CRM to Stay Flat in 2004

Analysis firm Forrester Research has published 50 new reports establishing the firm's predictions for the IT industry in 2004 and beyond. Although some sectors like outsourcing will continue to be hot spots, Forrester says the CRM market will remain flat for the year. According to the report, CRM licensed revenues were down roughly 20 percent in 2003 and will grow only modestly, 5 percent to 10 percent, through 2005. Continued emphasis on cutting costs in the enterprise is the key reason for the less-than-ideal outlook. "Siebel Systems really surprised us with some positive fourth-quarter numbers, so 2004 may be a little more positive than we initially thought" says John Ragsdale, research director in the CRM practice at Forrester. "But overall, most CRM implementations these days are tactical, one module at a time. Companies are being much more cautious than they were in the past when they purchased huge suites." Ragsdale also says that in addition to smaller CRM projects, more and more companies are shifting towards the one-vendor approach to their IT needs. "If a company has SAP [AG] in their back office, they may simply add a single call center module," he says. "A lot of companies are seeing small, incremental sales this way instead of larger deals, with less software sitting on the shelf." In addition, Ragsdale says that the increase in hosted CRM sales has had a negative effect on the CRM market from a revenue standpoint. "Hosted deals are a little less expensive up front, and that affects the growth of the market as a whole," he says. Another detractor to industry growth is the fact that many vendors are severely lowering prices on their software to bring in some sort of revenue, according to Ragsdale. Even with a flat outlook for 2004, Ragsdale says there will be a few hotspots in the CRM space. He says that vendors will devote more emphasis to vertical CRM, that more areas of CRM will become outsourced, and that hosted CRM vendors will get into the consulting game as their solutions become more feature-rich and complex. Also, companies will be continuing to invest in solutions that provide for more accurate and up-to-date customer data.