CRM Spending Increases Despite Myriad of Market Players

The customer relationship management (CRM) software market is set to grow to more than $10 billion by 2005, according to a report by Ovum.

Ovum’s report, “e-CRM: Personalization Technologies for the Web,” explains that the goal of e-CRM is to personalize the experience for customers who are using self-service channels (like the Web and WAP phones) to ensure they experience a consistency and quality of interactions that they’d expect from traditional channels. The CRM market currently has a variety of players, many of whom are known for other e-commerce offerings.

“The lion’s share will go to e-commerce platform vendors such as ATG, BroadVision and Open Market, with the remainder going to specialists such as Annuncio and Net Perceptions, or to general-purpose application server suppliers such as IBM (with WebSphere) or BEA,” said Colin Brash, Ovum analyst. “Siebel, Clarify and the rest have established a solid position in a maturing market, but if they want to continue their explosive growth by playing in the new e-CRM market, they must radically shake up their offerings.”

According to the report, there is no single product set that currently provides everything a company will need for e-CRM. On the analytical side of e-CRM alone, a plethora of approaches are employed including data mining, rules engines, and collaborative filtering to build customer profiles in order to personalize online experiences. But these systems are far from comprehensive and many companies are having to add proprietary systems to the off-the-shelf solutions. The Ovum report also predicts there will be consolidation both within and across the categories: commerce servers, e-marketing software, personalization engines, analytical software, and e-service software. Within five years, Ovum foresees only one or two multi-billion dollar players, and a reduced number of niche suppliers.

“Traditional CRM vendors must re-think their approach to e-CRM fast or they’ll lose key business opportunities to the new kids on the block,” Brash said.

A report by the Aberdeen Group predicted that the CRM market will exceed $8 billion by 2003 and will remain a high-growth IT market.

“A broad base of end-users employ CRM applications and best practices to form the underpinnings for successful e-business and mobile e-business initiatives,” said Christopher Fletcher, Vice President and Managing Director of Aberdeen Group. “CRM remains a high priority for IT executives because innovative technologies have raised the bar and customers expect quick, efficient service and support.”

CRM initiatives are also proving to be worth the investment at many of the companies that have implemented them. A 300-company survey conducted by the META Group found that nearly 80 percent of organizations report success with their CRM programs and projects. The META Group study also found that corporations expect to increase investments in enterprise-wide CRM strategies by 75 percent in the coming year.

Results also indicate that investments in CRM software and consulting/systems integration service budgets are increasing dramatically year to year. However, findings also show that 76 percent of large corporations have not yet fully integrated CRM programs into their e-commerce initiatives, such as Web storefronts and Web self-service. According to META Group, this is impeding implementation of multi-channel, life-cycle-driven CRM strategies.

“CRM has clearly emerged as a key business imperative of the new millennium,” said Aaron Zornes, META Group executive vice president and a leading industry expert on CRM. “While increased spending and high satisfaction rates for CRM initiatives bode well for the success of these projects, adequate integration among all customer touch points continues to plague many organizations.”

More spending on customer-facing applications such as CRM, as well as supplier management applications, are among the reasons AMR Research, Inc. predicts that IT budgets among US-based companies in the manufacturing and services industries will increase by an estimated 5 percent in 2001.

According to AMR, the e-commerce, supply chain management (SCM), and CRM markets are marked by homegrown applications and vendor fragmentation. AMR based its findings on interviews with 900 IT applications development professionals.

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