Need for Customer Interaction to Lead CRM Industry

Thanks to an increase in Web-enabled systems for customer interaction, customer relationship management (CRM) services are becoming more important for companies, according to Gartner Group’s Dataquest Inc., which also predicts the worldwide CRM services market is on pace to reach $19.9 billion in 2000, an increase of 28 percent over 1999 revenue.

Spending plans for CRM initiatives among end users show that, on average, enterprises budget more than $1 million for their CRM initiatives, and this spending will double over the next 12 months, according to Dataquest’s report “CRM Services Market Trends and Demand Characteristics for 2000.”

“The CRM services market is being driven by increased penetration of the Internet as a technology platform, growing importance of CRM as a strategic initiative, the growth in e-commerce driving the use of Web channels for CRM, and the growing need for scalable customer management solutions,” said Debashish Sinha, senior analyst for Gartner Dataquest’s IT Services worldwide group.

While there are great market opportunities, the CRM market has been hindered by a lack of skilled resources. Many enterprises can benefit from CRM services, but Gartner Dataquest analysts said there is a lack of CRM expertise.

“As this market grows, the resource constraints will begin to show in implementation services, as well as the enterprise’s ability to handle the increasing volume of customer interaction,” Sinha said. “Although Web-based self-service may take up some of the overflows, we believe that access to a global workforce for handling the increased interaction flows of successful CRM implementations will become a service component provided by the CRM service providers.”

CRM is a business strategy aimed at anticipating, understanding, and responding to the needs of an enterprise’s current and potential customers. It involves capturing customer data from across the enterprise, consolidating all internally and externally acquired customer-related data in an integrated data repository, analyzing the consolidated data, distributing the results of the analysis to various constituents of the extended enterprise, and using the information when dealing with the customer.

Dataquest divides the market for CRM services into two major segments: maintenance-related services and professional services. Maintenance-related services include hardware maintenance and support services, and software maintenance and support services. Professional services are broken into six major market segments: 1) consulting, which includes business consulting and IT consulting; 2) development and integration, primarily application development, system integration and deployment services; 3) education and training; 4) IT management services, which involves managing and operating the enterprise IT infrastructure; 5) transaction processing services; and 6) business management services, includes managing and operating IT intensive business processes.

A report by Ovum found that the CRM software market is set to grow to more than $10 billion by 2005.

“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 CRM market, they must radically shake up their offerings.”

According to Ovum, there is no single product set that currently provides everything a company will need for CRM. On the analytical side of 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.

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