Over 281 million served

Under the banner of customer relationship management, companies are transforming the maxim "the customer is king" into a technology-driven business strategy.

Last year, organizations worldwide paid $23 billion for CRM services and software, said Tom Topolinski, lead analyst for worldwide applications software at Gartner Inc.'s Dataquest unit. That figure is expected to grow to $76.3 billion in 2005, despite reports that users are having difficulties recouping their investments.

The government, which has more than 281 million "customers," accounted for only about 3 percent of the CRM market. Its acceptance of CRM has been hindered by cultural, budgetary and privacy issues. But revenue trends indicate those barriers are falling with public-sector CRM revenues jumping 86 percent and 94 percent, respectively, in 1999 and 2000, Topolinski said.

A concept that has accrued several definitions, CRM is a business approach that uses technology to zero in on customers' desires and, in industry jargon, to deliver products and services that "delight" those patrons.

Key technologies involved include:

* Call centers — Systems used to handle incoming and outgoing telephone calls. They can use a range of technologies, including automatic call distribution and can even be Web-enabled to receive calls initiated by clicking on a Web site link.

* Web portals — Web sites containing a variety of content, services and links that are fundamental to the development of Web "storefronts," which serve as interfaces between sellers or service providers and customers.

* Data warehouses — Repositories of information extracted from across an enterprise, including buyer-seller transactions, that are organized with an eye toward strategic business use.

* Data mining — The process of analyzing stored data using database or business intelligence tools to discover patterns or relationships. It is used to discern customer trends and predict behavior.

Although those technologies can be used separately, together they form a continuum. For example, organizations use call centers or Web portals to personalize buyer contacts, and use data warehouse and mining applications to gather and analyze information from the transactions to further refine those interactions.

Culture Shift

CRM's commercial thrust provides the first stumbling block for potential government users. CRM began as a way to build customer loyalty for businesses under "some pretty extreme competitive pressures," said Beverly Gibson, general manager of public sector for Siebel Systems Inc., a leading CRM vendor. "Customer loyalty isn't a huge issue" for government agencies. Agencies have a virtually captive audience. "Who else can I go to to pay my taxes or collect my Social Security benefits?" she asked.

Those agencies have their own pressures. Budget cuts are forcing them to become more efficient, and spurred by improved commercial services, citizens are demanding better service from government, Gibson said.

Also, while government does not have customers, the "C" in CRM can also stand for citizens or constituents. The federal government has an abundance of those: individual citizens, citizen groups, businesses, state and local governments, and even its own departments and employees, said Ray Bjorklund, vice president of consulting services at Federal Sources Inc.

David Kleinberg, the Transportation Department's deputy chief financial officer, is not shy about using the "C" word, flatly asserting, "We want to serve the customers."

With a boost from Oracle Consulting, in October 1999 DOT launched its Do It Yourself Web site using Oracle Corp. iStore technology to improve services to commercial truck and bus operators and freight forwarders — constituents of the Federal Motor Carrier Safety Administration. They can go to the Do It Yourself site (diy.dot.gov) to register with the administration, as required by law, and use credit cards to pay fines for violations of federal motor carrier safety regulations or to acquire insurance.

"It has been quite successful," Kleinberg said, noting that about 60 percent of the organization's registration applications are being made over the Internet. Since the site was launched, seven Do It Yourself sites have been added, with more planned to target areas "where we take money from the public," he said.

Where's the Money?

Once past the cultural barrier, agencies must also find a way to justify CRM expenditures. This is not just an issue for government; it is "one of the biggest problems in the CRM space today," said Debashish Sinha, senior analyst for CRM Services worldwide at Gartner Dataquest. It is difficult to quantify the benefits because they "do not accrue over one or two quarters but over the long term," Sinha said.

Further complicating the picture is a Gartner study predicting that 55 percent of all CRM implementations through 2004 would fail to meet expectations, Sinha said. These outcomes are largely caused by the failure to perform the necessary upfront preparation and follow-up support, he said.

Federal agencies face their own budgetary challenges. The government does not operate by profit and loss rules, "so it is very hard for [it] to measure return on investment," Bjorklund said.

There are other metrics that can be substituted, such as "reducing costs and being as efficient and effective as possible in managing [relations with] citizens," said Fiona McKenna, public-sector industry marketing manager for SPSS Inc., a business intelligence software vendor. Those objectives were urged by the Government Performance and Results Act, the Clinger-Cohen Act and the Government Paperwork Elimination Act, she said.

To attain those goals, the government must revamp its procurement process, said Linda Zecher, senior vice president for e-business solutions at Oracle Service Industries. Agencies could be delivering many services to citizens via the Web, "but they have to invest upfront to do that, and that is a hard process for them," she said.

The Education Department's Office of Student Financial Assistance Programs (OSFAP) built the cost of its CRM initiative into projected cost savings. The organization's goal is to keep its budget "flatlined" over the next four years even as the number of aid recipients increases, said Edward Funaro, business development director for CRM government at Accenture. There are about 30 million students and 6,000 schools involved in the program.

Accenture is using Siebel portal technology to unscramble the tangle of systems, people and organizations involved in OSFAP's operation and "create a single workforce, if you will, and a much more streamlined e-commerce kind of business that interacts directly with the student as the end customer," said Kenneth Dineen, a partner with Accenture.

The company is building a Web storefront composed of separate portals tailored to the needs of students, schools and financial aid organizations, which will be connected to "create a common view," Dineen said. The project is expected to be completed by 2005.

Information Security

In the end, privacy concerns may pose the greatest challenge to the deployment of CRM by the government.

"The government is obviously held to a higher standard than the private sector," Zecher said, adding that "there are still issues to be solved about what is supposed to happen to all this information that will be gathered."

In devising its CRM project, DOT thought a lot about privacy issues, Kleinberg said, noting that 128-bit encryption is used to secure transactions. The department also ensured that "transactions would be compartmentalized," he said. None of the information obtained in those activities is shared or pooled with other government or departmental agencies, he said. "We are very conscious of [citizens'] civil rights and concerns."

"The whole privacy issue has got a life unto itself," said Mark Battaglia, president of SPSS Business Intelligence, the core operating unit of SPSS. Use of CRM is following an evolutionary track, he said, beginning with transactions such as driver's license renewal and continuing through "a measurement phase," using applications to gauge Web site activity and program performance. Agencies are using those techniques, but few have taken the next step, which is using data mining technologies to predict trends.

"On the commercial side, there is quicker interest in that because [it] drives the revenue portion," Battaglia said.

The bottom line is that agencies, such as the Internal Revenue Service, "can't track you individually with personalization services, but they can improve their Web applications by knowing which ones you have gone to and hit — not you personally but you as a generic person," said Jennifer Hill, director of the public-sector strategy and support group at SAS Institute Inc.

McKenna is a freelance writer based in the San Francisco Bay area.