Where Does CRM Go in China?
In the last blog entry, I provided a brief introduction to the history of CRM in China. This time, let's go a little deeper with regards to what direction CRM went in China after the economic crisis.
In October 2008, TurboCRM, regarded as one of the first successful CRM vendors in China, was taken over by UFIDA. Usually, the acquisition of a top vendor is not a good sign for any given industry. However, the buyer was a native ERP vendor, as well as the largest one in the Chinese market (13%, 2008). Thus, some analysts speculated that the acquisition during a downturn implied local ERP vendor had confidence in the CRM market. Furthermore, UFIDA could deliver better CRM solutions, taking advantage of its mature channel, guaranteed service, and mature sales and marketing strategy.
Should we have confidence in the CRM market in China, today? Perhaps we can find a hint from the figures provided by IDC: the enterprise application software market in China will reach over 1.65 million Euro by 2014, with a compound annual growth rate of 14.3%. Eighty percent of this market will be represented by small and midsize enterprises (SME). Actually, from 2006 to 2010 the SME will increase on average by 62%. By 2008, there were already over 43 million SME companies.
Meanwhile, the financial crisis has stimulated a huge demand for CRM. As a world factory, the economic downturn has resulted in the dissolution of many small foreign trade companies in China, and has forced the rest to turn their business from exclusively foreign orders to domestic demand. A lot of the surviving companies need to rebuild their sales and marketing departments almost from scratch: from setting up a sales team to developing their working process. Including small foreign trade companies, most enterprises realize that customers are valuable resources when considering survival during this difficult period. How then to identify a potential customer and turn them into an active customer; how to maintain the relationship with an existing customer, within a limited budget; and how to increase customer satisfaction and provide differentiated customer service? These are the top three questions facing enterprises these days.
We can see this is a big and price sensible cake (you know the reason). This cake seems to provide a huge arena for Software-As-a-Service (SAAS) products. To make attracting potential customers easier, one of the vendors explained it as Monthly Online Renting CRM. With this new solution, even in cases where the company does not have a large IT resource and a lot of money, they can still take advantage of IT and improving their customer relationship management. They just need to pay on a monthly basis, priced by the number of users, while the system and hardware is maintained by the vendor. This seems the best choice for the SME companies. Believing bright prospects, a lot of vendors have entered this area. Besides local SAAS vendors such as XTools, ERP vendors, namely UFIDA and Kingdee, also deliver their SAAS products to the market.
Chinese SMEs, on the other hand, are prudent. Their first concern is data security. Currently there is no convincing proof from vendors to show they are data secured. Secondly, the standard business application provided is limited, and customized business applications are not cheap. Last but not least, there is not yet a good solution for seamless integration between SAAS CRM and other legacy systems.
Having already spoken of many local CRM vendors, at this point we should also consider foreign vendors (such as SAP) when talking about the main competitors in this market. Actually, SAP CRM entered this market at a very early stage, having their first CRM customer in 2001. Big ERP vendors like SAP and Oracle actually made a lot big wins in China, due to their reputation, industry experience, R&D, and branding. However, as I mentioned in my previous blog, there are still quite a lot companies who developed their own CRM application system, for example telecom companies and banks. Since SAP CRM 2007, SAP CRM has impressed every one including Chinese customer by its new user interface and improved functionalities. Some Chinese companies are already running SAP CRM 7.0 to improve their customer relationship management.
To summarize, the Chinese CRM market is a big cake, however no one yet has successfully found the best way to enjoy it. China is a big and complicated market, where economic growth, customer maturity, and culture vary from region to region. Furthermore, we cannot overlook the fact that China's current marketing environment and management culture is quite different from that in Western countries. As a consequence, vendors need to develop a deeper understanding of what Chinese companies actually need rather than merely introducing one dazzling technical concept after another, and it seems likely that this must happen before a profitable CRM business model can be developed.
You can find my previous blog here:
CRM in China (Part 1)
