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The Vertical Advantage: CRM & the Electronics Industry

Can customer relationship management (CRM) really help generate revenue? You bet!

C-level sales executives might disagree and claim, “Sales people drive sales, not IT.” In the context of traditional CRM solutions, they are right.

A shift from the past

Before I venture to explain why a next generation CRM solution built for semiconductor and component manufacturers can in fact help drive more designs and revenue into the funnel, we must first take a look at the past.

I wrote an article in 2007 entitled CRM: Vertically Challenged. It outlined the drawbacks of generic CRM solutions in supporting the business needs of semiconductor and component manufacturers. Now the landscape has changed.  Today, I could write about “CRM: the Vertical Advantage .”

CRM goes vertical

The importance of adapting CRM solutions to vertical industries has grown dramatically during the past few years. An example is the emergence of companies like Veeva Systems that within five years, has achieved dominance in pharmaceuticals, displacing Siebel. Another example is Salesforce.com, which in 2013 aligned its go-to-market organization around six vertical industry business units.

 Companies like SAP, Oracle, and Microsoft seem content to rely on the service providers in their eco-system to create customizations that bridge gaps in their solutions. These three legacy companies have not committed their product lines to support specific industries. Therefore customers that purchase from them must accept less relevant function and higher cost of ownership as part of the package —and then customize solutions to meet requirements.

Why semiconductor & component companies are challenged by CRM

Generic CRM fails to meet the basic requirements of semiconductor and component companies. Why? Because semiconductor and component enterprises operate in a multi-tiered value chain.

Between the chip or component maker and its end customer lies a network of manufacturing reps, original design manufacturers (ODMs), distributors, and contract manufacturers (CMs), and electronic manufacturing services (EMS) companies. CRM solutions do not address this fundamental concept. Apple, for example, is an end customer that does not purchase directly, but through a contract manufacturer that buys through a distributor. So the semiconductor or component supplier has a hard time discovering if and when the business was won.

Design registrations generated by the channel are not supported by standard CRM solutions either though these registrations require review and approval. After all, they drive visibility into channel-generated demand, and pricing and incentives to the channel. Industry-automated data exchanges, like RosettaNet, are also unsupported.

As a result most CRM deployments separately manage channel funnel and direct funnel. They rely on business intelligence (BI) tools to approximate a picture of actual demand. Demand signals can be generated around the globe and through multiple entities. So it is very difficult for companies within the industry to identify similar or duplicate opportunities generated through different channels and regions.

Add to this the challenge of identifying incoming opportunities that result from transfer business—the process in which the same opportunity moves across regions but may appear in the CRM system as multiple opportunities. Talk about skewing forecasting and operational planning!

The fix is expensive, not guaranteed

I have met with 15 companies that have made substantial CRM investments in the past two to four years. One company has more than a half a million lines of custom code built on their solution to address a small portion of the items I just discussed. In addition to this “sunk cost” they incur an ongoing annual expense of more than $1 million to maintain the customizations—not including the recurring license fee of the CRM solution. Custom development is quite typical, even though costs range from a half-million dollars to as much as $2.5 million.

What makes custom development even more disconcerting is that these companies were not able to avoid the usual pitfalls of CRM adoption. Sales representatives, for example, view CRM as a data entry system that guarantees their compensation, but they are not convinced that CRM helps them sell. Adjacent processes that are integral to the sales process such as samples and quotes often are run on other systems. Sales representatives, therefore, must use multiple systems to get their jobs done. So the question remains, why bother with customization?

 Changing the CRM paradigm

A successful CRM system for the industry needs to:

  • Track multiple purchasing entities (ODM, EMS, distribution) against the same end-customer opportunity
  • Manage transfer business workflow
  • Provide full support for the design registration process through a single view of the entire funnel, sample management and global account management
  • Display embedded analytics that go beyond showing a static view of the funnel to enable analysis of trend changes
  • Seamlessly integrate with a revenue management system to manage quotes and gain full visibility into contracts, orders and point of sale.

For the semiconductor industry, moving beyond fixing industry specific issues and nuances are keys to driving maximum selling and effectiveness. 

It also needs an embedded solution-selling engine which based on end-market application and block diagrams, recommends to the sales representative what else they can consider proposing to their customer. This means that every sales person and manufacturing rep, regardless of how new or knowledgeable, is turned into a better solution seller who is better equipped to capture every socket on a board and drive more designs into the funnel.

This shifts the paradigm of CRM. CRM is no longer just a data entry solution, but a sales engine that maximizes revenues and sell time, proposes ideas to sales teams in order to help them sell more and reach their objectives.

Conclusion

CRM has gone vertical in many other industries. For semiconductors, an industry operating in single digit growth rates, the ability to drive more designs into the funnel and increase sales productivity makes a difference in business performance and sales effectiveness.

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