Editor's note: This article was originally published in July. Given its continued industry relevance, it is being republished from the archives.

Customer relationship management (CRM) systems have evolved over more than three decades from paper Rolodex files to AI-driven platforms. The current market is crowded with vendors whose services overlap significantly, yet each still attempts to differentiate through customer experience (CX).

However, some vendors—such as Salesforce—stand out more prominently in differentiation.

Salesforce rode the wave of cloud computing to become the most dominant player in the CRM market, despite formidable competitors like Microsoft, Oracle, SAP, and Adobe. As of April 2018, Salesforce held a leadership position in Gartner's Magic Quadrant for CX and CRM Customer Engagement.

Its strength lies in going beyond the role of a mere CRM vendor: according to Gartner, enterprises using Salesforce also rely on it for strategic consulting advice.

Different departments within an enterprise maintain distinct relationships with customers or clients, but all depend on a unified CRM platform. According to Gartner, organizations must "harden the core" by introducing enhanced technologies, such as tools from the CRM application economy ecosystem, to meet this demand.

But before CRM vendors can fully meet enterprise needs, they must first address their own shortcomings.

The four stages of CRM development

About thirty years ago, CRM was almost synonymous with sales force automation, and its functionality has expanded over time, said Julian Poulter, research director at Gartner, in an interview with CIO Dive. CRM used to be "primarily internally focused," whereas now customers or clients "carry considerable weight" in it.

Historically, salespeople had limited transparency into leads, which was like a black box for sales leaders and managers. Additionally, CRM was costly and difficult to implement on on-premises servers, and customization often sparked controversy, especially for small businesses.

According to Byron Matthews, CEO of Miller Heiman Group, speaking to CIO Dive, CRM has essentially undergone four transformations:

  • Stage one:The rudimentary form of CRM appeared in "the era when my father was in sales." There were already concepts of customers, contacts, and opportunities, but they had not yet been organized through technology.
  • Stage two:CRM moved beyond the Rolodex form to become packaged software, building common systems for various organizations and injecting "more science" into sales organizations.
  • Stage three:When third-generation CRM emerged, cloud computing rose concurrently, enabling CRM platforms to scale.
  • Stage four:The core of the current fourth stage is building tools that help salespeople sell more through automation and insights into prospect behavior. Today's CRM platforms should enhance salespeople's ability to act and effectively guide their behavior.

But Matthews pointed out that the fundamental problem with third-generation and, to some extent, current CRM is that it was never truly designed to help salespeople sell more; it was designed for sales leaders and managers.

When CRM can help salespeople clarify the actions they need to take and learn individual selling styles, it can provide recommendations for the next opportunity. But the next breakthrough in CRM requires further evolution to help change behavioral patterns within deals.

Salesforce: A force of nature

In the late 1990s, Amazon pioneered new standards for consumer tools, enabling consumers to accomplish various tasks over the web and cloud.

Salesforce's leadership wanted to bring this business-to-consumer (B2C) experience into the business-to-business (B2B) world, "making enterprise software as simple as a consumer buying a book on Amazon," said Robin Grochol, vice president of product management for Salesforce Sales Cloud, in an interview with CIO Dive.

Poulter said Salesforce was among the first CRM vendors to "lead or pioneer the cloud wave." Through cloud deployment, it attracted tens of thousands of small businesses, then gradually added customer service features to strengthen integration. Its product suite matured over time, "but their differentiation advantages in specific functions are hard to substantiate."

This leading CRM company maintained growth momentum through aggressive sales strategies, but Poulter believes its current leadership position is largely tied to artificial intelligence—AI is helping deliver recommendations to users.

In Matthews' view, AI is Salesforce's next "cloud" and its response to the fourth stage of CRM. The company's AI platform, Einstein, is embedded across all layers of its CX platform. Launched in September 2016, Einstein has exceeded expectations and currently makes over 2 billion predictions daily.

Salesforce's product suite matured over time, "but their differentiation advantages in specific functions are hard to substantiate."

—Julian Poulter, research director at Gartner

This positioning is significant because, according to Gartner forecasts, by 2022 approximately one-fifth (20%) of customer service interactions will be handled by AI, a staggering 400% increase from 2018.

Grochol said sales is both an art and a science, and AI serves to enhance the artistic side. The art of sales partly stems from salespeople's intuition; the science (i.e., AI) steps in to help salespeople make more specific and accurate decisions.

However, as with cloud computing, being an early adopter of new technology comes with challenges. Grochol said Salesforce had to educate customers and "show them a vision of how things could be different." This takes time, but the CRM market and Salesforce have evolved toward "a more action-oriented experience," where "the key is action and guidance."

Not alone at the top

Poulter noted that vendors in the CRM space often imitate what the leading players do, a common occurrence. "This is a very active market space," and service overlap is inevitable, which also creates a "gray area" in Gartner's market rankings—because all leading vendors score relatively close to one another.

As with any software or service, no single vendor excels in every aspect. Some vendors are strong in certain areas but lacking in others. For example, Salesforce ranks first in customer service and sales, but drops to second in marketing and third in commerce, Poulter said.

To decide which platform best suits an enterprise, Poulter acknowledged that companies seek advice from analysts like him.

More mature CRM platforms helped inject "more science" into sales organizations.

—Byron Matthews, CEO of Miller Heiman Group

Enterprises must first clarify their own goals. "There is always a tension: whether to buy a suite platform that handles everything but may lack depth, or buy 45 different best-of-breed products and worry about their integration?"

Neither extreme is necessarily correct; the balance lies somewhere in between.

Part of CRM's progress lies in helping enterprises decide how to treat customers, and the applications available in app stores help "fill the gaps," Poulter said. Having a platform that allows applications to communicate with each other is crucial, making whatever the enterprise sells much easier.

Having a vast application economy ecosystem is, even for a leader like Salesforce, its "peripheral moat," as Matthews described it.

Ultimately, a good CRM vendor enables enterprises to see a unified view of customers, trends, and prospects. Poulter said that if enterprises "want to play with those trendy AI things, they must have high-quality data"—that is, a complete view of customer interactions, behavior, and history.