The steps of Finnish medium sized SAP / EPR USERS towards an implementation of a CRM system

Table of content

1 Introduction
1.1 Sponsorship
1.2 Market Development
1.3 The Finnish Market
1.4 The Research Problem
1.5 Outline of the Study

2 CUSTOMER RELATIONSHIP MANAGEMENT
2.1 The Development to a Customer Centric Strategy
2.2 What is CRM
2.3 Goals and Objectives of CRM
2.4 Benefits of CRM
2.5 Elements of CRM
2.6 Summary of the Chapter CRM

3 THE CRM SYSTEM
3.1 Functions and Processes of CRM
3.2 The Implementation Approach
3.2.1 Hosted Solution vs. On Premise Solution
3.2.2 Isolated CRM system vs. Integrated CRM system
3.3 Functional Categories of a CRM System
3.3.1 Operational CRM
3.3.2 Analytical CRM
3.3.3 Collaborative CRM
3.4 Summary of the Chapter CRM System

4 The Hindering Factors for an Implementation of a CRM System
4.1 Leadership as a Hindering Factor
4.2 Strategy as a Hindering Factor
4.3 Organisation as a Hindering Factor

5 Methodology and Research Design
5.1 The Research Process
5.2 The Research Approach
5.3 The Sample
5.4 Data Collection
5.5 Reliability
5.6 Validity

6 Finding and Analysi
6.1 Awareness of our Respondents for CRM
6.2 Evaluation of the Usefulness of a CRM System (Sample mySAP CRM)
6.3 The Current Situation concerning an Implementation of a CRM System

7 CONLUSION

8 Recommendation

9 List of source

10 Appendice
10.1 Questionnaire to customer relationship management (English version)

Glossary of Abbreviations and Terms:

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FIGURES:

Fig 1. The Research Path

Fig 2. Outline of the Study

Fig 3. CRM through Different Communication Channels (Siebel 2006)

Fig 4. Implementation Model (Chen and Popovich 2003)

Fig 5. MySAP Customer Relationship Management – Solution Map (SAP 2006)

Fig 6. Enterprise Resource Planning System (Network Dictionary 2004)

Fig 7. ERP and CRM (Buk 2006)

Fig 8. The CRM Cycle (Beck and Summer 2001)

Fig 9. 360° Degree View of CRM (Oracle 2006)

Fig 10. The Different Aspects of Knowledge (Allen 1999)

Tables

Table 1. CRM Options (Oracle 2006)

GRAPHS

Graph 1. Outline of the Empirical Part.

Graph 2. Communication Channels of the Respondents (N=41)

Graph 3. Self Evaluation concerning Customer Orientation (N=41)

Graph 4. Importance of CRM (N=41)

Graph 5. Importance of Retaining vs. Acquiring Customer (N=41)

Graph 6. Importance for a Strategic Customer Segmentation (N=41)

Graph 7. Ranking of the CRM Elements (N=41)

Graph 8. Ranking of the Functional Categories of a CRM System (N=41)

Graph 9. Usefulness of Cross Functions (N=41)

Graph 10. Operation Time of the ERP System (N=41)

Graph 11. Problems occurred through an ERP Implementation (N=41)

Graph 12. Current Situation concerning the Functionality of ERP (N=41)

Graph 13. Current Situation concerning CRM Systems (N=41)

Graph 14. Hindering Factors for an Implementation of a CRM System (N=18)

1 Introduction

The actuality of the topic CRM and its importance it places in today’s businesses has aroused our interest for CRM. This topic in combination with the possibility to solve a current problem of our sponsors represents a challenging and interesting frame for our thesis. To familiarize the reader with this research we impart the required background in the first section of this thesis with a more detailed explanation of the research problem, purpose and overall frame.

1.1 Sponsorship

Company Profile of SAP AG / OY

The SAP headquarter is located in Weinheim, Germany and was established in 1972. SAP employs about 36,600 people in over 50 countries and gains nowadays a turnover of about 8.5 billion euros. Furthermore it serves more than 32,000 customers worldwide and is one of the world largest business software companies and independent software provider. Our sponsor is the Finnish subsidiary of SAP, which is operating since 1996 and has more than 100 employees.

In general, SAP is covering with their process solutions all transactions, which are within the sector of supply chain management, customer relationship management and product life cycle management in order to create time independent and smooth collaboration between customers and suppliers. (SAP 2006a.)

Company Profile of Capgemini S.A / OY

Capgemini is a consultancy and has around 60.000 employees which are located in 300 offices in over 30 countries around the world. Capgemini is herewith one of the top five consultancies world wide, due to the turnover of about 6,954 billion euros in 2005. In Finland, Capgemini is operating in several offices all over Finland and has about 600 employees. Competitors in Finland are Tietoenator, WM data, Accenture, Fujitsu, Deloyd Consultance and Siemens business service. Capgemini is working as one partner of SAP and is offering consulting service, technology services and outsourcing services to their customer. (Capgemini 2006.)

1.2 Market Development

According to the report “Trend 2006” by Forrester research, revenues from CRM solutions (service, maintenance, software and integration) will grow annually till 2008 by 5 – 6%. Furthermore they mentioned that revenues from CRM licences will increase by 2-3% till 2008. (Computerwoche 2006.)

According to IDC, established vendors like Siebel, Oracle and SAP dominated the market in 2004 and cumulated they have almost a quarter of the whole market. All in all there are approximately 140 vendors and a plenty of function specific categories on the market. IDC analyst Mary Wardley stated, “The market is quite fragmented and offers many special solutions.” (Computerwoche 2005.) The research of IDC “the Western European market for CRM applications” showed the five major markets of CRM, in growth or volume, which are France, Germany, Italy, Spain, and the U.K. These five countries made up around 70% of the total market and there is a keen competition among the software giants. (IDC 2006)

1.3 The Finnish Market

The Finnish market for CRM software solutions can be seen as an untypical, which is due to the market size and the high amount of small and medium sized companies. These attributes make the market unattractive for many software vendors, as smaller companies normally have quite small budgets available for such IT systems. This can also be seen in the amount of CRM implementations, as in whole Finland 23 companies decided to implement a CRM system of SAP, whereas only 14 are in operation. (Parviainen 2006)

In reference to the prediction of IDC concerning the development of CRM solutions in Finland, it has to be said that the predicted growth has not taken place yet. Due to the weak demand and small market for CRM systems there are only a few big global vendors competing against each other like Oracle, Mircosoft and SAP. Nevertheless there are also a plenty of small vendors, which are offering smaller systems represented on the market. (Jouppi 2006.)

Due to the exceptional structure of the market and the environment of competition, the responsibilities of SAP and the consultancies are managed differently than in other markets, as SAP is mainly targeting their consulting service to larger companies in Finland. For medium sized and smaller companies, partners like Capgemini are responsible. Therefore SAP Finland is mainly focused on selling licences rather than consultancy. Thus, we have two interest groups for this research which finally lead to the fact that we have two sponsors for our thesis. (Ibid).

1.4 The Research Problem

As the typical customer does no longer exists and consumers have more choices than ever before, customer relationship management emerged to a really important and crucial topic for companies in the last decade. The focus of companies has changed substantial and together with the upcoming awareness for CRM, the demand for IT solutions increased. This was leading to the growing market for CRM solutions, which was explained in part 1.2.

However, even if the world market is booming, the mentioned trend seems not to have reached the Finnish market in its full intensity. Our sponsors can still not denote this development in the demand for CRM IT-solutions in Finnish companies. (Parviainen and Jouppi 2006.) Therefore our sponsors see the situation itself and especially the situation in the market segment of existing ERP users as questionable. This existing customer base (ERP users) is representing an interesting target group for SAP, as these companies are expected to be even more likely to purchase a CRM system (Jouppi 2006).

As SAP has close collaborations with the large companies and small companies are not the target group, we set the focus for this research on medium sized companies. More specific, we concentrate on medium sized companies which already have a SAP system implemented, the ERP system. (Jouppi 2006).

The Research Purpose

Based on the situation mentioned above, the purpose of this study is, to gain a better understanding for the current and future situation concerning CRM implementations in medium sized SAP/ERP customers on the Finnish market.

Through the meetings with our sponsors we gained the necessary knowledge, so that we were able to develop a roadmap of prerequisites for an implementation of a CRM system. These prerequisites are examined closely through the research questions and will enable us to state where the particular problem for the situation is located. This below shown pyramid represents the path towards an implementation of a CRM system and is based on our three research question.

Fig 1. The Research Path

1. Are the respondents aware of CRM?

The first research question applies to a prerequisite for every CRM initiative, the awareness for the topic and the evaluation of importance. This question is considered to be relevant to understand the attitude and opinion the companies have concerning CRM. If this first prerequisite is not given in the analyzed companies it represents a possible hindering factor for an implementation.

2. Are the supported functions evaluated as useful?

The second research question then applies directly to the technological aspects CRM entails and will examine if the companies see it useful to support their business with a CRM system. In addition it will show which functions are of high value for the focus group and which are considered as less important. If the companies do not see any usefulness to support their business with the functions, it will turn out to be a hindering factor.

3. What is the current situation concerning an implementation of a CRM system?

This research question examines the current situation concerning an implementation of a CRM system closer. We will recognize if respondents have already taken all steps till the final implementation of a CRM system or if the respondents are restrained from the implementation due to a particular hindering factor.

Demarcations

As the topic we are dealing with is one which spreads with its different aspects and facets enormously wide, we limited the thesis and the research to the above stated questions. Every aspect of CRM will be treated according to the importance it has in the context of this research. The variety of different systems and their supported functions will not be considered in this thesis, as we focus on the main functions of a mySAP CRM system. Furthermore the study will not give any consideration on differences in the ERP implementation due to installed modules or purpose of implementation. As well we will not attend to differentiate the companies in their decision power for the implementation, due to ownership or affiliation to mother companies abroad.

1.5 Outline of the Study

Our study is divided into eight chapters which are explained below.

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Fig 2. Outline of the Study

The introduction was used to familiarize the reader with the background of the study concerning sponsors, market and the research problem. The literature review in chapter 2 refers to our first research question and consists of various sources which have been pre-studies in this field and are therefore used as supplementary information for our research. We recognized that there are countless different terms, explanations and views on CRM, but with closer consideration all have the same core. Therefore, the theoretical part of the study is based on avowed authors and strives to give a detailed understanding of CRM. In chapter 3 we give an overview of the technological aspects a CRM system has and which are addressed through the second research question. This part is based on our sponsors system, mySAP CRM. The last chapter of the theory applies to the third research question and to the specific situations companies can face concerning the implementation and which factors make companies eschew the final step, the implementation of a CRM system. Overall, the gained knowledge through the literature review is essential for the later application in the empirical part.

In chapter 5, we explain the research methodology of our study. What kind of research we have used and in which way we have collected the data for our research. The findings and analysis we gathered through the research are presented in chapter 6. Finally, in chapter 7 we conclude the findings of the research, whereas we give in chapter 8 recommendations which developed from our work.

2 CUSTOMER RELATIONSHIP MANAGEMENT

2.1 The Development to a Customer Centric Strategy

In an era of globalization and mature markets in which the number of competitors rises inexorably while at the same time the services and products on the market differ less and less at their core, companies are facing decreasing rates of customer retention and increasing costs of doing business. Good products or low prices are not enough to have a real competitive advantage, as the high complexity and variety of products and its features are hard to differentiate for the customer. According to this mentioned situation, CRM gained a widespread recognition in the late 1990s. Researchers and practitioners both in the academic area and in the business field enthusiastically have shared their viewpoints and experiences in applying CRM. (Payne 2006, 1.)

In less than a decade, CRM has escalated into a topic of major importance. Although the term only came into use to a significant extend in the 1990s, the principles has been existing for a much longer time. (Ibid. 2) However the shift from the product century to the customer century is supported and explained by a shift in the marketing approaches companies are doing (Grönroos 1994, 25-26). The context of marketing is changing dramatically with regard to physical distance, time, markets, competition, and was leading to fundamental changes in the way how marketing was done. Among the most important factors are the increasing power of computers, the decreasing costs of computers, the increased storage capacity of computers, the availability of increasingly sophisticated tools to undertake data analysis, the ability to target customers via internet at much lower costs and an increased sophistication in marketing approaches and the development of better ways of targeting customers. (Hewlett Packard Development Company 2004, 11-20.) This includes one-to-one marketing, permission marketing and mass customisation (Peppers & Rogers 1993, Godin 1999, Pine 1993,).

Due to the intense competition for market share in today’s markets, managers have to attend to customer retention and the how’s and why’s of a patron returning and continuing to repurchase (Pritchard and Howard 1997, 2-10). Companies are moving closer to their customers, and transforming the customer relationship into one of solution finding and partnering rather than one of selling and order taking (El Sawy and Bowles 1997, 457). This is underlined by the CMP research group which also explains in its findings that managers are placing a greater emphasis on managing their marketing relationships nowadays (Lindgreen et al. 2000, 294-308).

This emphasis on relationships, as opposed to transactions, is redefining how companies are interacting with their customers (Gummesson 1999, 6). The increasing emphasis on relationships is based on the assumptions that building committed customer relationships results in greater satisfaction, loyalty, positive word of mouth, business referrals, references and publicity.

2.2 What is CRM

The three letters CRM are standing for customer relationship management. The task and meaning of CRM is to help companies, to know their customers well enough to understand which ones to keep and which ones they should be willing to lose. CRM also means automating many of the business processes and accompanying analysis and saving precious time. (Dyché 2002, 5.) Another definition is given by Swift (2001, 12), customer relationship management is an enterprise approach of understanding and influencing customer behaviour through meaningful communications in order to improve customer acquisition, customer retention, customer loyalty and customer profitability. Besides the previous definitions, Siebel defines CRM as an integrated approach to identify, acquire and retain customers, by enabling organisations to manage and coordinate customer interactions across multiple channels, departments, lines of business, and geographies. CRM helps organisations to maximize the value of every customer interaction and drive superior corporate performance. (Siebel 2006.)

Nowadays organisations have to manage customer interactions across multiple communications channels including the web, call centres, field sales and dealer or partner networks. A lot of organisations also have multiple lines of business with many overlapping customers. The challenge is to make it easy for customers to do business with the organisation any time, in every way, through any channel, in any language and to make customers feel that they are dealing with a single, unified organisation that recognizes them at every touch point. (Oracle 2006.)

Fig 3. CRM through Different Communication Channels (Siebel 2006)

2.3 Goals and Objectives of CRM

According to Wilson et al. (2002, 193-219), organisations are getting aware of the increasing importance to have closer relationships to their customers. The objectives of leading companies and their endeavours in CRM can be summarized as:

- Improving the process to communicate with the right customers.
- Providing the right offer for each customer.
- Providing the right offer through the right channel for each customer.
- Providing the right offer at the right time for each customer. (Ibid.)

The above mentioned objectives of CRM have high contribution to the customer satisfaction. Therefore we want to give a more detailed insight into this issue, to point out the importance of customer satisfaction in the creation of a relationship between companies and their customers.

Customer Satisfaction

To satisfy the customer is the mission and purpose of every business (Peter Drucker 1973, 79). A more detailed explanation is given from Kotler (2000, 36), customer satisfaction is a person’s feeling of pleasure or disappointment resulting from comparing a products / service perceived performance in relation to his or her expectations. When companies are able to meet or exceed the expectations of each customer, several benefits can be generated from customer satisfaction. For example, existing satisfied customers are using word of mouth which leads to the attraction of new customer as well as to a decrease in customer migration to the competitors (Bateson and Hoffman 2002).

In this context it has to be said, that companies often have the misunderstanding to measure customer satisfaction with customer complaints, which is not appropriate, as in reality 95 percent of dissatisfied customers do not make any complaint and just migrate to the competitor. Therefore, it is important to measure customer satisfaction regularly through surveys which ask for customers’ opinions and to create an environment which makes it easy to complain, since researches have shown that about 54 to 70 percent of the complaining customers will continue to do business if their complaints are handled properly. Statistically, this number can even increase to 95 percent if the complain receives quick response and action. (Kotler 2000, 73.)

It is obvious that customer satisfaction is a crucial point for the retention of the customer and finally for the achievement of the benefits of customer relationship management.

Customer Retention

Organisations have discovered and research studies shown that it is up to ten times more costly to generate revenue from a new customer than from an existing customer (Swift 2001, 39). This is underlined by the Pareto principle which makes the assumption that 20 percent of a company’s customer generates 80 percent of its profits. Consequently, companies have realized that in order to develop successful, long-term relationships with customers, they should focus on the economically valuable ones, while keeping away and eliminating the invaluable customers (Romano 2003, 233). Due to the Pareto principle and the cognition of companies that profits can be increased by focusing on the existing customer base, the attention for customer relationship management emerged. Besides the mentioned Pareto principle, also Reichheld and Teal (1996, 40) state that retained customers are more profitable than new customers, due to the following points:

- Revenues from existing customer typically grow over time due to cross- and up-sales to the existing customer base.
- Existing customer can be served more efficiently, which leads to costs reductions.
- Satisfied customers act as referrals who recommend the business to others and to themselves.
- In some industries, existing customers are paying effectively higher prices than new ones, as they become less price sensitive over time. (Ibid.)

Bateson and Hoffman (2002, 308) argue that companies have to develop effective tactics for retaining customers to subsequently making them loyal. Tactics which can push customer loyalty are for example, remembering customers between calls, building trusting relationships, monitoring the service delivery process, responding swiftly to customer needs and provision of discretionary effort.

2.4 Benefits of CRM

Swift (2001, 28) states that CRM can be measured and utilized to increase the value chain’s profitability. In detail he mentioned the following benefits which result from an implementation of CRM.

- Lower costs of recruiting customers through better customer segmentation and overall more precise marketing. Savings can be achieved in mailing, follow up, fulfilment and services.
- There is no need to recruit so many customers, as a better segmentation and detection of profitable customers is possible. This leads to a better customer base with less but more profitable customers.
- Reduced cost of sales, as usually existing customers are more responsive customers. Companies have a lot of knowledge of their customers and therefore they can be reached more effectively through distribution channels.
- Higher customer profitability, through a larger share of wallet, as the ability to achieve cross - and up-sales is better.
- Increased customer retention and loyalty, leads to better communication and finally to a better relationship between customer and company. Therefore CRM increases the opportunity and accomplishment of real lifetime value.
- Through evaluation of customer profitability, the company is able to define the degree of service every customer will receive. Furthermore it helps in the decision process if the customer will be managed by external channels or internal ones. (Ibid.)

2.5 Elements of CRM

According to Chen and Popovich (2003, 676-685) and Meta Group (2006), customer relationship management is a combination of the following three key elements people, process and technology.

Fig 4. Implementation Model (Chen and Popovich 2003)

The Element Process

Renner (2000) states in Chen and Popovich (2003, 684) that optimizing customer relationships requires a complete understanding of customers, profitable as well as unprofitable ones. Furthermore it requires the organisation of business processes to treat customers individually based on their needs and their values.

In the figure above the business processes (Sales, Service and Marketing) of a company are illustrated. These three processes are called “front office” and represent interfacing processes between the company and the customer. A single and more detailed view of each process will be given in part 3.3.1.

These processes are essential to all areas of customer relationship management and require therefore a continuous effort of redesigning. Also Dyché argues that the days of BPR, when companies redesigned their core business processes to drive new levels of efficiency, are back with CRM (Dyché 2002, 180).

To realize an effective process change, a company needs first to examine how well existing customer-facing business processes are working (Goldenberg 2002, 15). Furthermore these processes need to be constantly reviewed for acceptance from both, customers’ point of view and organisation’s perspective.

In fact, an inappropriate automation of the CRM business process will only speed up the errant process. Unfortunately, often companies make an initial and dangerous mistake of trying to correct their own customer-facing process deficiencies, by not agreeing internally on how users would like a process to be done, but rather by purchasing CRM software that contains one or more business processes that have been pre-built by the CRM vendor. By doing this, they force the “not-build-here” process upon system users. (Goldenberg 2002, 15-16.)

Finally it can be said, that a successful implementation of CRM needs a systematic design of the concept, which considers all relevant business processes (Oberweis et al. 2001, 1).

The Element Technology

Davenport (1990, 91) states that IT has long been recognized as an enabler to radically redesign business process in order to achieve enormous improvements in organisational performance. For many companies, CRM is still a synonym for information technology and in most cases the core of it. This is one of the typical misunderstandings concerning CRM.

Technology plays a significant role in CRM initiatives by providing functions for the efficient management of interactions across different customer touch points. Furthermore CRM technology supports the creation of an environment, in which customer knowledge is shared and customers are served by adequate employees. (Galbreath and Rogers 1999, 16-17.) The information gathered through the touch points helps to identify the most valuable customer relationships and equips employees with abundant and relevant knowledge about customers in order to provide more effective sales, service and marketing (Ibid). Hence, the effective management of information plays an essential role in CRM, as it is also important for product tailoring, service innovation, the creation of a consolidated view on customers, and calculating customers lifetime value (Knox et al. 2003, 71). Overall, with IT support, companies can create a 360 degree view of customers to learn from past interactions to optimize future ones (Watson 2001, 15).

The Element People

While technology and business processes are both critical to successful CRM initiatives, it is finally the individual employee who is building customer relationships (Chen and Popovich 2003, 684.) Since employees are the final users of the CRM application, they are determining the success of a CRM implementation. Thus, improving the customer orientation of the employees is indispensable.

The employees who have not properly understood the reasons of the change, the ones who do not participate in the formulation of the change or who do not get sufficiently trained on the requirements the change is causing, will often be adverse to that change (Goldenberg 2002, 13). Therefore people need to be recruited, managed, developed and motivated within a supporting company structure. When this is applied throughout the whole organisation and every employee in contact with the customer, it entails the creation of superior value. (Hajjat 2003, 93-94.)

Furthermore, the commitment from top level management is an elementary requirement to the success of CRM, as a customer centric management requires top management support and commitment to CRM. Moreover, CRM projects require full time attention of cross functional project teams, which should consist of representatives from sales, marketing, manufacturing, customer services, information technology, etc. (Chen and Popovich 2003, 684.)

Due to the creation of a customer-centric business model, some positions may have to be eliminated and some employees may have to leave or their jobs have to be significantly changed in order to have a successful implementation of CRM. In addition to the before mentioned training, employees have to enhance their skills and knowledge, to keep them committed and motivated in order to reduce resistance to the change. As well, management must ensure that job evaluations, compensation programs and reward systems are modified on a basis that facilitates and rewards customer orientation. After all, how people are measured will determine their behaviour and finally the success of the initiative. (Chen and Popovich 2003, 685.)

2.6 Summary of the Chapter CRM

Due to more transparent markets and the connected high level of competition, CRM is more important than ever before and companies should be aware of this issue. In general CRM means to understand the value of each relationship a company has with each customer and to create valuable and long term relationships. Through focusing on long term relationships, the customer can be served more efficient, as customer wishes are easier recognizable after close collaboration. Besides the better treatment of the customer, more benefits can be achieved through the usage of CRM. For example an increase in customer profitability, a higher share of wallet, cost reduction as well as a higher loyalty of customers can be realized.

Generally, CRM initiatives consist of the elements people, process and technology. Every element is important for the success of a CRM initiative and none of them should be neglected. As the collaboration of these elements can create for the customer valuable processes, smooth and efficient interactions with the company which are conducted by empowered employees.

The imparted theory is a prerequisite and an introduction for the next chapter, which considers the technological aspects of CRM more closely and gives a detailed view on CRM systems and their functionality.

3 THE CRM SYSTEM

As already mentioned in the previous chapter, the information technological aspect in a CRM initiative is important. As well it was explained that it is a misleading opinion that CRM is just an IT tool.

Nowadays, businesses compete in a much more complex environment and potentially with millions of customers they have never actually met, so IT systems have become a vital feature of managing customer relationships (Payne 2006, 229).

A general definition of a CRM system is given by Nykamp (2001, 103)

“Any application that supports the collection, cleansing and maintenance of and /or access to customer information and that provides this information to appropriate entities in support of CRM applications.”

As a plethora of CRM systems are available on the market, concentration is focused on the sponsors CRM system, namely on mySAP CRM.

3.1 Functions and Processes of CRM

The figure 5 shows a simplified version of the mySAP CRM functions and processes. The vertical structured functions represent the cross functions, which support all processes in the front office (Sales, Marketing and Service). Front office applications support all activities that involve direct interaction with the customer. These applications are used to increase revenues by improving customer retention and raising sales closure rates. (Payne 2006, 258.)

As mentioned before, there are many solutions available on the market which are specialized in front office systems, but do not support all front office processes. Hence, these solutions do not enable a collaboration of all operational processes and are therefore not further considered.

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Fig 5. MySAP Customer Relationship Management – Solution Map (SAP 2006)

The complexity of the processes and functions shown in the figure above makes a detailed explanation necessary, which is given in the parts from 3.3.1 till 3.3.3.

3.2 The Implementation Approach

In this part attention is given to the description of the different kind of implementations. Firstly, the difference in the implementation concerning the responsibility in maintenance and supervision of the CRM system is shown. This is done through the comparison of the hosted and the on premise solution. Afterwards attention is given to the difference in the implementation intensity which is done through the comparison of an isolated system and an integrated system.

3.2.1 Hosted Solution vs. On Premise Solution

CRM systems can be implemented in two ways, either as an on premise or as a hosted solution. The decision which system is implemented depends on three relatively simple differentiators, the scope, the degree of integration and the importance placed on customer processes (Anderson 2006).

Hosted solutions (also called On-Demand) run on servers which are managed by known software vendors for this solution like Rightnow, Salesforce.com and Siebel. The advantage of a hosted solution is that companies normally do not have to install, operate or upgrade any software. This is especially suitable for companies which have little or no IT - experts available (Bsales 2006).

Through the installation on external servers by the software vendors, the customer can benefit from a fast implementation and is thus free to concentrate on core competencies. In general it can be said that the hosted CRM solution is most prevalent in small-to-medium size companies, especially those who do not already have well-established CRM processes (SAP 2000). As the requirements for CRM processes are increasing and additional functions are needed, most software vendors offer the possibility to migrate from a hosted to an on premise solution.

An on premise solution (also called In-House) runs on companies own servers and requires implementation and maintenance by own IT resources. As the storage of customer data takes place on own servers, the data is kept inside the company, which can be due to security reasons recommendable. A high degree of customization and integration with existing systems is often connected to the decision for an on premise solution. (Jouppi 2006).

In general these two implementation approaches differ in particular concerning required resources, degree of customization, budget and the data security. A comparison of both systems is listed in table 1.

Table 1. CRM Options (Oracle 2006)

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3.2.2 Isolated CRM system vs. Integrated CRM system

Besides the decision for having an on premise or hosted solution, consideration should be given to the implementation intensity, as a system can be implemented either as an isolated system (also called Standalone) or as an integrated system.

The simplest realisation of a CRM implementation is the isolated system, as it is not connected to the back end system. Mostly institutions like insurances are using an isolated system, as they do not have any need for logistic functionalities like industrial companies and therefore a connection of front and back office is insignificant (Buck-Emden and Zencke 2004, 403.)

In the following an integrated approach is explained, which is a CRM system (front office) that collaborates with an ERP system (back office). Nevertheless, before applying to the integrated system, a short introduction of the other involved system in an integrated approach is necessary, namely the ERP system.

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