By Adi Jagan
Like Slack, social media and celebrity cancellations, “customer relationship management systems” sounds like a phenomenon unique to the 21st century. But people selling goods and services have been managing relationships with their customers ever since trade began. The first ledgers we have evidence of were created 7000 years ago in Mesopotamia (modern-day Iraq). As they were “maps of economic and social relationships and interactions,” many consider ledgers the oldest CRM tool we have.
Rolodexes + Mainframes = The Birth of Modern CRMs
Over the next seven millennia, sellers of goods and services certainly had informal or undocumented CRM methods, but the 20th century business accessory historians point to as the first physical CRM is the Rolodex.
A mashup of “rolling index,” the Rolodex was a small circular file with alphabetical tabs where the upwardly mobile could track all of their business contacts. The Rolodex was the precursor to LinkedIn connections and Gmail contacts, and became so emblematic of business power and influence that there’s one in the Smithsonian.
Writer Anna Jane Henderson described the Rolodex as the wheel of life: ” ‘I think I have her in my Rolodex,’ they’d say. Or, ‘If he leaves, he’s going to take his Rolodex with him.’ “ (In a 1986 episode of the TV show “Moonlighting,” a stolen Rolodex is held ransom for $50,000.)
The widespread adoption of the mainframe computer was another key moment in CRM history. They were dubbed “mainframes” around the time of their invention in the 1950s because their CPUs were housed in a large cabinet, called a main frame. Mainframe computers were used primarily by large organizations for bulk data processing tasks: from censuses, statistics and enterprise resource planning to large-scale transaction processing.
By the early 1970s many mainframes had interactive user interfaces, facilitating quick searches and organization of customer data. Analog and digital information tracking were perfectly poised to collide.
Database Marketing and Contact Management Software
Pioneered by Robert D. “Bob” and Kate Kestnbaum, database marketing was the true beginning of CRM software. Organizations started to collect and analyze customer details to gain better insight about customers’ behavior. It was the first large-scale effort to integrate customers with sales strategy.
By the late 1980s, contact management software had come into vogue. When Conductor Software launched first contact management software in 1987, its CMS was simply a digital Rolodex that helped businesses store and manage customer data efficiently. But by the early 1990s, technology updates enabled companies to track leads, contacts, opportunities, quotes and many other sales-related business functions. CRM was now officially a product.
In 1995, Siebel Inc. released the first Siebel Sales Enterprise software for sales force automation. By the late 1990s, many ERP vendors like Oracle and SAP got into the CRM market via acquisitions or in-house development.
In 1996, Sridhar Vembu, two siblings and three friends all co-founded a new network management company: AdventNet, Inc., Originally the business built software for other companies, and by 1999, the company’s valuation was already $140 million. When a VC offered Sridhar $10 million in funding, he famously turned it down, preferring instead to retain control rather than turning over decision making to investors. (Though he didn’t know it at the time, Vembu and AdventNet were going to play a key role in the expansion of CRMs in the 2000s.)
In 1999, former Oracle executive Marc Benioff and three other partners (Parker Harris, Dave Moellenhoff, and Frank Dominguez) formed Salesforce.com.
21st Century CRMs: Surviving, Acquiring and Innovating
When the dot-com bubble burst in 2001, CRM and the software industry were hit hard as companies halted their spending on technology. But the tech companies that survived the collapse bounced back in the years that followed:
- In 2003, Microsoft released Dynamic CRM
- In 2005, AdventNet released Zoho CRM, an app designed for sales needs.
- In 2006, Oracle acquired Siebel in a deal worth $5.8 billion
- In 2007, Salesforce.com launched force.com, a cloud-based application development environment.
- In 2008, CRM turned into social CRM, as companies started to track customers’ social behavior to offer a better customer experience
Zoho continued to lead the CRM evolution in the 21st century. In 2009, AdventNet rebranded as Zoho Corporation, and in 2011, the Zoho CRM app was redesigned to better accommodate UX. Within three months the app surged to six times its previous user numbers, proving that great design could drive CRM adoption in an increasingly crowded market.
Since then, Zoho Corporation has expanded to produce a suite of web applications for small businesses and organizations. In 2016, the company released an updated version of Zoho CRM dubbed “the industry’s first multichannel CRM” with a mobile app, dedicated sales-oriented email client, and cloud-based application that pulls together social media, user feedback, support ticket tracking, and other customer-based actions. Today, Zoho CRM is used by more than 250,000 businesses in 180 countries, and is recognized as “one of the oldest players in the CRM industry” with “a keen sense of what technologies work best.”
Like Zoho CRM, the paradigm-changing concept of inbound marketing was also born in 2005. Brian Halligan and Dharmesh Shah were graduate students at MIT in 2004, who observed that consumers were ignoring brands that yelled loudly for their attention. They realized 21st-century audiences were oversaturated with intrusive bids and aggressive sales tactics. Modern consumers don’t want to be interrupted or harassed by marketers pushing products—but they will accept help. This idea is called “inbound marketing,” and it was a tectonic-level shift in CRMs. Halligan and Shah used the idea to found their new company: HubSpot.
CRMs of the 2020s and the Future: Back to Fundamentals
Today’s CRM is by design social- and mobile-friendly. The hard sell tactics of the old days are increasingly obsolete as companies have shifted their focus from transactions to interaction. Customer experiences will only become more personalized. Increasing customer value has become far more important than new customer acquisition. Modern CRMs will continue to become more streamlined, intuitive, and easy to integrate, with increased adoption of AI, more robust automation workflows, and more self-service options that allow buyers to troubleshoot and solve issues on their own.
RevOps is primed to be another hallmark of CRM’s evolution. A 2022 survey showed that, even though CRMs have been widely adopted by businesses of all kinds, they remain a source of frustration to many users. Of more than 500 sales and marketing professionals surveyed, only 21 percent said they were “extremely satisfied” with their CRM solution, with 62 percent “somewhat satisfied.”
Some CRM systems suffer from function-bloat, forcing users to wrestle with complex or unnecessary tools rather than freeing them up to focus on the actual customer. We’ve learned that even the latest and greatest CRM can’t deliver if people and teams remain isolated in their respective departments. Sales needs to communicate with customer service, and customer service has to share data with marketing.
The adoption of a RevOps strategy, which unifies business goals and allows all departments to work from a single data source—is key to truly getting maximum benefit from a CRM. The trend is now swinging back—towards simplicity, and towards a truly customer-centric philosophy.
The future of CRMs is very bright—and it has only just begun.
Could a CRM help your business? Do you need a better system? Let’s talk!