2006: The Year Services Become King

The coming year is going to see the fruition of several dominant trends that have been percolating just under the surface of CRM specifically and enterprise software markets generally.

It’s going to be an invigorating and challenging year because many software companies will need to re-invent themselves to sustain their current sales levels or even hope to grow. At the center of CRM best-of-breed vendors re-inventing themselves is a complete services focus, and that strategy will pervade every other aspect of many best-of-breed companies’ efforts to continue selling.

The shift to a services model over products inside best-of-breed vendors will be one of the most noticeable trends in 2006. That’s just one of several predictions for the coming year that will influence many other aspects of how CRM and enterprise software gets sold and used.

Let’s take a look at additional predictions for 2006:

• Selling services based on being a trusted advisor makes transaction selling obsolete. This ties back to the services-oriented approach many best-of-breed companies are going to adopt in 2006. Transaction selling ignores relationships and focuses purely on closing deals on incentives and price. Trusted advisors will outsell transaction-oriented sales reps by a wide margin in 2006.
• The biggest CRM spending category of the year will be integration and services. A few of the CIOs I know are holding onto their decision-making responsibility due in large part to this point. They own the customer data and maintain its many integration points. Look for the vision of a unified customer to be a major focus during the coming year throughout CRM.
• Software-as-a-Service (SaaS) breaks out of CRM and into the rest of the enterprise. Credited with the rejuvenation of CRM, SaaS continues its torrid growth pace anchored by Salesforce.com and RightNow Technologies in 2006. In keeping with a services focus extending into the coming year, SaaS will find its competitive strength in the greater depth of functionality relative to licensed applications and more affordable pricing. Expect to see the option of single- versus multi-tenant SaaS models in 2006 depending on the feature refreshes required by the customer. Ultimately, SaaS will find its way into providing supply chain visibility back to channels through CRM systems so orders, quoting and pricing are in synch with each other constantly.
• Service Oriented Architectures prove they are ready for prime time. In keeping with the dominant trend for 2006, Service Oriented Architectures will prove themselves ready for the more complex business processes, including consolidated order management and fulfillment and pricing integration.
• Measuring Marketing and Voice of the Customer Programs using analytics and dashboards gain momentum globally. Marketers in many companies are constantly fighting battles related to the results of their strategies and engaging in debates over whether their efforts are making a contribution to sales. Look for marketing departments to champion hosted analytics apps like sales departments champion hosted CRM and SFA apps today.
• Indian outsourcing companies start acquiring software companies. Infosys and HCL are two, specifically, that could make an even deeper move into the retail industry by acquiring retail software companies that focus on order management, pricing or data management.
• Google acquires at least four more companies and firmly establishes itself as an enterprise platform. The names of these four companies may or may not be publicly shared, yet Google is well on its way to becoming an enterprise platform due to the constant contribution of content from both indexed sites and new initiatives, including Google Base; reliance on advertising by smaller companies that can’t afford more expensive advertising strategies; and the fact that search engine technology is the quickest fix for the most broken of content management systems. Look for Google to be the first out with video Instant Messaging and other collaboration applications that will serve as on-ramps for entire content management taxonomy support.
• AdWords sparks an industry of optimization tools due to lead-generation successes. The technology behind constraint engines could easily be applied to Google AdWords to further optimize word selections and the optimal allocation of budgets by keywords chosen. Google offers a Budget Optimizer today yet it doesn’t allow you to see the median bid for a keyword network-wide. If a constraint engine could define the median value for a keyword, its optimal performance for your subject by time and location, then the economics of buying keywords would change drastically and greatly improve individual companies’ performance.
• Google buys its way into China all the way. Stifled by the Chinese government’s labyrinth of regulations and agencies and the extensive censoring it imposes, Google gets serious about China and makes an acquisition move. Google has a stake in Baidu.com, China’s top search engine. Baidu.com claims its not interested in being acquired by Google, yet as anyone knows, that could change fast. Google is investing heavily in technology centers and hiring in China to establish a beachhead there. China is Google’s paradox and an acquisition could solve it.

2006 is going to be an exciting year. Thanks so much for checking in to read this column and sending in your comments from time to time. Please let me know how I can assist you in any way. Make it a great and memorable holiday season and Happy New Year!