Forrester had forecast a 7 percent growth rate for CRM in 2004.
Posted Sep 30, 2004
Many large corporations, despite a sluggish early 2004, still intend to make CRM purchases a priority this year, according to a recent survey by Forrester Research and Forrester Business Technographics. The survey includes responses from 1,377 companies, each with a minimum of 1,000 employees. Approximately 63 percent of these companies were in North America, and the rest were European.
"Spending has been so lackluster in the first half of the year," says Erin Kinikin, vice president at Forrester Research, but she notes that 21 percent of North American companies--and 33 percent of European ones--are planning new CRM investments by the end of December.
Kinikin says Forrester had forecast a 7 percent growth rate for CRM in 2004. "In the first half of the year CRM [spending] was flat or down, so CRM definitely has some catching up to do," she says. "But companies are still planning to spend the budget they had in the beginning of the year--they're just going to be spending it in the last two quarters."
Much of the spending seems oriented toward expansion. "We're seeing a lot of money being spent on servers and storage devices, a sign that companies are gearing up for growth," Kinikin says.
Forrester's survey did not address the size of the CRM purchases that companies were planning, nor did it delve into the nature of the CRM applications themselves, particularly avoiding the question of whether the plans were for hosted or on-premises applications. According to Kinikin, demand for hosted applications seems to be growing much faster. But, she says, it's worth noting that the kind of companies putting CRM on their shopping lists has changed significantly. Among North American respondents the top-three verticals stating a preference toward buying CRM this year are manufacturing, retail/wholesale, and business services.
"It's not just the typical financial services and pharmaceutical companies anymore," she says. Those early adopters continue to invest in CRM, but at lower levels. "We're finally getting to the mainstream of CRM. These companies have very pragmatic objectives: 'Let's get it done and integrated into our business processes.' It's about customer retention and making sure you're successfully delivering on what the customer asked for as efficiently as possible." These companies, she says, "need CRM integrated with their supply chain and core business operations, not just [information about] whether they answered the customer's question, but what happened to the order and how accurate is the bill."
CRM buyers in the Forrester survey seem to have similar items on their shopping lists. "A lot of the people who are buying CRM are also buying related technologies like business intelligence and portals," Kinikin says. "We're seeing CRM go from an operational system for employees to a system that drives decision-making and is [open] to customers and partners, which makes it much more valuable."
The multiple application buys may indicate a preference for large-scale deployments. "It's like we're inching back toward 'enterprise CRM'--and we all know what happened the last time we went through 'enterprise CRM.'" This time, she suggests, "companies are doing a much better job getting their governance policies in line before getting into a cross-department CRM initiative."
Much of the pending CRM purchasing, according to Kinikin, is directly related to how each company applies technology in the enterprise. The survey results show a difference, she says, between "IT organizations that focus on cost savings...and those that have established enough of a partnership with business that they're working on 'competitive advantage' initiatives. People who do CRM [properly] treat their investments differently from people who treat their investments tactically.... Companies that think strategically about CRM are much more likely to invest in innovation than [other] companies."
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