High Customer Expectations to Lift CRM Market

Worldwide revenues in the customer relationship management (CRM) services markets will increase at a compound annual growth rate of 29 percent from $34.4 billion in 1999 to $125.2 billion in 2004, according to International Data Corp. (IDC). This growth rate is more than twice as fast as the expected increase in the overall IT services market.

IDC believes customers’ elevated expectations and the impact of e-business are major factors in the growth of CRM services.

“Without a doubt, the growth of e-business is the most important factor impacting the CRM services market,” said Katrina Menzigian, program manager for IDC’s eCustomer Care Services research program. “E-business has not only changed how companies conduct business, but also how they interact with and relate to their customers. In addition to creating new communication channels and alternative interaction options for consumers, e-business has changed the rules and expectations surrounding customer service, fundamentally altering the consumer experience.”

With customers’ expectations increasing, companies that can provide a higher degree of service have the competitive advantage.

“As one credit card or airline increasingly resembles another, consumers will ultimately spend their money with the vendor that provides them with a satisfying consumer experience. Accordingly, customer service is elevated to the role of a critical market differentiator in both the online and offline worlds,” Menzigian said.

Outsourcing/operations management is currently the most frequent activity in the CRM services market. According to IDC, this segment generated 67 percent of the market’s revenues in 1999. It will continue to be the most popular activity through 2004. Its share, however, will decrease to 60 percent in 2004. At the same time, CRM implementation services will increase its share from 19 percent to 25 percent.

“As more midsize firms begin investing in CRM solutions, they will choose to implement these solutions in their own environments instead of outsourcing them,” Menzigian said. “Two factors will contribute to this trend: the introduction of CRM consulting and implementation services targeting midmarket firms and the continued focus on large companies by the outsourcing industry.”

Businesses are beginning to take advantage of the increasing popularity of wireless devices to improve CRM, according to IDC. As CRM becomes a more integral component of the modern enterprise business strategy, many companies are turning to wireless devices as a means of delivering market-differentiating customer service.

“Corporate wide CRM will undoubtedly be enhanced by accessing enterprise data and services through wireless devices,” said Brian Bingham, senior analyst for IDC’s eCustomer Care Services research program. “The exact benefit to the business and customer will be determined by the nature of the product and/or service being offered, but regardless of the benefit scale, the value-add to a CRM program is the extension of the customer knowledge base into a remote location.”

IDC believes some industries are better positioned to improve their CRM by using wireless devices than others. These industries include utilities, financial services, healthcare services, manufacturing, and retail.

“With wireless CRM applications, businesses will be able to be more proactive. Field service representatives will be able to make decisions based on real-time data, and the time spent on each transaction will be reduced as members of the sales force have instant reads on parts, inventory, schedules, order status, and other relevant information,” Bingham said.

However, before CRM applications on wireless devices can really take off, a few challenges will have to be overcome: There is no standardization in wireless infrastructure or protocol, and the differences can cause gateways to shut down or crash; there is also a lack of a clear value-added business use, and the need for education could slow the impact of wireless CRM.

META Group predicts a 50 percent annual growth rate for the global CRM market and projects it will grow from more than $13 billion in 2000 to $67 billion in 2004. In particular, analytical CM software, consulting, and systems integration services will be the fastest-growing CRM segment through 2004, with an average annual growth rate of 82 percent.

According to META Group research, 40 percent of Global 2000 organizations will have a dedicated CRM program management office in place by the end of 2000.

“CRM initiatives will require investments comparable to or larger than investments made in enterprise resource planning initiatives,” said Aaron Zornes, executive VP and director of META Group’s Application Delivery Strategies. “Much work is yet to be done in terms of implementing CRM strategies and technologies, integrating front-office processes with the back-office, and enabling e-channel interaction and collaboration to augment existing channels. Clearly, the CRM market continues to thrive.”

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