Smaller companies are finally providing a long-expected boost in CRM adoption rates, but curbing overall IT-spending growth.
Posted Dec 23, 2004
In a new report, "CRM For Small to Medium Business," Datamonitor projects that the CRM market for small and midsize businesses will grow at nearly three times the pace of the overall market. This represents a 17.2 percent compounded annual growth rate between now and 2008, compared to 6.5 percent for the entire CRM industry. That growth will see SMB share of CRM business expand from less than 17 percent in 2003, to more than 27 percent in 2008.
Projecting big gains among smaller businesses is a frequently repeated element of the pop psychology of the CRM business. Indeed, considering that in the mid-to-late 1990s sophisticated CRM capabilities were virtually unheard of in large enterprises, there is some truth to the repetition. "Penetration rates are [still] lower among SMBs, but now there are products that appeal to SMBs [on price]," says Evan Kirchheimer, a Datamonitor analyst. It took years for CRM vendors to live up to the promise of the market and provide nearly the same capabilities enterprises enjoyed at a small fraction of the cost. "I don't think those solutions existed prior to the Internet bubble bursting."
Any ongoing growth in small enterprise CRM will come as technology decision-makers adjust the throttle on overall technology spending. Forrester Research has unveiled year-end survey results revising the expected growth in small business IT spending downward nearly one-quarter, from 6.6 percent to 4.8 percent. Fewer than half of all SMBs are expecting to add IT headcount, and rank desktop replacement ahead of all other technology initiatives. Forrester's data also indicates a strong reliance on technology vendors for direct sales, although ongoing support contracts are still shared roughly equally with third-party providers.
Forrester's questions about direct sales and reseller channels did not address CRM directly, but for years purveyors of midmarket CRM solutions have believed that a rich reseller channel is crucial to adoption. SalesLogix even went so far as to dismantle its direct sales force this year. "Any vendor with a large in-house sales force or a strong focus on customization is going to have problems," Kirchheimer says. Yet some of the most successful names in the SMB space are Dell and Salesforce.com, which favor direct sales models and highly specialized reseller arrangements over blanket integrator certifications. "It's going to have to be a value-added channel or telesales," Kirchheimer says. "I can't see a direct account-manager relationship evolving" even as the midmarket's investment in CRM grows.
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