of the Gartner Group (2008: 1-7), open source will soon be found in every organization. The report stated that almost all businesses will use open source and that by 2012 more than 90 percent of enterprises will use open source in direct or embedded forms. Concerning the use of open source as customer relationship management software, it was decided to concentrate on three open source CRM systems: vTiger, Sugar CRM and OpenCRX. Next to these three open source solutions, there remain also other CRM solutions which are issued under one of the open source licenses. However, the special focus in this book is to reveal the features, advantages, and disadvantages of these CRM systems which are usable without any license fee and without any requirements on special co-software and which insofar comply the entire criteria’s of the open source definition outlined in 4.1.1. Having these restrictions regarded in the decision process, also other interesting CRM solutions could be encountered. The names of these solutions are: XRMS, TinyERP, ERP5, and Hipergate. However, one of the main selection criteria was based on the criteria of further

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development and a strong community on which the administrator could find help and support. Open source software is mainly build and improved by a large community which does its contributions to projects, paying for further development and filling the needs of the users. Even many companies directly support the open source community by employing software developers and providing support in the form of self interest (Locke 2004: 22).

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Considering the importance of the background community, it was evident to concentrate on the three biggest open source CRM solutions on the market: vTiger, Sugar CRM and OpenCRX. The following chapters will reveal general information, features as well as advantages and disadvantages of the three mentioned CRM systems. Special attention is also paid to further support possibilities through the companies who issue these CRM software systems. In the last step, a conclusion will be drawn and a comparison according to the findings outlined before will be compiled.

4.1.3.1

Sugar CRM

Sugar CRM is one of the world’s leading provider of commercial open source customer relationship management software. They classify their product as CRM software for companies of all sizes and identify their open source architecture as the world’s best concerning the customization possibilities. The company is situated in Cupertino, California in the United States within the Silicon Valley and employs about 150 people. Since two years, Sugar CRM has a subsidiary in Germany which is responsible for the European market. In the last years John Roberts, Chairman, CEO & Co-Founder, has raised over $ 46 million in financing from various Silicon Valley capital firms.

Unlike the other open source CRM solutions, Sugar CRM does offer two commercial editions and one open source edition. This means, that Sugar CRM classify them self as open source, offering the basic features of a CRM as free software and charging for

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the advanced features a certain amount of money per user and per year.

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The following figure depicts the functional differences between the two commercial editions Sugar Enterprise and Sugar Professional and the open source solution called Sugar Community Edition.

Figure 7: The Different Sugar CRM Editions

 

Source: Sugar CRM Inc. 2008. 

Like the figure clearly stated, does the company Sugar CRM restrict their open source Community Edition to the main features and enhances their commercial editions with powerful extra tools. The Sugar Community Edition is released under the General Public License (GPL)

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which classifies them as open source software (compare 4.1.1). In the following chapters only the Community Edition will be considered because only this edition could be classified as “real” open source CRM solution. In order to be able to use the commercial edition Sugar Professional, one has to pay $ 275.00 per user and per year and for the enterprise edition $ 449.00 per user and per year (April 2008).

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In addition to the revenues generated through the selling of the professional and enterprise edition, the company offers various support services models as well as professional implementation and customization services. The support levels are classified into standard support, extended support, and premium support. The different support levels mainly differ according to the maximum reaction time after transmitting a problem. Next to this, the company also offers support & training services in order to provide their customers with special trainings and assistance after the implementation phase.

Especially for the users of the open source Community Edition, the Sugar CRM forum offers a variety of support features helping the technical administrator responsible for the implementation to make use of the frequently asked questions and current problems. The forum consists out of 87.793 members (April 2008) and is insofar the biggest community of an open source CRM solution. 2

Concerning the technological framework it should be highlighted that Sugar CRM is developed in PHP and MySQL. PHP is a computer scripting language designed for website building. MySQL is a database management system released under the General Public License (GPL). The combination of PHP and MySQL allows to store the required data into the MySQL database and to access the data, performed in PHP by every Internet Browser. This means, that Sugar CRM is programmed barrier-free. It is accessible by every computer which contains an Internet Browser (Internet Explorer, Mozilla Firefox, Opera,

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Konqueror, etc.) (Kannengießer and Kannengießer 2007: 12-15).

                                                             2

All the above outlined information is obtained from the Sugar CRM website. Retrieved 22/04/08, from http://www.sugarcrm.com.

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4.1.3.2

vTiger

vTiger is an Indian alternative version of Sugar CRM with a differentiated focus. The core development team of vTiger CRM is based in Chennai, India. vTiger is organized in a private limited corporation with offices in Chennai and Bangalore as well as in Sunnyvale in California. The vTiger team characterizes their product as a “community-driven, fully open source, CRM software project with the aim to provide the best and most open CRM solution with the lowest total cost of ownership to small- and medium enterprises” (vTiger Inc. 2006). In comparison to Sugar CRM does vTiger contains many of the commercial features of Sugar CRM and offers them under the General Public License (GPL). Insofar does vTiger CRM provide small and medium-sized enterprises with completely free and open source software. vTiger maintains a low cost operation with a community-driven model and a small core team at the vTiger company. This allows them to publish their software as completely open source, generating revenues through support services, training, and customization services. In addition, the vTiger team is sponsored through donations from various enterprises which are convinced of the capabilities of the software and sponsor the team in order to finance further development. The vTiger philosophy consists of the idea to not charge for the software itself, but for support subscription services and professional customization services.

vTiger was initially launched and founded in the year 2003. The latest stable version was released in March 2008 in the version 5.0.4. vTiger is, like Sugar CRM, developed in PHP and MySQL providing it with the same

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advantages like explained in 4.1.3.1.

Like Sugar CRM does vTiger has the advantage of having a huge community in the background which helps the team in identifying errors in the software and enhances the system by further developments. The vTiger forum consists out of 56.886 users (April 2008) which defines them as the second biggest community in the field of open source CRM solutions.

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The philosophy of vTiger implies the consideration of requests and contributions from the individual user of vTiger CRM and to integrate them into their new versions. Insofar, does vTiger stands in direct contact with their customers allowing them to identify the customer’s wishes, expectations, and requirements. 3

4.1.3.3

OpenCRX

OpenCRX is an open source CRM solution with advanced groupware features. In comparison to Sugar CRM and vTiger, which are released under the General Public License (GPL), OpenCRX is based on BSD License. This allows other developers to contribute to the code and still retain the copyrights of their work. This handling of contributing source code from individuals is unlike to the proceeding in Sugar CRM and vTiger where the copyright to the code is transferred to the corporation and can be freely distributed, shared, and modified.

OpenCRX is issued by the CRIXP corporation which was founded in May 2003. CRIXP is a privately held company with its headquarters in Zurich and is owned by the founders Christoph Mueller and Werner Froidevaux. Their vision is “to empower companies and enable their employees to handle relationship information across all systems, processes and organization units effectively and reliably, with the most advanced and convenient IT technology imaginable” (CRIXP 2006).

OpenCRX is characterized by the CRIXP corporation by an unrivalled low total cost of ownership compared to other CRM applications. Like it is also highlighted by the vTiger and Sugar CRM Inc., does OpenCRX allow due to the open source license to maximize the Return on Investment (ROI) by investing in a business solution based on

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open standards rather than acquiring vendor specific or proprietary technology from a commercial CRM vendor. The company is financed according to their revenues generated through their services. Like vTiger and Sugar CRM, CRIXP offers implementation services including customization and integration as well as training and support services.                                                              3

 All the above outlined information is obtained from the vTiger website. Retrieved 23/04/2008, from http://www.vtiger.com 

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In addition to this, the company offers various consulting services like business analysis and a convenient solution design. By offering this service, CRIXP is able to offer an all-in-one package for companies who want to implement a customer relationship management system.

OpenCRX is developed in the scripting language Java which also allows the user to access the CRM without any limits with any Internet browser. OpenCRX is not as famous as vTiger and Sugar CRM; however, it is ranked on rank three of the open source CRM solutions concerning the size of the community in the background which contribute to the further development of the CRM. 4

4.1.4

Comparison of the three Open Source CRM Solutions

The Sugar CRM Community Edition, vTiger, and OpenCRX are the most used open source CRM solutions which are nowadays available in the market. Like already outlined in 4.1.3 are the criteria of a strong community in the background and the assurance of further development of the products two important issues in selecting an appropriate open source CRM solution.

According to the outlines above, one can state that the assurance of further development of Sugar CRM is guaranteed according to their financial module by offering two commercial editions with extended support and additional features. In order to gain new customers, the open source Community Edition is used to bait potential new customers. However, is the open source Community Edition restricted according to their features (compare Figure 7).

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Concerning the evaluation of the community in the background and the community support, one can state that vTiger and Sugar CRM do have big advantages. The community forums of both provide a lot of information available without any charge, offering the user and the administrator a lot of background information and how-to guides in order to ensure a successful technical installation.                                                              4

All the above outlined information is obtained from the OpenCRX and CRIXP website. Retrieved 23/04/2008, from http://www.opencrx.org and http://www.crixp.com.

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OpenCRX does have only a little community in the background. The lack of users who actively participate in the development and improvement of the solution, are a clear disadvantage of the system. The same occurs with the available documentation about the features, the use, and the administration of the open source CRM solutions. vTiger and Sugar CRM are offering a variety of instructions of how to use, implement, and administrate their system. In addition, did Frank Piepriorra from the company crm-now publish in 2007 the vTiger CRM v.5.x: User and administrator handbook explaining in detail the overall scope of vTiger.

Next to the community support, all companies are doing commercial support activities by offering different service and support modules. The quality of the support levels only differs in the response time. The faster the response, the more expensive the support level is. The subscription-fee for being able to get basic support from the vTiger company is about $ 150 per user per year and $ 200 per user and per year by CRIXP. Sugar CRM is offering only support to their users of the commercial editions.

According to the customization possibilities of the three CRM solutions, it has to be remarked that all solutions do offer possibilities to adapt the CRM software in a way to the needs of the company (compare Table 4, Customization). However, does the fact that the source code is available without any restrictions offer the possibility to develop individual modules and customization possibilities within the system without paying a license fee. The fact that all systems are programmed in common scripting languages (PHP, MySQL and Java) all over the world, does offer the possibility to implement direct customization activities by every software company which is able to program in PHP and MySQL or Java.

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Next to this, do the companies or the community of Sugar CRM, vTiger, and OpenCRX release specific add-ons in order to enhance the features and the scope of the CRM. The most add-ons are clearly available for Sugar CRM. However, most of the add-ons are not published under the GPL, meaning that the most-add-ons have to be purchased. vTiger also offers specific add-ons which are mostly published in the vTiger forum and developed by the community. The idea of vTiger to provide an honest open source

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solution is also reflected in the add-ons philosophy. Nearly all add-ons which are released for vTiger are provided for free under the GPL license. Another approach is done by OpenCRX. The company CRXIP publishes the status of the required new features on the OpenCRX website and everybody who wants this feature to be realized can make a donation in order to accelerate the development of the features.

According to the findings outlined above, the following advantages and disadvantages of the three different open source CRM solutions could be explored:

Table 1: Advantages and Disadvantages of Sugar CRM

Sugar CRM Advantages

Disadvantages

Increased probability of further

Restricted functionality – many features

development

are not available in the open source Community Edition (compare Figure 7 and Table 4)

Huge community in the background

Community Edition will ever be restricted according to the financial interest of the company – no “real open source”

Customer-focused support activities due to commercial interest Good documentation

Easy to modify according to the GPL license

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Many add-ons available Many IT companies are familiar with Sugar CRM Source: Own elaboration

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Table 2: Advantages and Disadvantages of vTiger

vTiger Advantages

Disadvantages

vTiger offers the most functionality

Developer team is restricted according to

(compare Table 4)

the financial possibilities

vTiger is “real open source” – everything

Further development (releasing of new

is released under GPL, everything is for

versions) is slower than in Sugar CRM

free Excellent documentation Huge community in the background Easy to modify according to the GPL license Many add-ons available released under GPL Published in version 5.0.4 – vTiger is the CRM that has maintained over the longest period of time on the market Many IT companies are familiar with vTiger Source: Own elaboration

        Table 3: Advantages and Disadvantages of OpenCRX

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OpenCRX Advantages

Disadvantages

OpenCRX offers more than just the

Some of the main CRM features are

common CRM features

missing (compare Table 4)

Extended by groupware features and

Developer team is restricted according to

features of an ERP system (compare

the financial possibilities

Table 4)

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OpenCRX is “real open source” –

Further development (releasing of new

everything is released under GPL,

versions) is slower than in Sugar CRM

everything is for free Funding for further add-ons is published

No strong community in the background

on the OpenCRX homepage – everybody is able to participate Easy to modify according to the BSD license; only add-ons are under the copyright of the author Source: Own elaboration

4.2

Could Open Source CRM Solutions Fulfill the Requirements

According to the comparison performed in 4.1.4 and the outlines about Sugar CRM, vTiger, and Open CRX the following chapter reveals if the three or at least one of these three CRM systems fulfill the requirements outlined in part 3. The chapter is subdivided according to the previous subdivision performed in part 3 into: basic components, main features, and the question on the special requirements of small and medium-sized enterprises.

4.2.1

Basic Components

According to the outlines in 3.1.1 does a CRM system consist out of three different components: Analytical, operational, and collaborative CRM (Zisper 2001: 36). Databases or data warehouses build the basis for every analytical CRM information

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system. They have the task to store data and to turn them into systematized information which should lead to a better comprehension of business events (Rajola 2003: 26). Concerning the technical evaluation of vTiger and Sugar CRM in 4.1.3.1 and 4.1.3.2 we saw that both use a MySQL database where they store all their information. With the help of the scripting language PHP, these CRM systems were able to depict the

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data in the required sense and to perform special reports and analysis (Kannengießer and Kannengießer 2007: 12-15). The function of being able to create special customized reports (compare Table 4, Reporting and Analytics) on the behavior, the loyalty, or the profitability of the customers helps the company to turn the data stored in the MySQL database into systematized information. The same possibility does also the CRM system OpenCRX offer. OpenCRX makes use of the PostgreSQL database which is a database system which was developed by an open source community. The functioning and technical possibilities of PostgreSQL and MySQL are nearly the same; however does MySQL offers the advantage that it is far more used and widespread than PostgreSQL (Boutelle 2005). As already outlined in 3.1.1 does OLAP and data mining tools also play a major function in the analytical part of CRM. It has to be stated that through the possibility of creating customized reports and dashboards (compare 4.2.2) on nearly every activity or every customer interaction the basic idea of OLAP could be performed at least by vTiger and OpenCRX. However, it has to be remarked that many commercial CRM systems are offering especially in the reporting function a more detailed output. On the other hand, does the fact that all the information is stored in a MySQL or a PostgreSQL database offer the possibility to develop special targeted new output features in order to be able to convert the data into useful information. MySQL is the most common open source database system in the world (Boutelle 2005). The fact of having various developers who are already familiar with the code structure does especially to small- and medium sized enterprises offer the possibility to easily adapt the output features according to their needs. The operational CRM is according to Hippner and Wilde (2006: 48) subdivided into the subareas of Marketing, Sales, and Service Automation. When comparing the feature descriptions of the three open source CRM systems on their websites, one can see

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that Sugar CRM, vTiger, and OpenCRX use the same differentiation. They divided their features according to the subareas of the operational CRM identified in 3.1.1. However, do not all features identified in 3.1.2 are fulfilled by all of the three CRM solutions (compare Table 4). The requirement of providing specified information about one customer directly to the employee is one of the main tasks of the operational CRM component. In the

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capabilities definition of the three open source CRM solutions, this is identified as case management. Case management centralizes the service history of each customer, allowing the employee a detailed view on customer requests and responses. With the interaction of the analytical CRM component and the information stored in the database or data warehouse, case management depicts the information to one special customer allowing the managers to monitor how cases are handled and to get an understanding about the effectiveness of case responses. For a detailed analysis on the operational features realized by the three open source CRM solutions, refer to 4.2.2 and Table 4.

As outlined in 3.1.1.3 does the collaborative CRM describe the communication concept and the interaction between the organization and the customer through various communication channels. According to the communication channels identified in 3.1.1.3 do all the open source CRM solutions fulfill the integration of an e-mail client in order to stay electronically in contact with the customer (compare Table 4). E-mails of the customers are automatically stored in the integrated e-mail client and could be transferred to the customer allowing them to be displayed in the case management. The integration of CTI by establishing an effective interface between the CRM and the call-center could only be realized by the CRM vTiger (compare Table 4) and only when using Asterisk as open source VoIP solution. Concerning the communication possibility via internet, it should be remarked that only vTiger offers the possibility to install a customer portal where the customer is able to communicate a problem or an order. The customer portal is directly connected with the vTiger CRM allowing to handle the process directly in the CRM and transferring the results to the customer portal while sending them automatically to the customer so that the customer is getting feedback in every step.

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In conclusion, it can be stated that the basic components of a holistic CRM approach could be realized by using an open source CRM solution. However, it has to be stated that not all systems are able to depict the whole features in order to be able to realize the holistic functionality of the analytical, operational and collaborative CRM segment. In order to be able to identify the most suitable CRM system, more information about the functionality of the three CRM systems has to be revealed.

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4.2.2

Main Features

In order to get closer to the evaluation if open source CRM systems fulfill the requirements, it is required to scrutinize the different functionality of the three systems.

The following table depicts the functionality of the three CRM solutions based on the identified main features which are, according to the literature, required by a customer relationship management system (compare 3.1.2).

Table 4: Functional Comparison of Sugar CRM, vTiger and OpenCRX Sugar CRM

vTiger

OpenCRX

GPL

GPL

BSD License

PHP/MySQL

PHP/MySQL

Java

5.0

5.0.4

2.0.0

Community Edition General License Technical platform Version Multilingual

(48)

(20)

(10)

Marketing Automation Campaign Management

__

Contact Management Lead Management Marketing Analytics

__

__

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Sales Force Automation Sales Opportunity Management Forecasting

__

__

Competitor Analysis

__

__

__

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Sugar CRM

vTiger

OpenCRX

Community Edition Quote Management

__

Invoice Management

__

Sales Analytics

__

Inventory Management

__

Products Catalog

__

__

Customer Support Case Management Integrated E-Mail Client Knowledgebase

__

__

Customer Portal

__

__

Trouble Tickets Call-Center Interface

__

*

__

Collaboration Project Management

__

__

Shared Calendar Activity management

Reporting and Analytics Customizable Reports

__

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Dashboards

__

(basic)

Case Reports

__

Customer profiles

__

__

__

Platform User Management

__

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(planned)

Sugar CRM

vTiger

OpenCRX

Community Edition Access Control

__

Audit Trail

__

Customization Custom Fields

__

Custom List Views Currency Customization Language customization

Interfaces Data Import via Excel Excel-Export PDF-Export

__

Print View

__

Add-Ons Outlook Plug-In

__

Office Plug-In

__

Open Office Plug-In

__

Thunderbird Plug-In

__

__

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Additional ERPFeatures

__

__

*Call-Center Interface is provided through an extension of vTiger and Asterisk, the world’s leading open source VoIP-solution. The extension is developed by the company Rahlfs + Ross Multimedia GmbH and is released under GPL (Rahlfs + Ross Multimedia GmbH 2007) Source: Own elaboration

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In the following explanations, the depicted features which are not self-explanatory are explained: 5

Campaign Management: Campaign management includes the feature to execute and monitor special marketing campaigns. Distribution channels could be via e-mail or doing a campaign mailing via letters.

Contact Management: The contact management feature lists all available customers with reference to their company. Contact management provides the possibility to store customer-related data like for example the address, telephone number, e-mail address, etc.

Lead Management: A lead is a potential new customer. Lead management is a feature to manage prospects. The task is to qualify and track the leads from the various performed marketing campaigns and hand them to the sales team. The lead management feature allows centralizing all the information about the leads in order to turn them into future customers.

Marketing Analytics: Marketing analytics allows companies to measure the effectiveness of marketing campaigns. With the help of the feature marketing analytics, the company is able to identify the ROI of marketing programs and to track which distribution channel is the most/least profitable.

Sales Opportunity Management: Sales opportunity management is a feature that allows the company to track sales

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opportunities. Special follow-up reminders remind the sales team to start follow-ups in order to turn the opportunity into a concrete sale action.

                                                            

5

The following explanations are based on the information obtained from the Sugar CRM, vTiger, OpenCRX, and CRIXP website.

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Forecasting: The forecasting feature uses the information of the analytical CRM in order to forecast sales figures. The idea of forecasting is to have an effective handling of the sales resources.

Competitor Analysis: Competitor analysis is a feature giving the company the possibility to track the activities of the competitors in the CRM system and compare their prices with the own ones.

Quote Management/Invoice Management: With the quote/invoice management feature, the sales team is able to generate accurate quotes/invoices for specific customers. The feature provides the function to store and send the quote/invoice directly to the customer.

Sales Analytics: Sales analytics gives sales managers the insight into their sales performance. The management can monitor the sales representatives according to their performance measuring for example how many calls each representative made over a given period of time and how many revenue he/she generated in the same period.

Knowledgebase: The knowledgebase allows the support team to create a FAQ and to manage problems which often occur with one specific product. The idea is to provide the customer with detailed information in order to avoid problems and to find an effective and efficient solution when problems occur.

Trouble Tickets: A trouble ticket is created whenever the customer reports a problem with a product or a

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service. The trouble ticket is directly related to the customer and allows the support team to enter specific information into the ticket and to describe a solution. By the interaction with the customer portal in vTiger, the customer can follow the status and the information stored in the trouble ticket in the customer portal. If the problem, revealed in the trouble ticket, occurs more often, the trouble ticket together with the elaborated solution can directly be transferred into the knowledgebase.

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Activity Management: The activity management feature streamlines all the tasks necessary to get a job done. With the help of the activity management feature it is possible to manage e-mails, meetings, calendars, calls, and tasks within a central location in order to ensure that the team works together. The performed and schedules tasks, meetings, calls and emails are attached to a specific contact in order to ensure a complete customer record which could be depicted in the case report.

Dashboards: Like already mentioned in 4.2.1 do dashboards provide employees and managers with real-time information about leads, opportunities, and contacts. Dashboards allow to present user-specific information about sales opportunities, the sales progress and create visual charts in order to be able to interpret the data effectively. Dashboards are used in the analytical CRM component in order to be able to turn the data into useful information.

Case Reports: The case reports feature allows to centralize the service history of each customer and to analyze how the case is handled and performed. The goal of case reports is to gain a complete view of the customer service request history and to monitor the effectiveness of case responses.

User Management: The user management feature allows companies to create and manage users within the CRM. Every employee should be one user in the CRM who performs his/her specific tasks within the CRM. User management allows assigning key customers to one special employee and increases the information sharing.

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Access Control: The access control feature allows information to be shared or restricted based on user role. According to the companies’ hierarchical constitution, the access control feature ensures that each employee does only what is his/her assigned task or right.

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Audit Trail: The feature audit trail consists of the control mechanism to track all the activities a user performed in the CRM. All activities could be tracked in order to create transparency.

Outlook Plug-In: The Outlook plug-in is able to associate e-mails with contacts stored in the CRM. In addition it provides the possibility to synchronize the tasks, calendar entries, and contacts between Outlook and the CRM.

Office Plug-In: The Office plug-in is used to get personalized information out of the CRM in order to be able to create individual serial letters in Microsoft Word for special marketing campaigns.

Open Office Plug-In: The Open Office plug-in is used to get personalized information out of the CRM in order to be able to create individual serial letters in Open Office Writer for special marketing campaigns. Thunderbird Extension: The Thunderbird plug-in is able to associate e-mails with contacts stored in the CRM. In addition, it provides the possibility to synchronize the tasks, calendar entries, and contacts between Thunderbird and the CRM.

Comparing the three open source CRM solutions, it can be seen that vTiger clearly offers the most features. A lack of features could only be observed in forecasting, competitor analysis, project management, customer profiles, Open Office plug-in, and additional ERP-features.

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However, does vTiger offer nearly all functions which are required according to the literature of a customer relationship management system (compare 3.1.2). Sugar CRM is restricted in the most features and is, according to the functionality, not able to depict the holistic approach of CRM. The same occurs with OpenCRX. In their latest version 2.0 CRIXP was not able to develop the system into a competitive CRM software. Basic components like the campaign management feature, marketing analytics or the possibility to create custom fields are missing.

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However, does OpenCRX offer additional ERP-functions like the management of real estates and useful groupware features. Comparing the usage and the intuitive handling of the systems, OpenCRX could not win against vTiger and Sugar CRM. The graphical user interface (GUI) is excessive and it is hard to follow the handling process of the software. vTiger and SugarCRM are nearly the same according to their handling attributes. The GUI is clean and the constitution of the software is logical (compare Appendix).

In conclusion it can be stated that according to the functionality vTiger could fulfill the requirements of a Customer Relationship Management. In addition, Sugar CRM and OpenCRX could – taking the lack of some features into consideration - also be classified as CRM system. However, it has to be remarked that Sugar CRM and Open CRX are, according to their functions, not able to depict the holistic approach of customer relationship management elaborated in the second and

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third chapter.

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4.2.3

Special Requirements of Small and Medium-Sized Enterprises

Especially small and medium-sized enterprises are faced with a restricted amount of time and budget when implementing a CRM system. In addition to this, does often the lack of qualified personnel force the management to hire special experts which are familiar with a CRM implementation.

Regarding the advantages of open source outlined in 4.1.2 it can be stated that especially open source software could create a competitive advantage for small and medium-sized enterprises. The fact of having the possibility to implement a software system without paying a license fee does not only create a financial advantage. In addition, another special requirement outlined in 3.1.3 could be achieved: Adapt the CRM system according to the sequences and company processes. The advantage of open source CRM systems is to be able and to be legally allowed to adapt the source code and to enhance the system according to the own preferences and requirements.

Especially concerning the popular CRM system vTiger various companies could be found which are specialized in the adaptation and customization of these open source CRM solution. Companies which are specialized on the customization of vTiger are crm-now (http://www.crm-now.de), visual4 (http://www.visual4.de), and Open Consult (http://open-consult.net). Companies which are familiar with SugarCRM are open Source Development (http://www.open-source-development.com), and sunzinet (http://www.sunzinet.com). CRIXP, the company which releases OpenCRX does also offer by themselves the service of the analysis of the business processes and the adaptation of the CRM

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software according to the workflow in the organization. The availability of various consulting companies offering their expertise on special open source CRM solutions does also implement that these system could fulfill the requirements of a small- and medium sized enterprise. However, it has to be stated that in order to realize the requirement to be able to adapt the CRM software according to the business processes the help of special experts who are able to customize the open source CRM solution is required.

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5.

Conclusion

In the increased competitive landscape the importance of customer relationship management increased especially in the last years. The transition from traditional to relationship marketing and the opportunities of improved customer knowledge and image improvement as well as increased revenue through customer satisfaction, require more and more companies to turn to an efficient customer relationship management system. Especially for small and medium-sized enterprises does the usage of an open source CRM solution offer a variety of advantages. As already stated in the introduction does customer relationship management mean a complex and difficult way of doing business. Next to the implementation of a CRM system, various other prerequisites have to be fulfilled in order to be able to gain a competitive advantage out of the usage of a CRM system. CRM should be seen as corporate business strategy. Even the best CRM software system does not evoke any potential benefit when the approach of developing a customer-oriented organization is not regarded. However does, in addition to the understanding and internalization of the holistic CRM approach, also the CRM software contribute in a way to the success of Customer Relationship Management.

SugarCRM, vTiger, and OpenCRX are stable open source CRM solutions which could, according to their components and features, fulfill the basic requirements of a customer relationship management software. However, especially according to the features, differences between the three systems have been discovered. Concerning the functionality, vTiger could be identified as winner due to the various features, add-ons, interfaces, and their holistic open source philosophy. OpenCRX could be identified as second winner according to the variety of features and

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the possibility to enhance the system as a starting point of for an ERP system with integrated groupware features. However, could also in OpenCRX a lack of some features be discovered. The Sugar CRM Community Edition could be regarded as third winner. It is not able to depict the holistic approach of a CRM software system due to the lack of important and required features in the analytical, operational, and collaborative part of CRM.

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According to the specialty of small and medium-sized enterprises, it could be clearly stated that all of the three scrutinized open source CRM solutions are able to satisfy the requirements. The fact of having no license costs, the simplified way of customizing, and the motivation of reaching technical excellence and to create superior value in comparison to commercial software producers are just a few advantages of open source CRM solutions.

However, it could be clearly stated that open source CRM solutions are no out-of-thebox solutions. According to the technical specifications and the requirement of customization, are in most of the cases special experts required who install, implement, and customize the system. The fact of having various IT companies which are specified in customization services of vTiger or SugarCRM is another advantage for the approach of realizing customer relationship management with open source software. Most of the IT companies are focused on small and medium-sized enterprises as their target group and are therefore also familiar with their requirements.

Concerning the question which CRM solution should be implemented, it is crucial to scrutinize the business processes and the individual requirements of every company. In most of the cases, the underlying criteria do not match with the capabilities of the different CRM solutions on the market. The advantage of a simplified way of customizing without paying a license fee for the software is one of the main advantages for using an open source CRM solution.

According to a report of the Gartner Group (2008: 1-7), open source will soon be found in every organization. The report stated that almost all businesses will use open source and that by 2012, more than 90 percent of enterprises will use open source in direct or

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embedded forms. When observing the open source developments in the last years, the predicted future of the Gartner Group could become reality. Especially in the last year, many organizations turn to open source software in order to save costs and to increase their IT-security (InfoWorld Inc. 2008). However, does open source business software find slowly its way into the organizations. Most of the companies are not aware of the possibilities of open source

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software and simply deny open source with the argument that something cannot be an asset when it does not cost money.

The current available open source CRM solutions could be regarded as stable and productive according to the findings of this study. However, does the further development and improvement of the systems decide about

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an increased success and awareness.

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Appendix

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Sugar CRM Homepage

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Sugar CRM Account Management

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Sugar CRM Marketing Campaigns

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Sugar CRM Dashboards

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vTiger Homepage

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vTiger Lead Management

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vTiger Calendar

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