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Growing with your customers

Is Customer Success Management yet another buzzword? Deep-dive into how it links your success to that of your customers. 

Customer Success Management (CSM) as a new level of client centricity has arrived at DAX-listed companies. Industrial engineer Dr. Marc Braun, Head of Customer Success Management in SAP on any Cloud at T-Systems, explains why CSM is more than just a new buzzword in the IT industry and how CSM is developing into a win-win relationship for customers and service providers.

It used to simply be called Customer Service. Then it was Customer Relationship Management (CRM). Then it became Customer “Experience,” followed by Customer Engagement. And now it's Customer Success Management. Isn't this all just old wine in a new bottle?

You might think so at first. But shouldn't customer-centric thinking be a given, no matter what I call it? The focus has always been on the customer from a sales perspective. How I can increase sales with a customer has been analyzed in detail. This applies to both B2C and B2B business. Customer service also played an important role in the IT industry. If there were too many outages at a data center, customers could not work, there was hardly any more business to be done. Everyone can still remember the awful news reports when these kinds of outages occurred. But something has changed massively in IT, which is also turning the relationship between the IT service provider and the customer on its head. 

You mean the shift to flexible consumption and Everything-as-a-Service (XaaS) models. How is this having an impact on IT service providers?

Dr. Marc Braun, head of Customer Success Management for SAP on any Cloud at T-Systems

Dr. Marc Braun, head of Customer Success Management for SAP on any Cloud at T-Systems

Usage-based billing is increasingly motivating IT customers to reduce their dependence on IT service providers. This is because the dependence of buyers upon sellers is decreasing. Before the arrival of the cloud, selecting an IT service provider took months, sometimes even over a year. On the one hand, that was due to the costs involved. On the other hand, it was also about the chemistry between the customer and the service provider. With budget volumes of several hundred million euros in some cases and a contract term of five to 10 years, the customer and service provider also had to get along on a personal level. Therefore, the motto was: “Look before you leap.” With XaaS models, things are different. The terms are extremely short. Predominantly, standardized services are booked. If a competitor comes around the corner with a more favorable offer, the switch can – theoretically – happen quickly. And it is likely to accelerate even more in the future. IT service providers are, therefore, under a completely different kind of pressure than with long-term contracts.

Does this mean that an IT service provider has to alter its customer service?

Yes, and even fundamentally, because relying on the classic account manager is not enough in the long run. The account manager’s role was to manage the interface between the customer and the service provider, ensuring that the relationship worked smoothly. If a customer was dissatisfied, the account manager looked for the reasons for this dissatisfaction and made sure that the mistakes were rectified. If the customer approached the service provider with a new request, the service provider checked internally to see how the request could be fulfilled. Most of the time, therefore, the service provider was passive, or at least reactive. The primary concern was to maintain a good relationship. But there is a crucial difference: CSM builds on the foundation of customer experience by trying to improve the customers’ product experience. It relies on indicators that predict the customers’ future value. It thus prioritizes customers' financial, social, operational, and strategic goals. CSM aims to ensure that customers derive the maximum possible benefit from a product or service. 

Did innovations not play a role in the contractual relationship?

Within the agreed services, yes. If there were changes in hardware, for example, customers benefited from them. Software updates were also part of the agreed framework, of course. But access to completely new and better technologies usually only came about after a contract had expired. Think, for example, of renewals of technological platforms such as our Future Cloud Infrastructure (FCI). This is now being introduced to our customers with contract renewals.

Where is the CSM located? In sales? In customer service? In operations?

Silke Dombrowski, Senior Service Manager for CSM

Silke Dombrowski, Senior Service Manager for CSM

This is a very crucial point for the success of Customer Success Management. In principle, CSM is a mixture of the previous areas of sales and service with a new component of customer management on top. It’s therefore important to overcome the previous divisional thinking to some extent. The classic salesperson must learn that his work does not end when the ink dries up on the contract. It’s not only the service department that has to ensure that everything runs smoothly for the customer. Everyone must work together to constantly put the current services for customers to the test. What can be improved? Are there new technologies that can help customers improve their own processes? This is an ongoing task. Because CSM represents a change in mentality. Customers are no longer “won over”; instead, they are shown how they can increase their added value. At T-Systems, we are in the process of ensuring that all employees across all divisions are aware of CSM. 

But how is “customer success” defined? With higher customer sales or lower costs?

A whole range of KPIs can be defined for measurability. For example, if we proactively suggest that a customer introduces a new AI tool in production, its impact on the processes can be measured – with reduced production times, lower production downtimes, all the way to new business models. Strictly speaking, this is no different to before. A manufacturing company would also not buy a new machine until it was convinced that it made sense.

And how exactly can this improvement flow into the customer-provider relationship?

For us, it is initially less important to link this type of idea and improvement management to contracts. Following the motto: I'll only suggest something new if I can benefit from it. For us, CSM is first and foremost a basic attitude: if the customer does better, we do better. But in principle, the customer's success can also be quantified in terms of the service provider's monetary success. For example, the service provider delivers in advance and only receives payment after the successful introduction of an innovation, and also receives a percentage of any increase in sales or reduction in costs. Such models existed even before digitalization.

But won't the sales I can generate with a customer still decrease?

As a result of this fear, CSM still has a hard time gaining acceptance in practice. But this way of thinking is wrong and it has long been proven that a good customer relationship leads to more sales in the long term. And because customer loyalty is declining sharply in industries where products and services are becoming increasingly interchangeable, CSM is one approach that can strengthen customer loyalty again. According to one survey, CSM helped more than half of companies to increase their up-sell and cross-sell revenues by 10 percent, as well as increase contract renewal rates and improve the amount of annual recurring revenues, while nearly a third of respondents saw an increase of 20 percent or more here.

Are there any success stories from IT?

An IoT provider found that a large number of customers were on the verge of not renewing subscription services for IoT solutions. By analyzing the reasons, the provider found that this was primarily due to a lack of understanding about how the solutions could be used and the value they could add. No one had bothered to show customers how they could benefit from ongoing product enhancements and extensions after installation. On the contrary, they tended to confuse customers, which made them want to cancel their subscriptions. CSM was able to solve this problem because there were now people to explain to customers how they could benefit from innovations.

Why is now a good time?

We are currently in a phase of “restart” after the pandemic. Many of our customers recently had to pause their project work, for example, on the introduction of SAP S/4 and the associated modernization of operational processes. Now things are starting up again. The only difference is that the projects are continuing in a completely different way than before. Our customers’ and our company’s day-to-day work processes have changed. Many things have been digitalized that were inconceivable before, and we travel less. In addition, the “technology leap” in the form of the cloud came at the same time. This means that now is the time to rethink customer success. 

And how will T-Systems use CSM? When it comes to cloud computing, companies are relying on hyperscalers. What can T-Systems do about this? 

It's not a question of doing anything about it. That's why we have agreed to close partnerships with the hyperscalers. The hyperscalers themselves focus on their core competence of providing computing services flexibly. However, they are also very innovative when it comes to new solutions and services, but which often don’t reach the users. This is exactly where we see the greatest user value for our customers. We bring these innovations to our customers, thanks to CSM.

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