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Business Software Case Study

crm CRM SOFTWARE FOR THE MID-MARKET | Market differentiation for medium-sized firms requires a different approach
By Geoffrey James
Geoffrey James is an award-winning author of best selling management book Business Wisdom of the Electronic Elite (Random House) and has more than 25 years experience in the enterprise software industry. Geoffrey authors articles for publications ranging from Wired to Men’s Health and has written extensively on the subject of Customer Relationship Management software and business strategy for SellingPower magazine.


Conventional wisdom says there are two industry market segments for Customer Relationship Management (CRM) software: “large enterprise” (generally referred to as “enterprise”) and small-medium businesses (typically abbreviated as “SMB”). That market segmentation, however, gives short shrift to middle-sized businesses, which face challenges that are profoundly different from either large enterprises or small businesses. Part One of this CRM software white paper describes why traditional CRM, as implemented for large enterprises or small businesses are entirely inadequate for middle-market firms. Part Two of this white paper provides a detailed case study of how a CRM software solution targeted at the middle-market was able to satisfy a particularly demanding set of requirements inside a middle-market company.

Part One: The CRM Segmentation Fallacy
The classic segmentation of CRM software into enterprise and SMB is not based upon actual market conditions, but rather upon the historical evolution of the software industry itself. It has often been observed that software tends to go through a simplification process. When new business software applications are introduced into the market, the problems they attempt to solve are usually not well understood, and therefore the solutions intended to address these problems tend to be complex, requiring significant customization and systems integration. As the problems that the software is supposed to solve become better understood, the solutions become more mature, better targeted, and easier to implement and support.

This basic industry dynamic causes software manufacturers to introduce new business applications by selling early versions into large enterprises, because those are the firms that have the financial means to invest millions of dollars on experimental information technology (IT) projects. As these business software applications mature, they trickle down to smaller firms, eventually becoming available to the very smallest companies, even sole proprietorships. For example, one of the early applications for the IBM mainframe was a payroll application, which in the mid-1960s was a big-ticket item. Today, however, anyone with a personal computer (PC) can purchase and operate a perfectly operational payroll system for a few hundred dollars. And that package is likely to have features that far exceed the capabilities of the original payroll applications.

This commoditization process determines the business model for most software manufacturers. Some software vendors (i.e. Oracle, SAP, Infor) primarily sell new, complex business software systems to large enterprises. Other firms (e.g. Microsoft, Intuit, primarily sell simplified, commodity-like products to a broad base, including everyone from large enterprises to very small sole proprietorships. As each application type becomes simplified, the only way that the enterprise manufacturers can compete against the broad-based vendors is by upping the ante and making the application scope larger and even more complicated. For example, word processing originally involved expensive, proprietary equipment, limiting its usage to a relatively small number of large firms. However, when word processing migrated to the PC, the software manufacturers who had been selling those high-priced systems (like Xerox and Wang) immediately began repositioning their solutions as something more elaborate: document management and publishing respectively.

That’s exactly what’s happened in CRM software industry. When it was originally referred to as Sales Force Automation (SFA), CRM was basically an experimental sales-focused software application. Installing an SFA system entailed significant risk. More than half of CRM projects failed (according to analyst firm Gartner), either because the technology was inadequate or it was trying to solve the wrong problems. Since then, however, CRM software manufacturers and the sales teams that use CRM solutions have made great advancements in understanding what CRM needs to do, so CRM solutions have become correspondingly more simplified and streamlined. As one might expect, now that simplified CRM software capabilities are available from broad-based vendors like and Microsoft, the enterprise CRM vendors have upped the ante. SAP and Oracle, for example, are now repositioning CRM as one element of a grander Enterprise Resource Planning (ERP) software strategy.

Because of the inner dynamics of the software applications business, enterprise CRM manufacturers and broad-based CRM software vendors alike tend to view the middle market as a continuum that edges into their original customer target markets. The enterprise manufacturers want middle market firms to embrace the ERP software concept and retool their entire computing infrastructure. Similarly, the broad-based CRM manufacturers want middle-market firms to add software customizations and third party partner applications to those vendors’ vanilla-level solutions. Unfortunately for middle-market firms, neither approach is very effective. On the one hand, middle-market firms can’t afford to install and support a massive (and risky) centralized ERP application system. On the other hand, middle market firms generally have needs that are too sophisticated to be satisfied with the Tinker-toy approach that the broad-based software manufacturers offer.

The root of the problem is this concept of the middle-market as being inside a continuum with the very largest firms at one end and the very smallest firms at the other. This concept is deeply flawed because middle-market firms are, in most ways, extremely different from both large companies and small businesses.

Consider this, large enterprises, regardless of industry, tend to be similar in terms of corporate structure (hierarchical) and fiduciary structure (public ownership). Further, within specific markets, large enterprises almost always have nearly identical business development, sales and marketing models. For example, there is very little difference, in terms of general activities, between Toyota and General Motors and Volkswagen. In these environments, the value of automation is found in creating ever-deeper layers of integration in order to create an incremental advantage over the competition. That’s why these behemoth firms are willing to invest in the ERP software and business process automation concept.

Small businesses are also similar in terms of corporate structure (little to none) and fiduciary structure (generally private and often family-owned or family controlled). Within individual industries, small businesses are often quite different (because they sell very different things), but because they are small, their business development, sales and marketing processes are, by definition, simplistic. In these environments, the value of automation is the ability to bring up a basic software application that can add at least some level of business process automation – and then extend it piecemeal. That is why small businesses are willing to buy into the concept of simple customization via mix-and-match systems.

In contrast, middle-market firms use a wide variety of corporate structures (networked, collaborative, consensus-driven, loose affiliations, etc.) and a wide variety of fiduciary responsibilities (venture capital, wholly owned subsidiary, private but planning to go public, public but planning to go private, etc.). Further, middle-market firms always have business development, sales and marketing processes that are both unique and complex. The reason is simple. If what a middle market firm provides is not both unique and complex, it is inevitable that a large enterprise will enter that market and use the power of its deep pockets to force those middle market firms out of business.

For example, just over two decades ago, thousands of small chain stores erupted around the world that provided high speed copying services to small businesses. One of these chains in the United States, Kinkos, eventually achieved critical mass and used economies of scale to undercut the other local franchises, eventually driving them out of business. This was possible because providing reproduction services to small businesses is insufficiently complex and unique to justify the presence of a middle-sized firm. Because the service is all a matter of who can buy the equipment and paper cheapest, there’s no reason for a middle-sized firm to exist, except temporarily (as when Kinkos was originally growing.)

By contrast, there are many regional financial services companies and banks throughout the world that offer financial services to small businesses. These regional banks continue to survive and thrive, even though they can’t possibly compete head to head, in terms of financial resources or services, with giant international banking concerns like Wachovia or Bank of America. However, in servicing small businesses, regional banks do something that’s complex and unique – assessing the value of a customer based upon personal relationships and local knowledge.

For example, to write effective loans to small businesses, a regional bank must make decisions based upon the local representatives assessment of the reliability of the person asking for the loan, and the validity of that person's business within the local economy. International and global banks are simply not set up for this type of decision-making, because their centralized nature inevitably pushes decision-making up the hierarchy and beyond the visibility of local conditions.

Obviously, the simplistic approach of the broad-based CRM vendors is wildly inappropriate for middle-market companies where the complexity and uniqueness of sales and marketing processes are the very reason that the firm survives. While the price for such systems does not create a financial burden, the out-of-the-box capability is simply too inflexible and feature-poor to support the complex uniqueness of middle-market sales and marketing processes.

Similarly, the ERP software approach taken by the large enterprise CRM software vendors is equally inappropriate, not because the functionality does not exist to support uniquely complex sales models, but because middle-market firms generally cannot afford to risk their entire business on ERP software, which assumes a complicated redesign of the entire corporate computing infrastructure.

What the middle-market needs for CRM strategy and supporting software applications is neither a scaled-down ERP application nor a cobbled-together kludge of vanilla applications. Middle-market firms need CRM systems that are feature-rich and flexible without requiring the firm to rewrite and rework its entire computing infrastructure. Fortunately, such applications are beginning to emerge now that a handful of CRM manufacturers are focusing on servicing these uniquely complex middle-market environments.

Part Two: The Synovus Case Study
The best way to illustrate how CRM solutions can best address middle market requirements is to examine, in detail, a middle market entity that is using CRM strategy and CRM software successfully. For this purpose, I’ve selected Synovus, a recognised financial services holding company headquartered in Georgia, USA which uses Aplicor to handle its business development, sales and marketing processes. Synovus, which delivers banking, investment and asset management services through a network of banks and offices in the southeastern U.S., controls a little over $30 billion in assets. At first glance, that might not seem like a middle-market amount of financial resources until one compares those assets with those of, say, Bank of America Corp., whose assets exceed $1.4 trillion.

As is common for a middle market firm in an industry where large industries dominate, Synovus is the antithesis of its larger competitors. Bank of America and its ilk are highly centralized, with worldwide branches that are as cookie-cutter as a Starbucks coffee franchise. By contrast, Synovus consists of 43 separately branded banking institutions that operate autonomously within their respective communities through approximately 325 branch offices.

This decentralized business concept allows Synovus’s banks to continue to position themselves as locally-deployed, thus providing customers the responsiveness that comes with local decision-making. At the same time, being part of a larger financial services company allows those autonomous banks to offer a wide array of financial products that otherwise would only be available from a multi-billion dollar holding company. “We’re trying to achieve the best of both worlds,” says Joe Majestic, the chief technical officer for Synovus’s Financial Management Services division.

Synovus is thus pursuing the classic middle market business strategy of offering financial services that are simultaneously complex (multiple financial services) and unique (delivering those services in a decentralized fashion). In doing so, however, Synovus faces some additional obstacles. The U.S. banking industry has recently been subject to disruptive technology (such as Internet banking) that has damaged overall margins. The decline of profitability in the banking and financial services industries as a whole forces all banks, regional and international, to focus not just on growing their customer base but on selling existing customers complimentary products and services.

To accomplish this, Synovus launched a new group, called Financial Management Services (FMS), which was mandated to offer specialized services, like trust management and insurance, that were outside the purview of most regional banks. This attempt to capture additional 'wallet share' added an additional layer of sophistication on top what was already a complex and unique go-to-market strategy. In addition to getting 43 banks (and 43 sets of local executives) to work together, Synovus now needed to coordinate the sales activities of FMS with sales activities of the various banks. For example, to be certain that the banks would send customers to FMS to handle trust accounts, Synovus implemented a compensation scheme where each local bank receives ten percent of the fees derived from that account as long as its on the books. This means that FMS needed to treat an institution (as opposed to an individual) as a compensated sales representative – the sort of weird idea that would be difficult to implement using run-of-the-mill broad-based CRM application.

As one would expect, Synovus had demanding requirements when it came to selecting a CRM software solution to automate and improve the performance of an admittedly complex sales environment. To ensure that all the different parts of the company would perform smoothly and profitably, Synovus wanted to achieve a holistic, centralized 360 degree view of its customers throughout its highly decentralized organization. Company executives also wanted automated workflow processing, extensive account reporting and analysis, as well as ongoing and accurate information about customers, markets and the company’s overall sales performance. “Essentially we wanted to make everything work together more quickly and more smoothly,” says Majestic.

To make matters even more challenging, Synovus needed to build this unique CRM capability on top of a highly heterogeneous computing environment comprised of all the various systems that had been previously installed inside the banks that Synovus acquired. To bring a CRM applications live, Synovus would need to convert and integrate data from many disparate mainframe systems into a single CRM system, and then supply both online and offline processing to local PC’s and desktops. In addition, the CRM system needed to integrate with several outsourced mainframe systems that provided corporate-wide banking functionality, like check processing.

When Synovus looked for a CRM vendor, they quickly discovered that most software manufacturers were either focused on small business or very large enterprises. However, they were able to find at least one vendor that was focused on the middle market and seemed to understand their business problems. “We did an RFP process and got bids from the usual suspects but we were attracted to what Aplicor had to offer,” says Majestic, “Our due diligence revealed that the Aplicor product had enough functionality to automate our complex sales and marketing processes, at a price point that was reasonable for us.”

Rather than trying to reinvent the proverbial wheel and retool the entire computing infrastructure (the approach that Siebel Systems wanted Synovus to take), going with a middle market CRM manufacturers allowed Synovus to focus its limited IT resources on automating those portions of Synovus’s business that were unique to Synovus – the company’s sales and marketing activities.

Synovus used CRM strategy and supporting software to build better synergy between FMS and the banks, as well as between the various banks in the corporate family. For example, using the data from the banking records, sales representatives for FMS can now see a holistic view of a customer or prospect, and then use whatever contacts that have already been established to open doors into the account. Thus, if one of the banks is lending money to a commercial customer, the lending office not only provides FMS with detailed knowledge of the customer relationship, but can actually provide an in-person introduction to the FMS rep on the next sales call.

The CRM software application also allows Synovus to offer additional complimentary services to existing end user customers. For example, Synovus has done interest rate swaps with some of its larger customers, thereby providing them a lower rate on the money they have borrowed. Similarly, the small business accounts unit in Synovus’ trust department has used the information in the CRM database to consolidate trust accounts, thereby lowering administrative overhead. “The CRM system not only enables us to do the typical CRM stuff, like cross-selling and up-selling, but it also helps us keep track of customers who might otherwise fall through the cracks,” says Majestic, “We even have an early-warning system where events trigger specific sales activities.” For example, if the commercial lender rep discovers that a customer is about sell a business, the CRM system cues the Synovus’s insurance sales reps to make a sales call.

This is not to say that the CRM software implementation was a walk in the park. Because there were so many disparate systems involved, “the biggest milestone was just getting the data right,” according to Majestic. The challenge here was creating a workable MCIF (Marketing Customer Information File) for each customer, even though some customers had their business account at one bank and their personal accounts at another. Resolving these data integrity issues was partly a manual process, but fortunately Aplicor supplied Synovus with some algorithms that helped identify and data problems and recommended fixes.

The positive impact of the CRM software system has been significant, according to Majestic. The company has been able to generate more revenue per depositor than before because Synovus can offer its customers the kind of services typically available only from a very large financial institution, while still maintaining the local relationship and decision making. “From a speed to decision point of view, we can move much faster that a traditional bank,” says Majestic, “Our decentralized approach has given us a unique competitive advantage that leverages our strengths as a major regional bank.”

Perhaps the best measurement of the success of CRM at Synovus is the way that the local banks have embraced it. Because the banks are run as autonomous entities, Synovus’s top management didn’t want to force them to use the system. A heavy-handed approach proved unnecessary, though, according to Majestic. “Once we made people aware of the capability, it grew by word of mouth,” he says, “We started with several of the larger institutions as pilots and once the word was out about the demonstrable successes, we had no problem signing other institutions onto the program.”

Synovus’s CRM experience with Aplicor strongly suggests that the CRM needs of the middle market can be adequately met by a CRM software system that’s targeted specifically for the needs and business requirements of middle market companies. CRM applications devised for large enterprises, while comprehensive, are too expensive and complicated for the middle market. CRM systems devised for the broad base of small businesses, while inexpensive, lack the functionality and business process required to address the unique and complex aspects of middle market sales and marketing processes.

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