Social CRM market will grow in 2012 – Measurable ROI & M&A surge since 2011

Most of the business organizations across the world have been able to some sort of social media presence as demanded by their customers and some of the businesses are trying to actively use social media in their Customer Relationship Management (CRM). Since the usage is at an early stage businesses are finding it difficult to tie with measurable business outcomes. Gartner analysts expect the worldwide market for social CRM software licenses and subscriptions to reach $2.1 billion in 2012, up from $850 million in 2011, and social CRM revenue will represent 10% of the overall CRM market. Social CRM grew 30% in 2011 in revenue terms and is 7% of total CRM spending globally as of 2011. Despite rapid rise in adoption of social applications by sales, marketing and customer service departments, Gartner believes that by this year end, only 50% of Fortune 1000 companies are expected to receive a worthwhile return on investment (ROI) from their social CRM initiatives. Another prediction by Gartner is that by this year end three-quarters of new social CRM initiatives that receive funding will have a business case incorporating measurable ROI. This highlights the fact that both vendors and customers are looking at ways to measure effectively the return of investment (ROI) that Social CRM efforts will generate. In fact the success of social CRM in next couple of years will depend on how well businesses and social CRM technology providers can tie Social CRM investment to clear and measurable business objectives rather than make social CRM projects just social objectives.

Social CRM is no longer a concern of marketing, but it penetrated into most of other marketing functions, sales, customer service and support and its importance is already evident in lead generation, cross-selling and up-selling capabilities, and other major successful sales & marketing functions. Social CRM applications help in capturing and sharing of data between users including the customers and other relevant stakeholders and involve them in developing and improving the products and services through their constant feedback. Social CRM applications can have both internal and external company users, communities both public & private and customers, marketing and service organizations use apps to create brand awareness, gather information, build trust, evaluate decisions, sell and aid post purchase activities. Social CRM adoption has been mostly among business-to-consumer (B2C) type organizations and business to business (B2B) companies are seeking to aggressively invest in social and by end of 2013, B2B organizations using social CRM applications will represent 25 % of all projects worldwide. Gartner expects business-to-business applications for sales use will have the fastest growth and will account for 30% of social CRM spending by 2015, up from 5% in 2011. According to a report from Gartner’s Ed Thompson titled “What’s “Hot” in CRM Application 2012,” Software-as-a-Service (SaaS) delivery of CRM applications represented 34% of worldwide CRM application spending in 2011. More than 50% of all Sales Force Automation (SFA) spending is on the SaaS platform.

Early part of 2012 and the year 2011 saw a flurry of Mergers & Acquisitions in the Social CRM space with large CRM players like Oracle & SAP aggressively buying smaller players in this space. Oracle has continued its social media CRM spending spree with the acquisition of Collective Intellect whose cloud-based applications for social media monitoring would be combined with Oracle’s social relationship platform and earlier Oracle acquired Vitrue for $339 million, a cloud-based social marketing and engagement platform that enables marketers to centrally create, publish, moderate, manage, measure and report on their social marketing campaigns. Salesforce recently announced that it has won a bid to acquire BuddyMedia for $689 million and also recently added Radian6, while Adobe bought up Efficient Frontier last year to push its own social CRM offerings. These acquisitions highlight the need for companies and Social CRM technology vendors to dynamically engage the customers on the various social media fronts and the Social CRM technology must simplify and make the two way communication effective. There is pressure on social CRM technology vendors to differentiate their offerings from their competitors in terms of functions, analytics, ease of use and superior experience delivered through professional services and this need is driving the M&A deals in this segment. According to Gartner Research Director Adam Sarner, “Vendors that can assemble a full set of social CRM functions and make progress in two or more areas, such as marketing and customer service or sales and marketing, will be best-positioned for success.”

Despite all the positive forecasts for Social CRM there is another angle that is highlighted by Gartner, that 50% of Fortune 1000 organizations that are not determining, or even measuring, ROI, will face failed projects. Among the companies who will not see a worthwhile return, only 20% will even have the data to evaluate where their social strategy is falling short. These organizations will be unable to justify future funding according to Adam Sarner. Another critical factor is social CRM works only with user communities participating which they will do only if they perceive value from engagement and Social CRM applications therefore must be more customer-centric than traditional CRM applications and they should allow the customer to manage the relationship and organizations should allow this rather than they trying to manage the customer relationships. Another important fact that business organizations need to keep in mind is that media is constantly evolving and new uses are frequently being discovered, the organization Social CRM strategy should be refined on an ongoing basis. Nucleus has found that early adopters of social CRM have recognized clear benefits, such as increased visibility and productivity. The 11.8% productivity gain is high, and Nucleus expects adoption of social CRM, particularly by salespeople, to grow not just in real numbers, but also in frequency of activity as users become more aware of the technology’s capabilities and as vendors’ offerings mature. And Gartner believes Social CRM technology vendors have to show quantified business cases and, more importantly, deliver repeatable social CRM processes that are not yet broadly available.

Social Media impact on business and future growth – IDC Research

2011 has seen rapid expansion of business change that is being driven by the social customer, empowered employees, and a convergence of new technical capabilities. IDC SVP and Chief Analyst Frank Gens, believes that 2011 is the year we tip from the PC/Server-dominant era to the era of Social/Mobile/Virtual (the latter effectively meaning cloud computing). The new era is driven by advances in four key technologies – social media, analytics, intelligent devices, and broadband networks. He suggests that high-value growth will result where industry-specific challenges mash up with these technology trends. Social commerce, for example merges retail + mobile intelligent devices + social. Telemedicine mashes healthcare + mobile broadband + analytics. . According to International Data Corporation (IDC), worldwide revenues for message and social media archiving applications will increase from $1.15 billion in 2011 to $2.04 billion in 2015. IDC said 62 percent of US businesses already have message archiving, and increasingly, corporations are looking to store social media data that's searchable within a data storage system.

IDC's Forecast for Management Survey, 2011, shows that over the next 12 months, more than 24 per cent of IT decision-makers will deploy social media or collaboration-type applications via platforms that allow the business to build applications in-house. Social business survey by International Data Corporation (IDC) shows that 41% of respondents have some sort of social business initiative underway. This leaves 59% who have not implemented a solution. However, these projects vary greatly – from grassroots bottom-up employee initiatives to sophisticated and strategic social customer engagement programs – as do the maturity of the businesses and their social strategies. Companies can set up all the technology and programs they want, but getting people to participate is another matter. Slightly more than 50% of companies said this was a major problem. Companies are hiring journalists, content strategists, content managers, and various influencer relations professionals among other new roles. IDC surveys show 51% of workers in the United States use social media in the enterprise. Roughly 5% are part of a corporate initiative while about 33% of employees embark on a self-directed initiative. And according to IDC data, 15% of businesses are using social media for work.

As social media matures, more tools become available for managing and while business units remain involved in picking these technologies, IT helps select and implement them. According to Michael Fauscette, an analyst at IDC, social media tools are spreading "across all departments" sales and customer service. When IDC first conducted the survey three and a half years ago, marketing dominated the results. Fauscette says social media is used internally for collaboration and idea generation, and externally for marketing and crisis response. When it comes to managing the strategy behind social media, however, marketing still rules -- it handles that responsibility at 48% of companies -- and IT isn't involved at all. Corporate communications is second, cited by 29% of the respondents as one of the departments that handles social media strategy (multiple answers were permitted). Meanwhile, 26% of the respondents named product development, 23% said customer service, and 16% cited sales. Fauscette calls this shift a sign that the social media market is maturing. He says this means the technology will begin to become part of IT's purview. IT shows up in the integration and implementation of the tools and when social media moves out of marketing's control, moves beyond experimenting then IT department will take over and look at broader perspective.

In an IDC study- Determining the Value of Social Business ROI: Myths, Facts, and Potentially High Returns states widespread industry adoption of enterprise social software is relatively immature and executives want a clearer understanding of the potential gains, costs, and return on investment that social business initiatives can have on a company’s bottom line. When conducting ROI on social business initiatives, the traditional rules of business still apply. This is regardless if a company deploys social business initiatives to assist customer service, marketing, public relations, product innovation, employee collaboration, or other functional areas of the organization. One of the obstacles to getting a clear ROI is that much of the well-publicized social media use cases have been in the area of marketing, an area where ROI is more elusive.

IDC research says that people are using social media outlets to access, distribute, share and influence the entertainment consumption of others. And that, says IDC analysts, is fostering a new "addressable" advertising category that is worth billions of dollars and growing fast. The report, "Social Entertainment 2.0: What Is It, And Why Is It Important?" estimates it will grow from $2.5 billion in 2010 to $5.8 billion in 2015, averaging 18% growth per year. And that's just in the U.S. Globally, IDC estimates worldwide social entertainment ad spending to be about twice that volume. Based on a survey of U.S. adults 18 to 34 conducted by IDC in April, the top five Internet destinations for entertainment content and news are Facebook (74%), YouTube (71%), Google (68%), Yahoo! (47%), and Hulu.com (31%). The top 5 regularly visited on mobile phones were similar: Facebook (63%), Google (45%), YouTube (39%), Yahoo! (25%), and Twitter (17%).

According to IDC’s Matt Healey, with the rapid growth of social media platforms, most enterprises are have embraced this form of communication from an outbound marketing perspective. There are few organizations that do not have a corporate Twitter account. However, using social media for outbound marketing represents only a small portion of the power of social media. Most organizations now realize that they need to monitor the conversations that are not started or controlled by their marketing departments. The problem is that traditional IT systems have not been designed to address these needs. As a result, several startups have begun to develop technology to monitor and analyze social media. As these organizations begin to mature, they will increasingly be the target of acquisition by larger SW vendors that are looking to incorporate this technology into their CRM or other enterprise applications. IDC expects that in the next few years, this type of social media analysis will move from a standalone application to an integrated part of larger systems. 2011 saw two acquisitions, acquisition of Radian6 by Saleforce.com and Twitter acquisition of BlackType.