Datamonitor: The End of eServices

First, the good news. The global customer-service automation software market will grow to $4.4 billion by the end of 2006, up from $2.32 billion last year, according to a report by London-based researcher Datamonitor. After all, better customer service is the key to customer retention -- the top priority for many companies fronting an uncertain economy, industry watchers say.

The hot spot will continue to be the small to medium-sized enterprise (SME) market, including divisions of large corporations, according to Datamonitor. That's because enterprise-wide, multi-million dollar sales are drying up. Staking a flag in what's considered by many as rocky terrain, Datamonitor also says CRM application service providers will be the big winners in the SME space, thanks to their ability to deliver reduced costs, ease of integration, savings on IT labor and access to new applications.

And then there's the downside: The eServices market will cease to exist as a standalone market, concludes Datamonitor. Why? Call it the brave new world of integrated systems. The lines are blurring, says Datamonitor, and now customer-service automation software must be deeply tied to sales automation and portals.

Of course, this doesn't mean the niche software vendor is also doomed. To avoid the risk of being marginalized, these vendors will forge partnerships with systems integrators, consultants, ASPs and other software vendors to deliver a more complete solution.

The other option is to build greater functionality in-house; but this is unlikely, says Datamonitor. Declining revenues and tight research and development budgets mean most software developers won't be building entirely new functionality or targeting new markets anytime soon. However, analytical CRM and knowledge management functionality are logical additions to existing core CRM solutions, the research firm reports.

Tom Kaneshige also writes for Line56.com