The History of CRM

Business & tech | Sales

One might gloss over the history of CRM (customer relationship management) and not think it has much relevance. After all, this technology is ubiquitous in business today, so why bother learning its origin story?

Looking at the history of CRM is almost like the history of SaaS (software as a service) itself since Salesforce is considered the grandfather of SaaS. Therefore shows some interesting patterns of the diffusion of innovation across the sales landscape.

While you can look back at ancient civilizations and see how record keeping and general accounting led to the rise of the greatest and strongest empires, we won’t go quite that far back in this post. Suffice it to say that organizing data is  the backbone of successful ventures, be those civilizations, governments, or even companies.

Behold – the Rolodex®

Let’s start with the beginning and a very analog tool that sat on many desks for more than 40 years. It was referred to as a Rolodex – even though that is actually a brand name. Essentially, it was a system of cards that were fixed to a spindle and each card contained contact information and contact details of a person. Sometimes it would be that person’s business card attached to the Rolodex card, or sometimes it was handwritten. Often, the owner would add personal information about the contact – spouse’s name, kids’ names, favorite place to vacation – to be able to personalize the conversations and interactions with customers and contacts. Details of customer interactions was key. It was the early stages of the importance of customer experiences.

That last part is important since it’s more relevant today than ever – the idea of the Rolodex was that you could be on a call and pull up personal information about the person with whom you were speaking. It was a tool for cultivating relationships. 

Next up: the computer

Giant mainframes took the stage next during the 1960s and 1970s. These were used to store customer information, but were not typically used by all employees. They were machines that filled a room and had operators to manage them. They were initially incredibly expensive, but over time, as with any innovation, prices began falling and computers became more accessible. Eventually, individual employees were granted desktop terminals that could access the mainframe, but these were still fairly clunky to use. Users engaged with a DOS prompt – there was no interface, graphics, or mouse, so the usability was cumbersome. The mainframes could process databases to send out large mailings of catalogs and brochures, which signaled the start of direct mail and direct marketing as a viable sales channel. It wasn’t true marketing automation yet, but it was a way of automating marketing campaigns. But, in business, this meant that the Rolodex stayed around on people’s desks for quite a while. 

First software emerges

There are a few key names and milestones in the history of CRM. The concept of database marketing was an early precursor to CRM and involved analyzing and segmenting data to determine who would be most likely to buy from a company. This was pioneered by Kate and Robert Kestnbaum. ACT! Software, which stands for Automated Contact Tracking, was also released at this time and was considered database software specifically designed for sellers. 

Next, Siebel Systems released a software product to manage databases of customers in the early 1990s. Its timing was right and therefore it rose to popularity quickly – becoming the market leader. Tom Seibel, an Oracle employee, left the company to pursue his own work on this type of software. The term Sales Force Automation was used by Seibel to combine database marketing and contact management software- two things that had been separate before. This coincided with the growth of personal computers in the workplace in the late 1980s and early 1990s, so suddenly individual salespeople/sales reps could access sales databases. 

Going beyond basic sales data and into the relationship information (just like the trusty old Rolodex) was in demand, and thus the term “Customer Relationship Management” was coined. There isn’t agreement on who actually picked that term, but the idea of data supplemented by notes or additional information about a person is at the core of it. Bob Kestnbaum, Kate Kestnbaum, Leonard Berry, Hugh Bishop, Tom Seibel, Jagdish Seth, Pat Sullivan, Mike Muhney, and the Gartner Group are all rumored to have a claim to coining the term. 

1999 – a big year

While everyone was freaking out about the Y2K bug, two important things happened at once in CRM in 1999. First, Salesforce hit the market as a CRM, edging Siebel out of the top spot. Seibel was still a player and was still innovating, having just released a handheld device (Siebel Sales Handheld) for use with its sales software. However Seibel was in the on-premises business, and Salesforce had a different trajectory. That trajectory was Software-as-a-Service, or SaaS, where software would be delivered online. It was a risk that paid off. Up until this point, software had big upfront fees, long implementation periods, and then ongoing maintenance fees. With SaaS, a monthly subscription fee was all it took to start using a software system. The popularity of SaaS skyrocketed.  

SaaS growth continues

Soon after and throughout the early 2000s, companies came up with more SaaS offerings including additional CRMs. The fact that data could be accessed anywhere, anytime with an internet-connected device drove the rapid adoption of SaaS. Open source technologies helped people grow their own CRMs and helped bring other CRMs and SaaS tools to market quickly. As the use of social media grew in people’s personal lives, so too did people’s comfort with SaaS. By the end of the first decade of this new millennium, SaaS had exploded, exploded, just in time for the bubble to burst in 2010. 

CRMs galore!

The 2010s saw a rapid advancement in connected technology and it quickly became mission critical. During the 2010s, the growth of CRM systems and SaaS in general grew exponentially with the use of smartphones and tablets. The CRM industry leveraged the internet for always-on technology, making it a part of everyday life. New CRMs came along that were faster and less expensive than Salesforce, including players like Insightly CRM, Pipedrive CRM, Nutshell CRM, Zoho CRM and others. These CRMs could delivered on what Salesforce had promised but had slowly began failing to deliver – a cloud-based software experience that was affordable, customizable, and flexible. As the market grew, specializations came into focus. CRMs became specialized in specific verticals or industries – e.g. a CRM for the healthcare space, for financial organizations, insurance agencies, manufacturing firms and the like. (While you can find CRMs for sales teams dedicated to these verticals, a broad, customizable CRM is still the most affordable and modern option.)  and CRMs became even more customizable for businesses to make their CRM work for their individual processes. 

Key features of a CRM began to emerge at this time. They are actually a series of digital tools that work together to automate the sales process, facilitate sales strategies, and allow for more efficient sales management. For example, moving contacts from the lead stage to the opportunity stage. Being able to customize a pipeline in the software and manage deals through it. Creating automated workflows for repetitive tasks. Sending templated emails. In addition, post-sale features like project management began to emerge in CRMs. Plus, resource management features that allow leaders to see customizable dashboards and reports are now standard. These features are table stakes today. As AI and machine learning become more accessible, the CRM landscape will continue to change where AI features in CRM help suggest workarounds, predict and forecast sales, write short code, suggest subject lines, and more. 

Where Salesforce went wrong

As newer, more modern competitors started to emerge, Salesforce focused more on its ecosystem rather than its technology or customer service. While integrating with tools and creating technology partners is important, the total cost of ownership of the system began to skyrocket at this time. Therefore, Salesforce became a legacy system that was, in fact, complex and difficult to implement – the exact opposite of what it set out to deliver in 1999. It especially moved out of reach for small to midsize businesses, and focused more on the enterprise space due to cost constraints. This is ironic because it was conceived on the idea of low start-up and overhead costs, but in fact had started becoming quite cumbersome. This made way for modern CRMs with newer code bases to advance on the market. While Salesforce still holds the largest market share, a host of strong competitors are slowly eating away at that advantage. 

CRM as a core business tool

Today, you’ll be hard pressed to find a business that doesn’t use a CRM to operate. In addition to being the single source of truth for company data, it can automate tedious, manual processes that take up time and are error-prone. CRMs must be lightning fast, be easy to use with a modern user experience, have mobile apps associated for people on the go, and be affordable for all types of businesses. The ability to interface with social media platforms is also a must since such platforms are a ket part of the customer journey for potential customers today, and they also contribute to customer loyalty and the associated benefits. Plus, with advances in artificial intelligence (AI) and machine learning, today’s CRMs can boost productivity. Here are some compelling CRM stats from Fits Small Business:

  • Businesses that use a CRM see higher conversion rates.
  • The CRM market is expected to grow 12.5% year-over-year until 2030.
  • At 27.8%, lead management & retention are the top use cases for CRMs.
  • 51% of small businesses that adopt a CRM see an increase in lead conversion rates.

Create your own CRM story with Insightly

Ready for your first CRM or need to switch CRMs? The 21st century tools are ready for you. Put Insightly on your list. You can watch a demo on demand at your convenience, start a free trial, or request a personalized walk through with a member of the team.