Red Carpet

Customer relationship management is a marriage of technology and business techniques that companies use to monitor buying habits, track which products their customers like best and prioritize buyers' potential value to the bottom line. As with many hot technology trends, federal agencies are getting into the act, using CRM's customer-centric focus to try to make doing business with the government a pleasure.

CRM bloomed first in the private sector. Today, airlines use CRM software to identify their most frequent fliers and butter them up with free seating up-grades and "platinum level" service. Amazon.com's "recommendations for you" feature offers customers suggestions about what to buy next based on their previous purchases-which the e-tailer meticulously tracks. The goal of CRM is to build long-term relationships with one's most valuable customers.

It's not a valueless proposition. A study by Harvard Business School found that a mere 0.5 percent of rental car companies' customers account for a quarter of the industry's business. Banks, the first companies to use CRM, derive their entire profit from just a quarter of their clients.

International Data Corp., a technology market analysis firm headquartered in Framingham, Mass., reports that the worldwide CRM applications industry grew more than 80 percent in 2000, from $5.2 billion to $6.2 billion and that the market will balloon to more than $14 billion by 2005. A July survey of 250 senior business executives responsible for CRM implementation found that more than 65 percent of respondents expect CRM to increase their companies' sales revenue by more than 10 percent. Charlotte, N.C., software vendor YOUCentric and Herndon, Va., online survey provider WebSurveyor conducted the study. Now CRM is poised to become the next big thing in the federal market.

The growth of CRM and its move into the federal sector raise a series of issues. Implementing CRM can cost millions, and many private sector firms have reported that the benefits of investing in the new approach are coming slowly, if at all. Then there's the question of how to apply a revenue-generating business model to government operations. After all, agencies aren't supposed to single out customers for special treatment, but serve all of them the same. And agencies don't face competition. Right?

Think again. The public sector actually is marked by a high degree of competition, says Ramon Barquin, president of Barquin International, a Washington consulting firm. Agencies compete with each other for approval from the public and their congressional overseers, which affects how much funding they get. They vie for appropriations, and battle with the private sector for highly skilled employees. Pleasing the customer and staying alive is indeed the business of government.

CRM gives organizations a competitive edge, but it doesn't come out of a box, says Phil Talsky, senior product marketing manager for Remedy, a Mountain View, Calif.-based CRM vendor. Rather, it's a process that helps organizations learn what their customers expect of them. Agencies must provide citizens with what they need, whether through toll-free phone hot lines, e-mail routing systems or Web sites that seamlessly conduct transactions.

Changing Their Ways

Agencies have discovered that what CRM is depends on how it's used. The Social Security Administration knows how crucial good service is to its survival. Plenty of private companies would be eager to get into the public check-cutting business, and it's not inconceivable that Congress would let them. So the agency has a huge incentive to offer service with a smile.

In addition to having a customer-friendly Web site and a network of 37 call centers, Social Security is deploying CRM software to automatically manage its inflow of citizen e-mail messages, a task that promises to grow more onerous as thousands of agency employees become eligible for retirement in the next few years, says Marsha Rydstrom, the agency's acting chief information officer. Last year, Social Security purchased software from eGain of Sunnyvale, Calif., that receives messages from "customers"-in this case any American who wants to know about his or her retirement benefits-and routes them to the people who can address the questions. Social Security will begin testing the system in the fall and hopes to implement similar data-wrangling tools to cope with phone calls and messages delivered through its Web site, Rydstrom says. One day, she wants customer service representatives to speak with citizens over the Web using Internet voice technology and live Web chats.

E-mail was a good place to start. Social Security received an average of nearly 15,000 electronic messages a month in the first half of 2001. And since baby boomers, the agency's fastest-growing group of customers, also are the fastest-growing group of Internet users, e-mail volume is going to skyrocket. The agency needed a product that could grow over time to handle larger amounts of information. CRM technology, with its ability to route and keep track of customer inquiries, was the most attractive choice.

In its year-long tech quest to implement an e-mail management system, Social Security grappled with private industry's definition of customer service versus its own. The bad news for industry is that the agency discovered many weaknesses in the products on the market, Rydstrom says. "The commercial packages are not really federalized," she laments. The ways companies weigh how much a customer is worth to them have no place in an agency with a mandate to serve everyone equally. Placing a value on different kinds of customers "is not even in our lexicon," says Rydstrom.

Social Security is not the only agency bemoaning the fact that many CRM systems just don't work in the federal context. Tim Vigotsky, director of the Interior Department's National Business Center, which sells administrative and financial support services to agencies, says the software industry doesn't fully understand why a federal CRM system has to be different from its private counterpart. The government has tried to emulate business' best practices, Vigotsky says, but he's afraid that business hasn't studied government with the same dedication. "Right now, the industry has not proven that it is totally ready to deploy [CRM] on a governmentwide basis." Even though Vigotsky thinks some CRM vendors aren't ready for prime time, that hasn't stopped him from giving the technology a chance to address one of his organization's biggest recent problems. The National Business Center's customers were vociferous in their complaints about the agency's personnel and payroll system, Vigotsky says. It was too unwieldy, requiring employees who wanted to make changes to their records to fill out a form, take it to human resources and linger for a response.

That process is now "totally out the window," he says. Earlier this year, the agency agreed to act as a federal test case for an "employee self-service" program developed by SAP, an e-business firm headquartered in Waldorf, Germany, that lets workers access their records over the Internet. In exchange, the company gave the business center its technology for "next to nothing," Vigotsky reports. Now, with a simple Web-based application, agency employees can check their vacation balances, see their earnings statements and make adjustments to retirement savings plans. Tasks that once took hours now consume no more time than an online bank transaction. Giving users constant and transparent access to their personal information (like the "my account" features on e-tailing sites) is a trademark of CRM technology.

No More Business as Usual

CRM isn't just good for customers, experts say. Putting a major new technology initiative like this in play creates a golden opportunity for agencies to change the way they do business in the electronic age. But observers caution that agencies shouldn't kid themselves: what works for other organizations-even government operations-won't necessarily work for them. "Generally, CRM is not a one-size-fits-all solution for anybody," says Erin Kinikin, a vice president with Giga Information Group, a technology analysis firm in Cambridge, Mass. The key to success is to find out what the customer wants and then match the agency's operations to it, she says. Kinikin advises agencies to find routine tasks that consume huge amounts of time and automate them-just as the National Business Center did.

Social Security is looking hard at its practices as well, says Sara Hamer, the agency's associate commissioner for electronic services. She says Social Security is identifying all the points at which it interacts with the public-whether technologically or face-to-face-so it can choose new tools to enhance its service capabilities.

Leif Ulstrup, a vice president with AMS, a Fairfax, Va., information technology firm, suggests that agencies segment their customers into distinct groups and tailor businesses processes to them at a focused level. He notes that the newly reorganized IRS now lumps taxpayers into classes-individuals, businesses, nonprofits-and then gears its interactions with them to their particular needs. While agencies may desperately want to transform themselves into models of efficiency with slick CRM software, they still face a cold reality: In most cases, the data they want to exploit is locked away in decades-old mainframe computers. The inability of legacy systems to talk to one another and share information is the Achilles' heel of CRM for many agencies, says Rydstrom.

Take her own agency, for example. Social Security's mainframes, which house information on every citizen, are comprised of 32 million lines of COBOL, an all-but-dead computer language that few people today are trained to use. Modernizing that system is one of the largest and most complex information technology jobs on the planet, Rydstrom says.

This gargantuan job is not unique to Social Security, says Kevin Fitzgerald, general manager of Oracle's public sector division. He says the entire government is 10 to 15 years away from replacing its antiquated systems. Private-sector companies have the same problem. The respondents to the YOUCentric/WebSurveyor survey said the biggest challenge to CRM's success was integrating legacy data.

Physically getting the data out isn't the hard part, Fitzgerald says. The trick is untangling the Gordian knot of unrelated words and numbers so that all systems see the same information. The National Business Center accomplished this on a localized level with CRM. The data fields used in the payroll system match those in the personnel system, so they can talk to each other, Vigotsky says.

Ready, Set . . . Wait

Very few agencies are up and running with CRM yet. Should the rest of them hang back at the starting block? Experts and agency officials say handicaps in public sector CRM projects will keep the technology from blasting off in the near term. "CRM in government is really in its infancy," says Beverly Gibson, general manager for the public sector division of Siebel Systems, a major CRM vendor. There are some early adopters of the technology, but there really is no pack of leaders, she adds.

Part of that sluggishness is due to the federal culture. "Citizens haven't typically been looked upon as customers," Gibson says. In addition, notes Kinikin, "constituents don't necessarily think of themselves as customers." Many people aren't aware of a service the government offers until they actually need it. And if the public isn't clamoring for something it doesn't know it can have, what's the incentive for agencies to give it to them more efficiently?

Most agencies also lack the technology to take a fully connected approach to CRM. Very few are making the effort yet to "push" online information to citizens. While Amazon.com will sell a product, track its shipment and send delivery updates all online, most agencies don't send anything out electronically on a large scale because they haven't integrated their infrastructure, Rydstrom says. AMS' Ulstrup says some agencies are good about getting paper documents out to citizens, but the kind of "push technology" CRM supplies is very different.

While many agencies resemble the tortoise, there is one that definitely plays the hare. The General Services Administration's Federal Technology Service has a CRM program in place that's "exactly the same" as those in private enterprise, says Mary Whitley, assistant commissioner for sales at FTS and the head of its CRM initiative. It's no surprise that a federal organization that operates like a business would be the best fit for CRM. FTS sells information technology products and services to federal agencies and is completely self-funded.

Whitley says a corporate CRM approach "fits like glue" with her organization's needs. FTS bought an off-the-shelf Siebel package after asking private companies which CRM product they like best. Agency sales representatives use the software to filter through GSA's federal procurement data system, the official database of contract transactions. Whitley says she can pick any agency served by GSA and find out what it bought, who sold it and how much the agency paid-all neatly displayed in graphic format on her desktop computer.

That information generates the leads FTS' sales force uses to bring home the bacon. "It's a database full of targets," Whitley says. A sales rep can make a compelling case to an agency he knows paid too much and pitch officials on using FTS' services next time around. Since early June, Whitley says, FTS has developed 250 new sales opportunities.

As for integration, Whitley notes that since the agency's systems are already standardized-all the databases are Oracle, all the e-mail is Lotus Notes-it's simple to get different systems to speak the same tongue. "I don't know of anyone else [in government] who is this mature" in CRM evolution, she boasts.

Slouching Toward Efficiency

Regardless of who's ahead, some agencies stand to score big points using CRM if they play their cards right. For large, service-oriented organizations like Social Security, the reward is better customer service, says Rydstrom. Her agency no longer thinks it's the only one that can provide benefits services to the public. To hold its dominant position in that arena, paying more attention to the customer is an absolute must, she says.

Tom Shirk, president of SAP Public Services in Washington, says agencies now have the chance to achieve modernization through initiatives like CRM. They're in a unique position to plan long-range for updates to their legacy systems, he says, but he reminds agencies that CRM is a component of a process to be taken one step at a time.

Oracle's Fitzgerald says that over the next six months, agencies should examine each opportunity to implement CRM technology across all communications channels-telephone, e-mail and Internet. They should look for ways to use technologies such as Web sites and telephone call centers to gather as much information about citizens as they can. Siebel's Gibson believes that the future of CRM lies in managing the "life events" of the citizenry. The birth of a child, the death of a parent, a marriage-all these require citizens to seek out government services. With "one-stop government," Gibson says agencies could manage all these transactions simultaneously.

In the meantime, experts caution agencies to define this new hype-infested technology in light of their own particular needs. "CRM means everything to everybody right now," says Giga's Kinikin. She exhorts agencies to study their direct interactions with the people they serve. If agencies can learn how to improve service at those points of contact, Kinikin says, citizens will learn to manage their own relationships with the government.

"The need [for CRM] will not go away," says Social Security's Rydstrom. "It will grow." Even if this particular buzzword goes away, she argues, the need to use technology to enable the government's mission will remain real. "Who knows what it will be called?" she asks. "I don't much care."