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Horizontal CRM vs. vertical CRM: What do you really need?

Cloud-based computing is making it easier to customize CRM applications for vertical industries -- but would a horizontal CRM app work just as well for you?

The CRM marketplace is becoming increasingly vertical, with apps for just about every industry. Advertising, auto repair, hospitals, entertainment companies, manufacturing, real estate, universities -- whatever industry you're in, odds are, there's a CRM application tailored for it.

But does every business need an industry-specific CRM app? Is there still a place for horizontal CRM?

For Potter's House Apothecary Inc. in Phoenix, the need for a vertical CRM app was obvious. Potter's House -- a compounding pharmacy that makes custom prescriptions for unique patient needs -- wanted a CRM application to manage its relationships with physicians, insurance companies and patients. A standard CRM application hadn't worked -- it didn't fit the complex and high-touch processes of the Potter's House business. The pharmacy needed a CRM app that could accommodate frequent communications with doctors, claims processors and insurers, as well as customer service -- and to have all that data and that workflow integrated.

"Compounding is expensive, and insurance companies have taken an adversarial approach to [it]," explained Amber Swaney, vice president of sales and marketing at Potter's House. "So we sometimes have to go back to the doctor to switch an ingredient or walk them through the formulations available. We also need to connect to our claims processors when insurers challenge a prescription."

Through a pharmacy colleague, the IT team at Potter's House heard of Syncsite's CompoundRM, a CRM app for compounding pharmacies. The pharmacy installed CompoundRM in 2013, and, while some changes have been made here and there, the Potter's House team says it's a much better fit.

Potter's House is an example of the increasing verticalization of the CRM market. According to Kate Leggett, vice president and principal analyst at Forrester Research, not only are CRM apps more verticalized, but their depth is also increasing, with more support for industry regulations, integration with industry-specific apps and available end-to-end processes.

Leggett noted that, in researching her report, "Vendor Landscape: The Growing Demand for Vertical CRM Solutions," she found that "every single vendor either had vertical templates or process flows, or deeply verticalized solutions or centers of excellence around different industries."

Leggett said she expects the vertical CRM market to grow during the next three years and become the preferred option for many industries.

She also divides vertical CRM apps into two categories: deep verticals that have end-to-end process flows and support for industry regulations, and lightweight verticals that have a common core of CRM capabilities, with vertical industry templates layered on top. CRM vendors that serve multiple industries tend to follow the lightweight model.

The main downside of a lightweight CRM app with industry templates, according to Leggett, is that it may not be deep enough or robust enough for companies with very specific needs and complex processes.

However, one potential disadvantage with some deeply vertical apps is they may have been developed for a single customer, and they may not be designed to be modified for other businesses -- at least not without extensive work and, probably, additional fees. Just because it was developed for your industry doesn't mean it will fit your business.

"In retail, for instance, different shops will have different marketing needs or longer or shorter sales processes, or they need to integrate with other software," said Erin Mathie, owner of CRM consulting firm Business Made Simple, an Insightly reseller in Salem, Utah. "But, if the CRM [app] doesn't have an open API, you can't go in and customize it."

Another concern is whether a vendor has the resources to keep the application updated with the latest technologies. Larger CRM vendors have the customer base to support innovation, such as with social CRM and predictive analytics, whereas a pure vertical vendor with a small customer base may be unable to keep up.

Cloud enables CRM customization

While some industries, like compounding, need highly specialized CRM, others can be served with more superficial customizations, noted Leggett.

Cloud-based computing has helped make small-scale customization easier and less expensive. The technology provides open standards and graphical tools that let business users make changes to screens or workflows and integrate with other commonly used applications.

Bill Combes, CTO at social media marketing business No Time For Social in Round Rock, Texas, needed a CRM app to manage client onboarding and billing and to keep track of client communication and project statuses. But, being a small business, Combes didn't want to pay for a vertical CRM app to provide features that only a much larger marketing company might use.

If the CRM [app] doesn't have an open API, you can't go in and customize it.
Erin Mathieowner, Business Made Simple

He looked at several low-cost CRM apps and opted for Insightly, a cloud-based app with tools for adding and changing data fields, automating workflows and other modest customizations. The product's open API and partner integrations also make it possible to integrate with supporting applications, such as accounting, email, marketing, customer service, data management and reporting, without spending money on consultants or additional IT staff members.

Daryn Reif, CEO and founder of CRM Switch, a consulting and migration firm in San Rafael, Calif., rarely recommends a vertical CRM application to his company's clients, who represent industries ranging from manufacturing to telecommunications. This is not because he dislikes vertical apps, he explained -- rather, he believes most businesses don't need extensive customization.

"The basic model that most businesses have is one of salespeople selling products or services to customers," Reif said, noting that core components, like contacts, accounts, opportunities and reports, are similar in many industries, albeit with different terms.

"Horizontal CRM can be tailored to fit the nuanced differences of most businesses," Reif said. "However, there are some industries that have major differences. In healthcare, for instance, the concept of trying to sell or up-sell customers doesn't fit."

When evaluating CRM apps, Leggett advised first taking an inventory of your organization's workflows, processes and practices, and then looking for a product that supports them.

"See if it fits your needs and if you can configure it to your exact usage scenario," Leggett said. "Remember that a lot of users may be nontraditional CRM users, and [they] can't use a heavyweight CRM. If it doesn't help them get their jobs done, they won't want to use it."

Next Steps

How to determine the best CRM software for your company

Why a CRM purchase should be a business decision

A guide to buying a CRM system

This was last published in January 2017

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