Functionality and Delivery of CRM

Functionality and Delivery of CRM at Verizon Using Cloud Computing

Company Background

Business Problems

Verizon's Enterprise Systems

Detailed Options/Solutions

High-level Implementation Plan

Functionality and Delivery of CRM at Verizon Using Cloud Computing

Verizon's continued growth in consumer and business-based subscriber levels can be attributed to the depth of customer insight and intelligence the company has operated with, in addition to their unique approach to selling services contracts. Cellular and telecommunication services providers must balance a transaction focus to sell more with a relationship focus to keep customers signing up year after year. Many businesses rely on Customer Relationship Management (CRM) systems to manage this balance between transactions and relationship-based selling (Chen, Popvich, 2003). Verizon is a sales-driven company that has grown quickly through mergers, acquisitions and alliances, and as a result, a transaction mentality pervades the company. The combination of the mergers, acquisitions and alliances and the priority put on new business over renewals has made Verizon suffer at building and maintaining relationships with customers. The company has a disjointed, disconnected series of customer processes that need to be unified through a Cloud-based CRM system.

Company Background

Verizon (NYSE:VZ) is one of the leading providers of cellular and telecommunications services globally, operating in 150 countries with 92.2 million customers globally. During their latest full fiscal year (FY), the company reporting $110B in revenues, an increase of 4% of their previous full fiscal period. Verizon attained a $12.8B operating profit in their latest fiscal year, which was a decrease of 12.1%. Net Profit during these two time periods also decreased by 5.7% during these fiscal years as well, with the company reporting $2.4B in FY2011. As with many cellular and telecommunications services providers, Verizon has gone through several reorganizations, each being focused on making the company more efficient at driving top-line revenue growth. The strategy has worked to this point and today the company has two globally-based business divisions, Verizon Wireless and Wireline. Verizon generates the majority of their revenues from the consumer segment, the majority of profits from the business and government sectors. In these latter segments it is more difficult to displace a cellular or telecommunication provider once contracts and service agreements are in place. This strategy of lock-in in the business and government sectors have compensated for the exceptionally high churn with consumers and small businesses, a problem hat a CRM system could solve.

Business Problems

Verizon today operates in 150 nations has partnerships in place with Cellco and Vodafone globally at the service provider level of their business. Verizon also has hundreds of partnerships with local cell phone, cellular equipment and enterprise networking companies as well. The two dominant divisions, Verizon Wireless and Wireline, rely on a procurement and supply chain management system that has over time been customized to the unique requirements of the company. The procurement and supply chain management systems are disconnected form the over two dozen CRM systems in the company as of 2012, which makes it nearly impossible for sales representatives, managers and senior managers to see what equipment they have available for sale. Instead, Verizon has integrated their procurement and supply chain management systems to their catalog management systems first. This is ideally used in a more inventory-based approach to selling which does not take into account customer needs first. Instead, Verizon sales reps are told to sell the products and services that are the most profitable without regard to customer needs. While this approach has been exceptionally successful in driving top-line revenue growth it has not yielded a high level of customer satisfaction. One of the most critical success factors of a CRM system is designing its many attributes to reflect what customers expect to be a successful interaction and relationship (Hsin, 2007). Verizon has today created the integration of their procurement, supply chain and catalog management systems to their many CRM systems for transaction efficiency first. Designing a CRM system for customer satisfaction first and transactions second or even third is critical to meeting and exceeding customer expectations on a consistent basis (Adalikwu, 2012).

Not only is the Verizon CRM system focused more on transactions than relationships, the sheer diversity of them and their lack of integration also has led to the company experiencing an exceptionally high level of customer churn. Estimates as high as 67% of customer churn pervade the cellular and telecommunications industry and Verizon is at the upper end of this scale (McKay, 2008). The CRM systems inside Verizon typify worst practices in relationship management in that they are designed to drive transaction size and velocity, not create more effective relationships throughout each of the three dominant customer bases of the company (Sanchez, Sanchez, 2005).

High-level Solution

As Verizon is a globally-based cellular and telecommunication service provider and they have over two dozen CRM systems installed as of 2012, the lack of integration across these many platforms is causing the company to churn customers. Second, the lack of integration of procurement and supply chain status to the business and government sales teams is causing significant cost overruns in sales as the sales teams are quoting products that are not in stock and often must be expedited. The lack of supply chain and catalog management integration to these enterprise sales forces is slowing down the largest sales in enterprise and government accounts.

At a strategic or high level, Verizon needs to concentrate on creating a unified CRM system that can span across the over two dozen existing legacy CRM systems in place that today aren't connected to each other. Verizon also needs to take into account the enterprise customers' needs for quotes and bids that elect accurately that the company can provide. The quoting process, typically part of a CRM system, is not present in the Verizon system architecture at this point. The quoting and bidding process needs to also see the procurement and supply chain status including inventory so that only those products in stock and that can be profitably sold can be included. It is a best practice to move beyond just quoting pricing on bids and quotes to include available-to-promise and delivery dates with high levels of precision, especially for enterprise and government customers (Hsin, 2007).

These two high-level solutions of a unified CRM system architecture and the real-time integration to procurement and supply chain management both need to share a common data platform. This common data platform must also have real-time integration to procurement and supply chain management systems as well, to support a more effective bidding and sales quoting process. Of the many approaches to accomplishing this, the most cost-effective will be using a Cloud-based architecture were each of these applications can be delivered as a service using the Software-as-a-Service (SaaS) foundation inherent in cloud computing. Cloud-based CRM systems have progressed to the point of providing a highly effective platform for consolidating previous generation CRM systems while also providing the integration support for procurement, supply chain and transaction-based Enterprise Resource Planning (ERP) systems (Hsin, 2007).

Approach

A Cloud-based CRM system provides Verizon with the flexibility to create a single, unified global system of record with regard to customer relationships, while also being able to tailor the system to specific requirements in the 120 countries it competes in. A SaaS-based CRM system also solves the most difficult problem for any CRM system, and this is how to gain greater adoption (Limbasan, Rusu, 2011). Conservative estimates of the cost of CRM implementations indicate that nearly 80% of their cost is associated with adoption and tailoring the system to the specific needs of users (Hsin, 2007). The Cloud-based architecture supporting the CRM also provides Verizon with a stable platform for integrating their procurement, supply chain management and back-office ERP links to ensure bidding and quoting workflows are accurate and only providing the most profitable, in-stock products on enterprise and government quotes. (Hsin, 2007). Verizon must concentrate on creating a highly reliable knowledge-based CRM system if they are going to be able to stop the customer churn and gain greater profitability (Lin, Su, Chien, 2006)

Verizon's Enterprise Systems

Verizon relies on the following CRM and ERP systems today to operate their global enterprise. It is significant to note that the majority of these systems are not integrated with each other, and many are on-premise, residing on servers in their Verizon it department:

1. Siebel CRM -- Verizon invested heavily in Siebel CRM as a means to integrate their business divisions during the early 2000 timeframe. Today they have 10,000 seats active and are now paying maintenance to Oracle, who purchased Siebel shortly after the implementation as complete at Verizon. Oracle has been very slow to keep the Siebel CRM systems current and as a result they are not well designed to support cloud computing at this time. In late 2012 CEO Larry Ellison finally defined the cloud computing strategy of the company at their annual event, Oracle OpenWorld. For Verizon, these 10,000 seats have become a symbol of all that is wrong in their CRM strategy. Oracle charges 22% maintenance fees a year, hasn't delivered a significant upgrade in three years, and is slowly moving the CRM suite of applications to the cloud. The one redeeming factor of these systems that comprise the Siebel CRM platform is the data portability and opportunity to move the data into a SaaS-based platform.

2. Microsoft CRM and Sales Force Automation - the consumer business is running the latest edition of Microsoft Dynamics CRM. The problem with this CRM system is the lack of mobility options as Microsoft lags behind SaaS-based CRM system providers with support for the Apple iPad and other tablet and smartphone devices.

3. SAP -- the procurement and supply chain management system in use by Verizon today, in addition to their centralized Enterprise Resource Planning (ERP) system, is an SAP R/3 instance located in their corporate headquarters in New York, New York. Verizon designed the system to be multi-instance so each operating division would have the opportunity to customize procurement, supply chain and pricing to their specific needs. The problem is that the Siebel CRM and Microsoft CRM systems can't integrate to the R/3 system reliably. The it team at Verizon is resorting to the use of shell scripts written in the PERL programming language to ensure reliable communicate between systems. This is incredibly time consuming and error-prone, and a primary reason why the company can't produce accurate bids and quotes for enterprise-class systems quickly enough. The SAP system of record for products and transactions is also in ABAP format, a highly proprietary data structure which has been problematic for the Siebel system to even understand. SAP and Oracle, now the owner of the Siebel applications, have an adversarial relationship which further makes this integration difficult for Verizon to achieve.

4. Network and infrastructure -- Verizon relies on a network infrastructure that is based a series of T1 lines from their network headquarters to each regional procurement and supply chain center, followed by leased lines to its top 15% of suppliers across each region they source from. The company has created fault redundant data centers throughout North America and Europe, and has two in Asia. These data centers are unified through the use of Cisco All-in-One Routing Systems, in addition to the customized platforms for managing large-scale cellular and telecommunications switching platforms. Verizon also relies heavily on the Sun Solaris operating system to support the fault tolerant nature of its data centers, within Microsoft Windows Server 2008 running on the servers supporting the front-office functions.

5. Website -- Verizon has a highly complex series of websites and supporting servers, with the majority used for automated customer service and Web-based self-service. One of the factors that have led to Verizon being so successful with its consumer business, despite the high churn rate, is the ease of online payment and contract renewal. Verizon uses a series of advanced e-commerce systems and platforms to streamline online payment processing. There are also customized websites for the enterprise customers and government accounts, which are today not linked to the procurement and supply chain management systems. This is a major problem for sales teams calling on these account, as they must manually log into the SAP ERP system to complete bids and quotes where competitors can do this in real-time.

Detailed Options/Solutions

Verizon's greatest strategic weakness today is the lack of a single customer-based system of record across their entire business. The options for solving this problem range from creating a Service-Oriented Architecture (SOA) strategy, defining a multi-tier ERP strategy, or creating globally Cloud platform strategy that will provide the integration support across all applications.

The major questions to be answered in determining which of the following options to accept are:

1. What are the costs of integration for the SOA, multi-tier ERP and global Cloud alternatives?

2. How will each of the three alternatives either contribute to or detract from the overall level of adoption for CRM today and in the future?

3. Which of the three alternatives most closely align with the specific needs and expectations of the customer? More specifically, which of these three options will be most effective in meeting and exceeding customers' expectations in terms of accuracy, speed and quality of service?

4. Which of these alternatives is most adaptable and scalable to the unique needs of a given market or region of the world?

5. Which has the least risk in terms of technology obsolescence and which the greatest?

A brief description of each of the alternatives is provided below, defining the customer-driven advantages of the SOA architecture strategy, multi-tier ERP strategy and global Cloud platform strategy:

SOA Architecture Strategy -- Starting with a comprehensive Web Service that scales across the 150 nations that Verizon competes in, this alternative is the riskiest in terms of adoption s it require entirely new CRM applications and systems. The Oracle CRM system in its present state is costly to maintain and also to customize. The SOA architecture that would work for Verizon would need to be based on the Oracle Fusion architecture, which itself is still nascent and now being called computing by Larry Ellison, the CEO of that company. The SOA architecture will also require the Verizon sales teams in the consumer markets to drastically change; which will be extremely difficult as this sales group typically churns the fastest. Verizon will end up with a massive re-education issue on their hands if they choose an SOA architecture as a result.

Multi-tier ERP Strategy -- Placing ERP systems in the most strategically important areas of the company's operations globally will provide the Verizon Wireless and Wireline divisions with much greater levels of control over their production processes and costing. It will also make it possible to create a more effective bidding and quoting system globally for the enterprise and government markets. The multi-tier ERP strategy will also lead to a much greater level of integration at the supplier level of the company globally. It will also quadruple the annual maintenance fees to SAP, drive up the costs of services to implement the systems, and also completely change how the Siebel system interacts on complex orders at a global level. So while there is the benefit of having a decentralized data structure for each region and better bidding and quoting workflows, it comes with a very high price paid to SAP and its system integration partners.

Global Cloud Platform Strategy -- the basis of this strategy is predicated on created a single, global customer system of record that is managed as a virtual resource throughout the entire architecture is the Force.com architecture from Salesforce.com. Using the integration adapters and customizable Application Programmer Interfaces (APIs) that Salesforce.com offers with its products and its partner ecosystem has, the existing ERP system could be easily integrated into this option. In addition, the export of Siebel data to Salesforce.com has been completed in the past with a comparable number of seats that Verizon has (Wang, Feng, 2012). Finally the Salesforce.com partner community has several bidding and quoting applications that can be easily customized to the specific needs of enterprise and government accounts. All of these factors are unified in a streamline, easily-used interface that can be customized to match how sales teams work today. The analytics in this application will also ma it much easier to measure customer satisfaction and focus on hwo to better strengthen key relationships, which is completely lacking in the existing CRM systems that Verizon is using today (Adalikwu, 2012).

High-level Implementation Plan

For Verizon to effectively implement a global Cloud-based CRM system, they will need to balance significant changes in technology with a comprehensive change management program. Both are defined below.

Changes in Technology

Beginning with their most expensive systems, which are the 10,000 seats of Siebel CRM they have running today, Verizon will need to define a sequenced migration, department by department, to Salesforce.com. The underlying databases that are running the Siebel CRM systems are running Sun Solaris, with Oracle 9i being the most recent database in operation today. The transition to Salesforce.com's CRM systems will begin with an integration to the Oracle 9i databases and a series of pilots completed first in North America and then across each of the consumer, business and government segments of Verizon's business. Following this integration will be the development of the Cloud-based integration to procurement and ERP systems, and the roll-out globally of a distributing bidding and quoting system. These systems will be tested across the Verizon Wireless and Wireline businesses followed by the development of tablet-based clients that all sales representatives can use globally. One of the greatest advantages of having a Cloud-based system is the ability to deliver a mobility-based strategy across all sales forces at the same time (Limbasan, Rusu, 2011). Verizon will be able to do this across all sales teams, giving enterprise and government sales representatives the opportunity to complete bids and quotes in real-time from anywhere eat any time via 3G and 4G support back to the Cloud-based systems that will be running the configuration, pricing and quoting applications.