Dynamics CRM 2011: Impact on Public Sector Productivity Impact of... · forward at the future trends and disclose the potential for opportunity in this industry. CRM is classified

Dynamics CRM 2011: Impact on Public Sector Productivity

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Table of Contents

Executive Summary .......................................................................................... 3

Market Data on the Use of CRM ....................................................................... 4

Market Maturity ........................................................................................................ 4

Application of CRM .................................................................................................. 4

Barriers to CRM Adoption ....................................................................................... 6

Advantages of CRM over other Solutions ...................................................... 6

What are the other Solutions? ................................................................................ 6

Choosing the correct tool and aiding implementation .......................................... 8

Key Benefits of CRM in Local Government ........................................................... 9 Examples: ............................................................................................................................. 11

Future Trends and the EU Market ................................................................. 12

Market Size ............................................................................................................. 13

Trends .................................................................................................................... 13 Cloud Computing: SaaS ....................................................................................................... 14 Social Media ......................................................................................................................... 16 Mobile Tools and Applications .............................................................................................. 17

Opportunities ......................................................................................................... 18

Conclusions .................................................................................................... 21

Bibliography .................................................................................................... 23

Appendix 1: Benefits of Microsoft Dynamics CRM ...................................... 25

Appendix 2: EU Government Online Capabilities ........................................ 26

Microsoft Productivity Innovation Center, Private Foundation. Manresa. 2011

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Executive Summary

This paper will analyze how the usage of CRM impacts the productivity of the public sector in Europe. It will uncover the current situation of the CRM market within the public sector, will look forward at the future trends and disclose the potential for opportunity in this industry. CRM is classified in the private sector as Customer Relationship Management. In the public sector the implementation and user are often quite different so the acronyms vary and it makes a considerable amount of sense to call CRM in this case Constituent Relationship Management. Other definitions of "CRM" and similar customer facing information systems include Citizen Relationship Management (CiRM), Public Relationship Management (PRM) and Citizen Encounter and Relationship Management (CERM), but ultimately the objectives in the areas of achieving the benefits of ease of use, user productivity, better information return on investment remain the same as in the private sector. As the individual voter, tax-payer, and resident in general has become more accustomed to receiving the high quality, immediate response customer service in their daily dealings with business, so has the expectation of such service been extended to public agencies, which includes having access to consistent information across all channels -- the Internet, email and the call center. Governments, educational institution, and healthcare facilities have realized that they can no longer expect to answer and log all constituent, student, and patient interactions using a pen and paper. The rise of eGovernment and the trend of adopting private sector business concepts into the government sphere have increased the vision and operational thinking that government can provide the same one-stop shop or multi-channel customer responsiveness as most large and decentralized companies. The increasing demand for efficient local government CRM software has made this a maturing market, but still with significant room for growth. At the moment, CRM is mainly deployed by governments in the form of call-centers, which barely scratches the surface of CRM capabilities, but is still the main driver for purchasing CRM solutions in the public sector.

There are certain barriers to CRM adoption that come from the significant cultural and behavioral changes necessary to fully take advantage of all the benefits CRM has to offer. But if these barriers are overcome, there are multiple benefits of CRM tools that focus on increasing the cost efficiency and effectiveness of services, thus ultimately increasing productivity. These benefits not only involve improving the relationship through building trust with the citizens but also through minimizing timely manual data storage and creating a location where all the data about the constituency can be easily accessed from multiple locations, even via mobile hardware.

Looking forward, the three main trends facing this industry will be:

Cloud Computing and the Software as a Service delivery model for CRM.

The rise of Social Media as not only an internal and external communication tool, but also as a means of managing and understanding the constituency.

The increased usage of Mobile Hardware and Applications.

As budget constraints begin tightening IT resources, the opportunities in this sector will come from vendors being able to harness these trends in low-cost and easy to use software.

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Market Data on the Use of CRM

Market Maturity

Public sector refers to healthcare, education, defense, and local, central and large government. Throughout the public sector, institutions have been implementing CRM for various reasons, but more generally to improve the relationship with their equivalent of a customer: patients, students, employees, and citizens. When it comes to education, higher education institutions are increasingly turning to customer relationship management systems to help find, win and keep students. CRM can play a valuable role in student life cycle management. The healthcare industry has significantly increased its focus on CRM. And local governments began early investments and adopting CRM tools into their suit of e-Government products over 10 years ago, making this a fairly mature market. Despite this, the levels of maturity vary from country to country. Europe is a slightly uneven market. The early adopters of CRM solutions were the U.K. local governments. In the U.K., these adoptions were driven by the local government e-government modernization programs launched in the late 1990s. At the moment, more than 200 U.K local governments have CRM software in place. Spain and the Netherlands started to invest approximately six or seven years ago, while adoption is more scattered in Germany, France and Italy, where it is primarily adopted by regional governments or cities with more than 500,000 residents.

There are various reasons for why certain countries are farther ahead in their adoption than others. John Kost, group vice president of Gartner CIO Research discussed when and where CRM began catching on in the public sector, "It's still not catching on in some, but where it is particularly strong is in local government in the United Kingdom as a result of a national strategy to improve the responsiveness of local authorities. That all started in the late 1990s." Kost notes that the citizen-information 311 systems (or their equivalent in other countries) have made municipal-level governments among the heaviest users of CRM. A 311 number is a special telephone number used in many communities in Canada and the United States that provides quick, easy-to-remember access to non-emergency municipal services or a Citizen Service Center. Dialing this number allows city residents to obtain important non-emergency services through a central, all-purpose phone number quickly and effectively. European countries have recently begun adopting this type of service as well. In fact, the main driver to purchasing CRM in the European public sector is to build call centers. "Local governments are the only ones widely using CRM at the enterprise level," he says. "At national and state governments, certain agencies use it for high-volume customer service, but usually for only one kind of transaction." (Lager)

Application of CRM

The way that public sector institutions use CRM products varies from how they are used in the commercial business world. The implementation and operation of CRM software in the private sector often focuses on increasing sales, customer retention and profits. While public agencies do not sell many products or services, and also most do not expect CRM to increase their revenue. In the public sector, CRM is primarily concerned with efficiently delivering services to citizens. In the private sector, the number of products and services are often in the thousands, while the services offered by a government, particularly at the regional and local level usually range in the dozens to the hundreds. In terms of education, CRM can be used almost anywhere at a large university (because of the SaaS or hosted capabilities). Individual departments, colleges and business units often make a CRM decision and have it hosted, and then they ask the CIO to integrate it with the student system or financial system.

Although governments are primarily interested in the customer services capabilities of these products, they are increasingly beginning to implement enterprise solutions that include field service management, mobility and reporting. The earliest investments in government CRM came from the

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automation of call-centers, road work, code enforcement, and the booking of parks and recreational facilities. Usually, local governments do not deploy sales management capabilities that CRM vendors have developed for private-sector customers. Economic, cultural and tourist development programs in large cities are sometimes an allowance to this pattern, because they need CRM sales capabilities to support their outreach activities. (Claps) It is important to note here that due to the nature of its constituency, in order to be effective, government must offer channels that have universal reach and affordability. Public sector CRM systems typically offer and accommodate multi-channel communication, or in other words, customer contacts through email, postal mail, Internet, telephone, facsimile or in-person. William Band, vice president and principal analyst at Forrester, says this shift in interaction is not only necessary due to a lack of funding, but also indicative of how customer sentiments have changed. ―Consumers and taxpayers today like self-service in their regular dealings,‖ Band observes. ―They have become more used to reaching out and getting their questions answered. Consumers have become more educated, and taxpayers expect and want to interact in that way.‖ (Beck)

But for the most part, at the time being we are seeing CRM being used by the public sector to support single, nonemergency call centers and there is still a lot of room for growth. The majority of these governments are at the moment only using CRM to automate their public information/service centers often linked to a single phone number as mentioned in the previous section. An excellent example is the current D155 initiative in Germany, which uses CRM to automate its service call center with a single phone number for all government agencies (http://www.d115.de/EN/Home/home__node.html?__nnn--true). But call center automation barely scratches the surface of a CRM system´s capability. The tool can incrementally help a city manage all of the activities, relationships, and contacts concerning major issues, such as transportation or waste management. It is expected that more government agencies will begin using CRM to greater capacity in the future.

The figure below shows the way governments can integrate CRM into their eGovernment systems, making the agency more citizen-centric and creating a one-stop service approach. This would mean that all citizen data becomes accessible in one location, minimizing time spent manually searching and consolidating information, thus ultimately increasing productivity.

Source: (Chhabra and Muneesh)

http://www.d115.de/EN/Home/home__node.html?__nnn--true

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Barriers to CRM Adoption

Public sector agencies are not able to take advantage of all the possibilities CRM has to offer because there are still barriers to adoption within these agencies. One is typical in any vertical structure where IT is driving the deployment. "CRM, to be effective, almost always requires significant cultural or behavioral changes by government, but not that many government officials are willing to manage those cultural changes," group vice president of Gartner CIO Research, John Kost, says. "Thus, CRM deployments are often left to the technologists--and the tool doesn't always live up to its potential" (Lager).

In the public sector, one of the toughest issues with CRM software implementation is the internal resistance that management and technicians face. Some public sector workers have more freedom to resist change for personal, bureaucratic, personnel, or political reasons than do private sector employees, who are more responsive to management and tend to embrace technology as a necessary force for competitive advantage, profitability and finally success. Creating success with CRM is much more than just a one off project activity; it is a change in thinking and a continuous journey that evolves over time as customer needs and organizational competencies change and the relationship evolves. Thus it is important to provide government agencies with the correct training, be it from the top down or vice versa, which will allow various facets of the organization to understand the benefits of CRM and how to adapt in order to make its implementation easier.

Advantages of CRM over other Solutions

What are the other Solutions?

CRM replaces the ancient manner of using a pen and paper to log interactions with constituents, patients, and students. Some institutions could potentially build custom CRM programs that would run based on their specific needs, but due to the recent nearly global public sector budget cuts, this seems less likely in the future. CRM government offerings can be divided into three major groups in order to describe and better understand the solutions available on the market. These are:

1. Enterprise CRM Systems which include the customer service, sales, marketing, and analytics capabilities that are used across the private sector. An example is Microsoft Dynamics CRM.

2. Government-specific citizen interaction systems which were developed as citizen request management systems to modernize operations of local government call centers and face-to-face contact centers. They then evolved to manage other interaction channels and to provide reporting capabilities. An example is Lagan ECM.

3. Local government “issue” management systems which have capabilities to automate workflows of a set of typical city services, such as waste collection, street and infrastructure maintenance, and code enforcement, by integrating end-to-end the service request, with the creation, management, closure and reporting of work orders. An example is Infor´s Hansen CRM. (Claps)

There are specific benefits of each of these three groupings that are over time becoming more blurred as vendors begin increasing their ability to provide a variety of new tools for governments. Below is a table of the top CRM Product Vendors for Local Government as rated by Gartner in 2010 and based on the following evaluation criteria: The vendors‘ vertical/industry strategy, Product/service, Overall visibility (Business Unit, Financial, Strategy, Organization), Geographic Strategy, Offering (Product) Strategy.

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Source: Gartner (September 2010)

One can see that seven out of nine of the top vendors received positive or strong positive ratings meaning that there are many high quality products to choose from in this market. Other top CRM government solutions and vendors include Aspect Software, Avaya, Genesys, and Aplicor. Ultimately it is quite difficult to analyze market players and compare them against one another as there are many various aspects to CRM software which are at different levels of importance for governments depending on their needs.

What is sure is that most governments will need a customer service contact center. Or what in

the public sector would be referred to simply as a call center to connect with their citizens and better address their needs. The main driver to purchase CRM software and the main market accordingly in the public sector in Europe is to build call centers. Although this may change in the future, it is still the main driver at the moment. The quadrant below represents Gartner‘s analysis of the top twelve vendors for CRM Customer Service Contact Centers in the market along the criteria of ―ability to execute‖ vs. ―completeness of vision.‖

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Magic Quadrant for CRM Customer Service Contact Centers

Source: Gartner (April 2011) (Maoz)

Microsoft is in the middle of the leaders and visionaries section. Its major strengths are:

Its Microsoft Outlook look and feel, together with the integration with SharePoint and Microsoft Office, are advantages for customers because they make the program easy to use.

It is a flexible system where users are able to extend the product creating their own objects and workflows. It allows for a unified view into multiple systems in a single interface, and is a standard part of the CRM package.

The company offers both an on-premises and a cloud version of the product, both of which are low cost, compared with competitive offerings.

Choosing the correct tool and aiding implementation

It is important for public sector institutions to choose the vendor that best suits their specific needs. All vendors offer the basic functional capabilities, such as complaint/ticket management, knowledge management, agent scripting and online self-service. The four criteria that impact the long-term outcomes of CRM initiatives that Gartner believes are important for evaluating vendors are: total cost of ownership, project implementation support and after-sale service, financial viability, and long-term credibility of product road map and strategies. (Claps) Beyond vendor evaluation, careful project governance and management are central to achieving the intended results.

Vendors could increase the value added of their CRM software by providing or aiding governmental organizations with types of services such as training, planning and implementation. It is recommended that the government agency would spend one or two months of work initially to

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document citizen service scenarios in a detailed way in order to lay the foundation for configuring citizen request data entry forms and service request workflows and for identifying opportunities for service redesign. Helping the agency gain sponsorship from the mayor would be ideal to ensure continued engagement of all stakeholders. And ultimately, it would be important for the public agency to staff the call center with employees that have experience with the work done in the individual service department. It will also be vital to drive change management through communication and training across the city, and not just among call takers. (Claps)

Key Benefits of CRM in Local Government

CRM practices and solutions enable the public sector to implement and support the delivery of modern public services. CRM can greatly improve the productivity of public agencies by allowing them to run their processes with more efficiency and reduced costs. Although productivity is hard to measure, we can say that saving time and cost while being more effective in daily activities are the ingredients to creating a productive organization. CRM enables an agency do all of this at the same time. Key ways in which the benefits of CRM products in the public sector will increase productivity are as follows:

Increasing productivity of call intake, when technology is complemented by streamlined and consolidated contact center operations, and appropriate training of agents.

Improving government managers' ability to make informed decisions, because standardized data entry and unified archiving of interaction history enable rich reporting capabilities, both for contact center supervisors that need to optimize workloads and line-of-service directors that can identify patterns of service usage.

Enhancing timeliness of service delivery, when the front-end customer service system is integrated with back-office work order systems, so that service requests' information can be routed in real time to individual departments and field crews. This includes better support for citizens through improved tracking and follow-up for inquiries and cases.

Reducing the number of mistakes and the resulting costs when responding to service requests, because of more precise data; for example, by integrating the customer service system with the geographical information system, field workers can be dispatched with increased accuracy and duplicate interventions can be eliminated. (Claps)

Avoiding costs from not needing to hire additional contact center agents.

Improved access to services by citizens as they find it easier to obtain information on how and where to access services which results in higher levels of satisfaction.

Improved efficiency and savings through better planning and resource allocation. CRM solutions can highlight activity highs and lows, as well as help managers spot developing trends and deal proactively with common problems.

Significant reductions in redundant contacts, including progress-chasing by citizens across multiple departments and repeat inquiries. As well as reducing the number of avoidable contacts.

Improving the number of contact center calls that become resolved at first point of contact.

Travel savings from electronically generated job sheets.

And ultimately, improved use of resources through reducing administrative costs and moving more staff to front-line delivery of services.

In terms of cost savings, centralization and shared services can achieve 15% and, in some cases, 20% reductions in operational costs within three to five years. Unfortunately, governments have rarely achieved the intended benefits of cost savings and service improvements in the planned time frame. (Di Maio, Claps and Mechling) This is not to say that those savings were not achieved down the road. In the public sector, each customer must be valued equally. Government‘s goal is to provide each constituent with a service customized to their needs. CRM facilitates easier citizen transactions with governments so that the customer‘s needs are understood and agencies can deliver

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the best services to address them. In the public sector, government CRM software addresses a very large number of constituents, using a small number of processes, to maximize a growing number of products and services. John Kost, managing vice president for Gartner's government and healthcare research, indicates that in many cases CRM systems can aid government in putting a contemporary face on aging, siloed legacy systems. "Few governments can afford to modernize all of their legacy systems," Kost said, "and CRM will increasingly be seen as a way of driving better customer satisfaction and better service" (CRM Forecast). Efficiency in processes ultimately reduces costs. And increasing the organizations productivity will not only improve the image of the government but in turn, build greater trust from its constituency. Furthermore, software manufacturers promote building a ―single customer view‖ in order to achieve a ―customer-centric‖ agency. In other words, most or all relevant governmental information on a citizen and their contacts with agencies will be accessible by one agent, be they serving the citizen in person or remotely. Thereby, the agent has a holistic view of the governments‘ relationship with the constituent and is better suited to resolve issues and meet expectations.

When it comes to education, CRM can greatly aid the process of student recruitment. For a competitive advantage, Gartner believes that educational institutions must have a CRM system for recruiting in place by this year, 2011. By 2013, an institution will be at a competitive disadvantage for recruiting without this type of relationship solution (Harris) Admissions recruiters can use the CRM application to manage the workflow of all parties — prospects, students and parents — with whom they are in contact. The system enables tracking of all these contacts so that, as they go through the process, the institution will have more information to make future decisions — for example, which type of channel is most desired. The system can also track the location of a prospect down to the country, region, city and town, which gives an admissions office a competitive advantage over an institution that lacks this capability.

In terms of healthcare and social services, CRM can provide multiple benefits for institutions

by increasing patient satisfaction through analyzing performance of routine processes over time for improvement opportunities or by coordinating the delivery of care through customized workflows that can automate care coordination, thus reducing costs and increasing operational efficiency. CRM can help healthcare institutions improve their community relations as targeted outreach campaigns could be developed and sent to new community members to promote new services and educational offerings. Ultimately, Microsoft Dynamics CRM can increase the productivity of the healthcare institution by providing the capability to integrate existing applications and bridge the gaps between separate systems and processes, thus maximizing the value of current IT investments.

Microsoft CRM is very relevant for customers because it is becoming a strategic product for

Public Sector organizations. As most of these organizations already use Microsoft software, having Dynamics CRM justifies other investments in software for the desktop that can be integrated with the application. Dynamics is built inside Outlook, so by running Outlook on your desktop, CRM will extend it to various scenarios such as customer care, workflow management, etc. However, Dynamics CRM can also just be run on the cloud with the browser. Furthermore, Microsoft Dynamics CRM is the first Microsoft same-capabilities product whether it comes to Cloud or On-Premises. This means that no matter whether a customer is running through program through the browser or on the desktop, the functionalities are the same. When describing the Microsoft Dynamics CRM Online 2011 offering, Amir Capriles, Senior Director Public Sector at Microsoft, said, ―Often, our government customers‘ first experience with the Microsoft Dynamics CRM Online platform sparks the imagination and appetite to tackle other business challenges. The return on investment is realized very quickly due to the ease of user adoption and the ability to invest once and leverage the many applications available to government‖ (Microsoft). Microsoft Dynamics CRM is a unique product in the market. The three aspects that make it stand out from the competition are:

Flexibility: customers can develop their own workflows and extend the product

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Pricing: very competitive pricing

Interoperability: Dynamics CRM can be easily integrated with other IT systems Microsoft Dynamics CRM adds great value to customers by providing them the ability to

maintain one set of citizen, student, or patient information which works to streamline data access across the organization and allow for the highest level of personalized service to be provided. As Dynamics CRM is built inside the familiar Outlook, it allows for the handling of all citizens‘ management tasks including sending and managing e-mail, storing contacts, and managing the appointment calendar without leaving Outlook. This can provide for an easy and seamless transition for public sector employees to begin using the product. Through the Microsoft Dynamics CRM Online solution, government agencies reap the flexibility, scalability and cost savings that a cloud-based solution offers, in addition to improved access to real-time data. In addition, it gives agency personnel the familiar Microsoft Outlook experience, browser and mobile access to their information, a RoleTailored design, and advanced user personalization to help them increase their productivity (Microsoft). With Microsoft Dynamics CRM the value added stems from the inherent increased user productivity, better integration with existing tools and technologies, and more flexibility and affordability when it comes to competition in CRM systems. To see more about the benefits of the Microsoft Dynamics CRM specific software please refer to Appendix 1

In the past four years, Microsoft Dynamics CRM has become one of the two significant pillars of the Microsoft Public Sector Connected Government Framework (CGF) and rest of Public Sector Solution Areas (the other being Microsoft SharePoint). CGF is a solution framework aimed to support local governments that need to digitize citizen service delivery and provides governments a common infrastructure that can be shared by multiple e-Government services. This framework provides a core model for interoperability expressed across six distinct levels: Infrastructure and networks, data access, service and component, service and process integration, security and identity, and management. Productivity benefits are wide-ranging from this product as it creates a single online identity for all Government services which means sharing common costs and enabling innovation in services. It accelerates the delivery of e-Government services by providing reusable common components needed for online service delivery. Not only does this framework provide an improved user and developer experience, but it also has a limited resource requirement, and can integrate easily with systems running on a wide variety of platforms.

Examples:

An excellent example of the possibilities of improving productivity through CRM comes from the city of Abrantes in Portugal. Abrantes streamlined the data management and data update process with Microsoft Dynamics CRM. Before, 50 different system entries were needed whenever a citizen‘s data, such as an address, needed to be updated. Information that was in numerous, disconnected databases is now concentrated into a single data record that all organizations can update, use, and view at the same time. Cross-system updates are completed with a single step, increasing efficiency and lowering the risk of inaccuracy. This has cut in half the average time it takes to process a citizen transaction. Council employees are working more productively with a single information system that integrates citizen information from all its line-of-business applications. Abrantes was also able to reduce mail response time from four to six days to one to two days using e-mail. The solution is also now being extended to nine other neighboring districts, as Abrantes consolidates its role as a services hub for other councils. Abrantes City Council says: ―We‘re now able to serve our citizens based on their personal specific needs and give them much more specialized attention.‖

The City of London implemented Microsoft Dynamics to improve citizen interaction through the

contact center. They experienced a 20% efficiency saving in the call center over a sustained period of 2 years thereafter. Calls to the street cleansing phone line were reduced by 30% in the first three

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months of transfer to the contact center, because calls were being answered efficiently and consistently. After implementation, 75% of contact center calls were resolved at the first point of contact (i.e. not passed on to specialists).

Derby City Council upgraded their contact center to Microsoft Dynamics CRM using Microsoft BizTalk Server 2006 in order to improve the service delivered to their citizens. As a result they saved 35 minutes per one way trip for the officers working out of the service depots from automatically generating and routing electronic job sheets rather than creating them manually and having them picked up by the officers every week.

Future Trends and the EU Market

Growth of CRM spending is forecast to continue, prompted by a mix of upgrades and end-of-life replacement in large cities and net new investments in midsize-to-small jurisdictions and emerging countries. But growth will not be in the double-digits, as it was the case seven or eight years ago; budget constraints have also resulted in postponing or reducing the scope of CRM investment in some governments. (Claps) Gartner‘s predictions for the coming years are as follows:

By 2015, more than 50% of government outcomes will depend on consumer or highly-commoditized technologies. By 2020, almost all IT infrastructures will be commoditized, and most of the horizontal applications will be shared or consolidated.

By YE11, at least 30% of governments worldwide will implement initiatives to reduce IT costs by 20% or more.

By 2015, 50% of government IT shared services and centralization initiatives will be supplemented by public or community clouds.

By 2013, 30% of North American governments will subsidize or support media tablets for senior managers and select staff. Although this does not refer to Europe, it is a trend that could manifest itself in the European market further down the road.

By 2014, agency IT infrastructure and operational head count will fall by 20% (Di Maio, Claps and Mechling).

By 2020, there will be no distinction between internal and external collaboration and information management will deal with internal and external information as a continuum.

By 2020, the convergence of information, operational and consumer technologies will create a new wave of transformational opportunities similar to what is currently named "Government 2.0" (Di Maio, Five Key Trends That Will Influence Government IT Strategies for the Next Decade).

There are multiple market implications that can be assumed from these predictions. The growing standardization of cloud-based infrastructure and application services will not only challenge government IT organizations that try to retain their independence, but also shared and centralized initiatives that do not leverage such solutions. It is also significant to note that the retirement of aging workers and the influx of younger ones such as the Generation Y, who are used to consumer tools and collaboration, will cause a greater impact of such tools on the outcomes they produce. (Di Maio, Claps and Mechling) This will result in employees choosing the right balance between the use of enterprise social software platforms and consumer social media, depending on their individual requirements and work styles. Consumer social media will be used for both external and internal communication.

While the last decade was characterized by the call for increasing citizen centricity, the planning horizon until 2020 will be characterized by the blurring of distinctions between different roles:

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Citizen, employee, user, supplier and other roles will overlap in many different ways, and value for constituents as well as governments will be created at the junctures where those roles overlap (Di Maio, Five Key Trends That Will Influence Government IT Strategies for the Next Decade). What this means for vendors is that in order to keep up with the quickly evolving market, they will need to provide ever most cost efficient products with new capabilities such as those that will support the use of social media within their products, be able to be used across a variety of mobile platforms, and provide for collaboration tools to be used seamlessly with their products.

Market Size

As more governments have begun implementing enterprise CRM solutions, the benefits and cost saving opportunities are becoming ever more apparent. ―As we get further into e-government and i-government, CRM will be crucial," says Alan Webber, senior analyst in Forrester Research's government practice. "Government by its nature is inherently poor at listening, [but] is beginning to understand what its 'customers' want." (Lager) But this market is still growing and will need vendors to adapt to its needs in order to be profitable. According to Framingham, Mass.-based analyst firm IDC, government CRM software purchases currently account for about 6% of the CRM market (CRM Forecast).

Although it is difficult to analyze the market size for government CRM applications, we can use the data found on EU Government Online capabilities (please refer to Appendix 2), which shows us that the majority of EU governments had eGovernment services in the year 2010. If we take the European 27 countries, the percentage of the 20 basic services which are fully available online is 84%. This figure jumped from 58.27% in 2008 to 72.87% in 2009 and now to 84%! And in the European 15 counties, the number goes up to 90%. The lowest scoring country was Greece with 47.5% and the highest, with 100%, were Ireland, Italy, Malta, Austria, Portugal and Sweden. We can also look at statistics such as the percentage of enterprises using the internet to interact with public authorities (i.e. having used the Internet for one or more of the following activities: obtaining information, downloading forms, filling-in web-forms, full electronic case handling) in European countries (Appendix 2). In the EU 27 and 15, this number is 72% and 74% respectively. This figure has only been increasing several percentage points over the last 2 years. The lowest scoring country is Romania with 41% and the highest is Finland with 96%. This data shows us that although many governments already have in place eGovernment solutions and that there is incredible growth in their implementation year over year, enterprises are still not using these methods to the full extent possible to connect with their governments. The reasons for this are intangible without surveys. And unfortunately we do not have the data for how citizens are interacting with their governments. But the key takeaways from this data is that as eGovernment services continue to grow, so will the openness towards new software grow internally in the government agencies. These agencies will begin seeing the benefits of these services and will become more susceptible to tools such as CRM software and renovating old systems, thus leaving potential for more growth within this seemingly mature market.

Microsoft Dynamics has become a strong player in this market. But despite this, Gartner estimates that less than 5% of Microsoft Dynamics revenue is generated in the local government market. Approximately 300 local and regional governments worldwide are using Microsoft Dynamics for enterprise-wide front-end automation, including some large cities, such as the municipality of Milan. The largest implementation is a hosted CGF (Connected Government Framework) solution for 112 municipalities in Biscay County, in the Basque region of Spain.

Trends

The three major trends in the future for the government CRM market will be: a move towards using the Cloud, Social Media and increased mobility. Below each trend is outlined in detail.

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Cloud Computing: SaaS

In the private sector, SaaS continues to penetrate the CRM market, accounting for nearly 24% of total CRM market revenue and ranges between 11% and nearly 40% of total software revenue, depending on the CRM sub-segment. As budget cuts begin constraining more and more European government agencies, the SaaS delivery model will become ever more attractive over on-premises implementation and traditional managed hosting. These cost pressures and skills shortages will cause government agencies to turn increasingly to shared services, outsourcing and cloud and will encourage government executives to take more risks when minimizing expenses — accelerating adoption of these alternative delivery models. "There is increasing movement of government agencies adopting the cloud in certain processes where it makes sense and CRM makes perfect sense," says Paul Plaia, president of non-profit and public sector software for CDC software. "I see government, either through a private cloud or shared services with other government agencies, increasingly using cloud CRM deployments" (Baker).

It is reasonable to assume that, by 2015, much government IT will run on hybrid cloud infrastructures — that is, a combination of public cloud (for open government and citizen engagement support), community or shared cloud (for workloads that require levels of certification and control that are not met by public infrastructure), and infrastructure utilities, as well as a limited number of private clouds for very large agencies. Also, by 2015, many horizontal applications, such as content management or collaboration and communication, will be cloud-based. By 2020, we can foresee the commoditization of many more horizontal applications (such as financial management budgeting, grant management, licensing, payment and human capital management [HCM]), some of which will be in their second or third generation as shared or centralized services (Di Maio, Five Key Trends That Will Influence Government IT Strategies for the Next Decade). Deploying CRM on the Cloud would mean that government agencies would no longer have to support:

Purchasing and supporting the server infrastructure necessary to install and maintain the software in-house.

Providing the equipment redundancy and housing necessary to ensure security, reliability, and scalability.

Maintaining a labor-intensive patch and upgrade process

There is an increased interest in this delivery model, in particular for jurisdictions that cannot afford the initial investment in hardware and software licenses. "The trend here is that this [CRM software] is a commodity offering and if it's a commodity, the cloud is a logical choice for implementing these systems," says Tom Begley, practice manager at TrueTandem. "In the past, organizational CRM systems took years to implement and had a long shelf life due to the expense of the systems. Today's hosted platforms eliminate these costs and time to get up and running." (Baker) Some vendors currently have customer references that have deployed or are implementing CRM products in a hosted environment, but few are using real SaaS. The key aspects which are important for governments when analyzing SaaS as an option are total cost of ownership, performance, security and interoperability of SaaS solutions. (Claps) There are several key benefits to SaaS that local governments could take advantage of:

Budget constraints could be mitigated by adopting delivery options based on pay-per-use, instead of one-time capital investments.

Lower short-term total costs. CRM SaaS startup costs are less than on-premises solutions (including 30 to 60 free-of-charge pilots); however, you must confirm a three- to five-year total cost of ownership to provide a complete picture of which delivery model is most cost-effective. (Desisto, Maoz and Collins)

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Cloud computing can potentially deliver 20% or more cost savings and enable more speedy and scalable system deployment while leaving individual departments to make independent decisions, instead of giving up authority to participate in shared-service programs (Di Maio, Claps and Mechling).

Alternatively, cloud computing could equally help government agencies deal with budget constraints if they assess what value centralized or shared services would add to users by undertaking the provision of cloud-based services, as well as evolve sourcing approaches to integrate external cloud-based services as part of shared-service offerings.

The benefits of virtualization and cloud are maximized via standardization and automation, substantially increasing input and output productivity, and decreasing the number of staff required (Di Maio, Claps and Mechling).

Greater focus on mission-critical workloads through internal resources.

Furthermore, SaaS could reduce the appeal of open-source products, such as SugarCRM, which are used in government primarily to support department-specific programs, because they will displace open-source benefits in terms of no or small initial costs for software licensing. (Claps) But there are still barriers to public Cloud Computing adoption including product and service maturity, portability, performance, maturity of the internal IT organization and government-specific compliance requirements (such as control over the data location). The figure below shows the way a government could use the cloud to better connect with its constituency and shows the five key potential roles for government in Cloud computing as identified by Gartner. These roles are:

A User: as mentioned above in terms of using SaaS CRM

A Provider: meaning the government would begin competing with vendors

A Broker: transparently sourcing part of its services from external providers

The Storefront: providing user organizations with a complete catalog of services available from market players and government providers

The Regulator and Supervisor: government regulations or intervention are required in security, data location, and standardization and portability; this could put pressure on market players

Five Roles for Government in Cloud Computing

Source: Gartner (July 2010) (Di Maio, Five Roles for Government in Cloud Computing)

Certain vendors provide greater benefits for governments playing the role of the user on their cloud. For example: Eskel Porter Consulting Inc. is offering its Public Records Tracker application based on Microsoft Dynamics CRM Online to help federal, state and local government agencies manage, track and respond to citizens' requests for information and meet FOIA-compliance requirements. The move to the Microsoft cloud has increased accessibility to the Public Records Tracker application, and now

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users can request information anywhere there is an Internet connection and access to Windows Internet Explorer. (PR Newswire)

Social Media

As mentioned in the predictions section above, it is important to repeat here that, in the future, employees will chose the right balance between the use of enterprise social software platforms and consumer social media and that consumer social media will be used for all types of communication. On top of this, monitoring of consumer social media, government-controlled external communities, surveys and other social CRM capabilities have started to emerge as areas of interest. Adam Sarner, Gartner analyst, contends that in social networking, ―CRM is where you are going to see the ROI in the business model as opposed to anywhere else. It‘s all about connecting and engaging in new ways with customers.‖ (McKay) Established local government CRM vendors are still at the early stages in developing these capabilities so it is possible that the competition will come from niche players and mergers and acquisitions that will take place in the next couple of years.

The benefits of using social media will be:

Regarding budgetary constraints, government agencies would benefit from using public cloud services to host public data and addressing the commoditization of government channels through the use of external social media.

Also, consumer social media are expected to have an impact on constituent relationship management, as more interactions between citizens and individual government employees take place outside of government-controlled channels to build communities with more-transparent communication and improved collaboration among stakeholders. (Claps)

Like other industry sectors, government is affected by a flood of consumer devices, and

although demographics and compliance requirements are less favorable to rapid adoption, consumer-class social media — such as Facebook, LinkedIn or Twitter — are sneaking in to support internal and external collaboration. Today, internal collaboration and external engagement and outreach are dealt with as two distinct concerns, usually under different responsibilities and using different technology platforms. But by 2020, it is realistic to expect that the workplace will provide tools that will allow the seamless sharing of information across multiple networks and that dynamic collaboration spaces will be created that cross role and jurisdictional boundaries (Di Maio, Five Key Trends That Will Influence Government IT Strategies for the Next Decade). And like companies, governments should align their social CRM strategies with existing CRM implementations. Ray Wang and Jeremiah Owyang of the Altimeter Group states in a report last year, "Social CRM does not replace existing efforts -- instead it adds more value," they wrote. "In fact, social CRM augments social networking to serve as a new channel within existing end-to-end CRM processes and investments. Social CRM enhances the relationship aspect of CRM and builds on improving the relationships with more meaningful interactions" (Information Week).

Certain vendors will begin implementing new tools as this trend grows in the market. It was announced in March that Microsoft is migrating its Social Networking Accelerator into Microsoft Dynamics CRM. Previously available as add-on capabilities, these features now will be completely integrated into Microsoft's CRM system. "In addition to the migrated accelerators, Microsoft Dynamics Labs will publish new solutions to demonstrate additional capabilities of Microsoft Dynamics CRM 2011 or provide a starting point for some innovative CRM extensions," said Palak Kadakia, program manager, on the Microsoft Dynamics CRM blog. (Information Week) The Social Networking Accelerator allows Microsoft Dynamics CRM users to discover online conversations, identify influential people, and engage with them on social networking sites using their customer system of record—Microsoft Dynamics CRM. With this tool government agents can identify their most influential

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advocates and better manage the image of the agency. In turn, citizen service agents can proactively identify and address issues.

Below is a figure which shows the social CRM objectives and capabilities. These can be all

applied to the public sector. For example, government could participate in a conversation discussing a local problem instead of just receiving the letter of complaint later. And social CRM for educational institutions would be an excellent way to have the students come up with ideas in order to improve the community and the services that the university provides. For healthcare, social CRM could allow patients in the facilities to support one another through their illnesses.

Social CRM Objectives and Capabilities

Mobile Tools and Applications

Part of the commoditization trend mentioned earlier is related to consumerization — that is, the use of consumer-oriented devices and software in the enterprise. Good examples today are mobile phones, laptops and social media, and the trend is likely to continue with new emerging devices. As a consequence of the "seamless socialization" trend, consumer solutions will need to be taken into account in specific areas, such as citizen engagement (Di Maio, Five Key Trends That Will Influence Government IT Strategies for the Next Decade). The growing penetration of iPhone among consumers, in particular in the U.S., has prompted vendors to launch mobile applications that enable citizens to send citizen service requests with embedded images and Global Positioning System (GPS) coordinates (Claps). This could result in numerous innovative possibilities for the future that will be discussed below in Opportunities.

Another important mobility tool to keep in mind is the tablet PC. Driven largely by the often

intense enthusiasm of individual employees for their iPads, Gartner predicts that many governments will be making institutional purchases of tablet devices by 2013 or subsidize or support employee-owned devices, including providing training, special applications and security. However, despite the optimistic scenario, budget constraints may significantly impede subsidizing employee purchases or outright government purchase of costly, Internet-enabled media tablets, especially ones offering easy opportunities to waste time. That is why initial tablet deployments will likely center on overseers and senior staff, public information officers, budget and operations analysts, and public-contact employees

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such as teachers, caseworkers, economic development officials and medical workers. In order for this to actually happen, more government-related apps will have to be introduced, such as secure links to enterprise financial, HR and customer relationship management (CRM) applications, and integrated ways to handle comprehensive curricular materials for K-12 and other educational settings. Governments must also become comfortable with the distractions of non-work-related applications, that time is managed well and that the net productivity impacts are clearly positive (Di Maio, Claps and Mechling). It is important to note that this trend may not reach Europe until several years later than 2013 and again, implementation may be sporadic among different countries.

Increased mobility, more flexible working times and places, real-time access to internal and external information, advanced analysis integrated with business process management, outreach support to better serve citizens and engage communities and intermediaries — these are just some of the requirements that the new workplace support tools will have to meet (Di Maio, Five Key Trends That Will Influence Government IT Strategies for the Next Decade). Further, it is likely that voice-enabled software will become a more requested component of CRM systems for government, however, will never completely replace live staff (CRM Forecast).

Opportunities

Besides the opportunities tied with each one of the trends mentioned above, there are other areas where the local government CRM market, though a mature market on many levels, shows signs that evolution and growth continue. The six main areas for CRM Investment in the European public sector are:

1. Call-centers and basic Self-Service eAdministration: Web portals, which up until three or four years ago had been deployed at silos, are now being integrated with call centers and walk-in centers.

o Example: An example of where this is already happening is in Milan. The City of Milan has used Microsoft Dynamics CRM technology to enhance the services available to citizens through the city‘s Contact Center. By deploying a solution that is part of the Microsoft Connected Government Framework, the city has been able to successfully pursue its path toward innovation and improve its relationship with City Users. Through the newly set-up dedicated phone number for city services, the City of Milan receives almost 2 million calls per year. Through this service, the City of Milan can now better track service requests, plan assistance interventions, cope with internal production peaks, eliminate queues at front offices, and reduce costs.

o Example: Service Public Fédéral (SPF) Finances collects and processes tax for the government of Belgium. Every day, the organization‘s contact center receives a large number of queries from taxpayers. Many require consultation from an expert who may not be available. By implementing a solution based on integrating Microsoft Dynamics CRM 4.0 with the organizations disparate telephone systems, SPF Finances has improved the efficiency of front-line staff, resulting in better customer service. Microsoft Dynamics CRM serves as the infrastructure for managing queries while staff can answer more complex queries by logging on to the organization‘s SharePoint portal for additional information. The main benefits were efficient query management, shorter waiting times for callers, better utilized experts, more secure systems, and the transparent views of enquiries.

2. Case Management and Workflow: CRM functionalities extended to provide capabilities that support case management processes.

o Example: The municipality of Matosinhos in Portugal was able to link back-office data and online service delivery by using Microsoft Dynamics CRM to

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capture details of citizens‗ interactions and to help civil servants understand their reasons for visiting central offices. This information was used to improve their services and increase communication channels. Civil servants used the same systems as were publicly available on the web, so citizens could initiate a service request online and then take documents to City Hall. Responses could be issued via email or SMS. This standardization also streamlined internal processes at city hall by making information available online for all users. Other benefits of this projects included improved responsiveness through better access to accurate citizen records, document management capability provided by Microsoft Office SharePoint server integrated with Dynamics CRM and simplified permit purchasing and issuing through an integrated online payment system.

o Example: Citizens in the Dutch City of Zoetermeer faced a problem of having too much information to process due to rapid growth from about 6,300 residents in the 1950s to a population of 115,000 by 2007. As a result, the 19-fold increase in population put a strain on the city's systems and internal processes. A few years ago, the city implemented a citizen-friendly service initiative, which made it easier for residents to access some services over the Internet. However, different information systems continued to impede the city‘s ability to meet its service goals. To serve its citizens more efficiently and effectively, the city has implemented Microsoft Dynamics CRM to help streamline processes, coordinate activities across departments, and provide seamless citizen-centric service. With the introduction of the Microsoft Dynamics CRM–based solution, the City of Zoetermeer is now able to access comprehensive citizen information in a single system, which helps the city provide enhanced services more efficiently. Information is now centrally located and easily accessible; response times are faster; and there is effective integration with city systems.

3. Reporting and Business Intelligence: Business intelligence tools are more frequently seen as a source of valuable information to optimize services. Citizens demand Key Performance Indicators for continuous measurement and good governance.

o Example: At the Municipality of Fredrikstad in Norway, the government is aiming to improve communication with its citizens. The citizens were demanding faster and more regulated services. The main key performance indicator was response time. The idea behind implementing a CRM service was to keep promises so that citizens could rely on the government service center. The government wanted to make sure that people would be confident that their case was being followed up. The CRM solution reduced pressure on case workers as service centers no longer needed to route simple status reports to them and the solution made the case workers more effective in their work as it diminished unnecessary distractions, simplified workflows, and reduced data search time. Microsoft Dynamics CRM was chosen due to the possibility for development and integration of the solution with other systems and the possibility to implement electronic workflows. The Mayor of Fredrikstad said, ―There is no doubt that the system is helping us in our work to improve our citizen services.‖

4. Social Media and eDemocracy 3.0: Governments are considering several types of social CRM functionalities such as monitoring of consumer social media and surveys as well enabling the citizens to have a consumer social network where problems can be reported in real time. Market campaigns could be conducted according to citizens‘ profiles.

o Example: An excellent example of a recently created tool that enables governments to use real-time citizen reporting to monitor the city is called Street

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Care. Street Care is an online citizen service platform that allows citizens to report city problems like potholes, debris, and other issues using an easy online form. Additionally, users can map and track the status of their report on Bing Maps and search for local reports filed by others. Street Care is built entirely on top of the Microsoft Cloud platform Windows Azure which offers fast time-to-market speed and the highest level of reliability, availability and scalability. It is important to note that Street Care can be fully integrated with existing internet portals and with Microsoft Dynamics CRM 4 or 2011, and CGF Extended Edition. Citizens can upload a photo and report an issue via computer or mobile phone. This type of tool allows citizens to actually collaborate on city care and leverages transparency on your organization, updating issue status.

5. Mobility: As smart phone use has become so wide spread, access to customer service is being extended to mobile phones. Citizens are now acting as real world witnesses, reporting issues in real-time.

o Example: As we already saw in the example above, tools are already being developed to allow citizens to help run their city and report problems in real time via mobile device. Another excellent example of this comes from Getafe Spain, where the government has developed a mobile application for its citizens with the help of IT consultancy CIC. Through this application called Getafe i +, citizens can quickly and easily access relevant information from the City Council and City of Getafe, contact the council and even report incidents with pictures attached. The content includes: news, agenda, campaigns, directory, Pharmacies on duty, citizen suggestion box, Facebook, Mayor‗s blog, and Twitter. It has an agile, easy-to-use interface and is available for various smartphone platforms to be downloaded from its website

6. Cloud and Sourcing: Sourcing would help mitigate budget constraints of smaller cities which do not have the abilities to fund a complete CRM implementation. This is creating interest for multi-tenant CRM deployments, where a city provides services to neighboring communities, or where several communities come together to create a shared contact center from their Private Government Cloud. The alternative would be to move to the Public Cloud (Claps).

o Example: Biscay County in Spain lacked an integrated technology solution that would allow citizens to electronically request services from local governmental agencies. The Biscay County Authority partnered with Microsoft to develop the BiscayTIK Project, a Microsoft Connected Government Framework–based initiative that provides free-of-charge email service to the entire population of Biscay through Microsoft Exchange Hosted Service, supplies each town hall employee with modern, integrated management applications, and operates a web portal that citizens can use to complete more than 100 of the most-requested services. The goal and ultimate achieved benefit of BiscayTIK was to improve the quality of services provided by the local government to citizens and improve operational efficiencies across the municipalities. The solution includes: the Citizens‘ Government Framework, with general services for citizens, including free email accounts; an Integrated Local Management System, to modernize IT tools for city councils; a world-class Technology Center, to capture and share knowledge with the international community.

As the devises we use daily grow more powerful, so do our expectations. Already these devices are able to combine crime reports, traffic accidents and real estate prices with maps to give citizens better information about whether to relocate and where. For example, in the U.K. there is an initiative called FixMyStreet (www.fixmystreet.com) which is a new model of reporting nonemergency requests, such as a broken road or misplaced garbage similar to the Street Care tool mentioned

http://www.fixmystreet.com/

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previously. Instead of a synchronous one-to-one conversation between a citizen and a call center operator, people can use the website via mobile phone or computer to enter information and images about a problem at a certain location in the consumer social network, which is then routed to the relevant authority to address the problem.

If we can do this today, tomorrow it could be possible to allow access to traffic light signaling

data or real-time video feeds from traffic cameras to enable consumers to program their car navigation control system to continuously adapt the route that provides the best time-to-carbon ratio. We could also enable home automation systems to read electric grid information in real time to control the operation of several electrical appliances in the most cost-effective way (assuming that electricity will be priced much more dynamically than it is today). Simultaneously, information and operational technologies used by government could increasingly rely on data collected by citizens: Consumer GPS devices (including smartphones) that are connected to the Internet to receive traffic updates could transmit anonymous information about their locations, as well as programmed routes to update road changes and/or change traffic light operations to make traffic more fluid (Di Maio, Five Key Trends That Will Influence Government IT Strategies for the Next Decade). There are a great many possibilities and opportunities to expand the productivity of our governments through the use of the correct tools, training, and implementation. As more governments understand the benefits of CRM technology, more opportunities will open up for vendors to showcase their products. The push for governments to move to CRM will come not from the top down but from the constituency demanding these services themselves. The marketing should then not be aimed at the actually government, but at the citizens. After all, it is Constituency Relationship Management.

Conclusions

Ultimately, CRM is helping public sector agencies successfully achieve a reputation change from being bureaucratic, slow moving or unresponsive to being citizen centric and helpful. SAP's Dave Kuenzel says "We're seeing a recent trend, over the last two years, where government is finding ways to integrate CRM with their other systems to take care of everything from their supply chains and emergency response teams like hazmat to citizen issues like pot holes, downed traffic lights and delayed garbage pick-up" (CRM Forecast). As we have seen in this paper, CRM can not only help the public sector improve its reputation and build trust among the public, but also improve the productivity of the various organizations internally. The three main ways in which productivity is improved through the use of CRM are:

1. Improving time use

2. Better resource management

3. Efficiency in activities

The use of time by employees is improved because public sector employees will spend less time searching for information and more time in actual interaction with the citizens. The increased and consolidated information that can be routed in real time to individual departments and field crews will minimize decision making time and facilitate the optimization of workloads. Ultimately, better time management will allow the agents to spend more time addressing issues key to the constituency rather than being bogged down by back-office work. Service delivery time will be enhanced as the front-end customer service system is integrated with back-office work order systems. Resources will be managed more effectively as more staff is moved to front-line delivery of services. The result of the

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better allocation of resources will be cost reductions on multiple levels: personnel, travel expenses, and administration. And finally the use of CRM will allow governments to run more fluidly with increased productivity and efficiency in activities as most or all relevant governmental information on a citizen and their contacts with agencies will be accessible by any given agent, be they serving the citizen in person or remotely.

Although the public sector may never be as fast moving in terms of technology implementation as the private sector, we will continue to see an evolution in the way that citizen‘s issues are addressed and an increase in the communication channels available to connect with the public. As social media becomes an ever more present aspect of our daily lives, so will the need to use this channel as a means of communication and idea creation. Unfortunately, budgetary constraints will continue to force governments to minimize IT spending and to look for alternative less expensive solutions, this will in turn pave the way for the rise of the SaaS delivery model. The top vendors will be those that will be able to provide an easy to use, inexpensive tool that will have the power to consolidate and run seamlessly with social media applications and on various mobile implements such as smartphones and tablet PCs. In this way, CRM will not only increase the agency‘s productivity but it will become an invaluable and irreplaceable necessity for governments looking to provide the best for their constituency.

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Appendix 1: Benefits of Microsoft Dynamics CRM

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Appendix 2: EU Government Online Capabilities

Short Description: The indicator shows the percentage of the 20 basic services which are fully available online i.e. for which it is possible to carry out full electronic case handling. For example if in a country 13 of the 20 services were measured as being 100% available on-line and one service was not relevant (e.g. does not exist), the indicator is 13/19 which is 68.4%. Measurement is based on a sample of URLs of public web sites agreed with Member States as relevant for each service for 2010. ( (EuroStat)

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Short Description: Percentage of enterprises using the internet to interact with public authorities (i.e. having used the Internet for one or more of the following activities: obtaining information, downloading forms, filling-in web-forms, full electronic case handling) for the year 2010 (EuroStat)

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