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As markets mature, they trend toward oligopoly or even outright monopoly. There isn’t much difference, because an oligopoly has several members instead of just one. Examples include electric power generation, an oligopoly made up of vertically integrated monopolies in most areas, and the airline industry — an oligopoly made up of many airlines that may have monopolies in regional hubs. As monopolies and oligopolies gain strength, it becomes increasingly difficult for newcomers to enter a market.
I think CRM is trending in the direction of oligopoly. Tha might not be bad, but it also signals market maturity. I also think the IT industry generally is moving toward becoming a utility — an information utility. Utilities form when a monopoly or oligopoly gains enough market power to dominate a market and set artificially high prices to the detriment of consumers.
The ultimate regulated monopoly was the phone company prior to the court-ordered breakup in the mid-1980s. That decision opened the floodgates to innovation — in products, services and business models — that had been held back by what was a regulated monopoly. This article explores where CRM is on the continuum ending in monopoly.
Is CRM a good business to be in? It’s a question rarely asked, and I don’t actually know if I’ve ever seen an answer or even if I’ve personally considered it.
A “good business,” by my definition, has to be one that makes money and does some social good. Cigarettes make money but their social good is highly suspect. Many organizations that do some kind of social good might be characterized as nonprofits. Social good, or making a positive contribution to society, makes sense as a differentiator. Car tires fit that definition in ways that cigarettes can’t.
In addition to making money and providing a social good, as a technical point, I’d say that a CRM business ought to be in business on its own and not as a part of some larger entity. Lots of software companies have a CRM component though their roots are elsewhere.
The reason is simple. A business owned by a larger organization could lose money but that might not matter if, for instance, the overall organization turned a profit. For instance, a few years ago Oracle bought Sun Microsystems for about US$7.4 billion. I don’t think Sun was making money at that point, and today it doesn’t matter. Sun provides a vital hardware component in Oracle’s drive to produce autonomous enterprise software.
So, a CRM business might be a loss leader — something that a company needs to sell to maintain its chops as an enterprise software vendor. This one-stop-shopping strategy might be designed to keep competition at bay. Again, using the Oracle-Sun example, Oracle can provide order-of-magnitude performance advantages using its hardware and software over competitors like IBM, which could supply hardware to run Oracle apps and databases, or Amazon, which competes in database.
For this purpose, when I refer to “CRM,” it’s CRM as an integrated, soup to nuts, 360-degree view of the customer solution set I’m thinking about. Lots of companies in the CRM space today offer a call center, help desk, analytics, sales, marketing or other single solutions.
However, unless they have superior integration capabilities, it’s difficult to make a case for some of them. More likely, the full-suite vendors provide the integration that underscores the question of how much better an independent vendor needs to be to compete.
I think you can tell a lot about a market’s health and age by the number of freestanding businesses it includes. Early in a market’s life there are numerous similar solutions competing for space. Twenty years ago, there were lots of independent companies.
Most offered one or two CRM elements, but that situation was unsustainable because customers found integrating disparate solutions way too hard. That resulted in a wave of consolidation; companies bought others by swapping stock, and some…