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CRM's Evolution
Forrester predicts market comeback; cross-channel integration, verticalization, Web services, new pricing models weigh in; Microsoft will dominate
Posted Jul 31, 2002
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CRM revenues will grow from $42.8 billion this year to $73.8 billion by 2007, according to a new study by Forrester Research. A chunk of this will come from services. This means the big winners will be consulting firms like IBM Global Services (which plans to acquire PwC), Accenture and Deloitte Consulting, as well as marketing-service providers such as Acxiom and Harte-Hanks. While CRM software sales will rebound from last year, the emphasis is shifting from capturing customer interactions to wringing value from them, says Bob Chatham, principal analyst and author of the Forrester report. This means companies are looking to integrate multiple systems and channel partners, leverage analytics software and redesign business processes to take advantage of new-found data. In other words, optimization is CRM's mantra of the future. "Just take a look at the upgrade rate for Siebel 6 to Siebel 7, it's only around 10 percent," Chatham says. "Once you relieve yourself of the mundane task of finding out who sent what to whom -- you don't need to do this part better -- then you shift to an operations focus to make your business better, which means extracting value from your existing software."
This bodes well overall for service offerings, such as contact center outsourcing, consulting and marketing automation. Other market drivers today include vendor verticalization, channel integration and a shift to subscription pricing from vendors such as Salesforce.com, Upshot and Salesnet. Regarding the latter, Forrester says mounting pressure for software warranties, class-action lawsuits, and the SEC rummaging through vendors' books for revenue optimization snafus will morph most traditional software vendors into hybrid businesses. Even Oracle chieftain Larry Ellison believes that a third of his firm's revenues will come from hosted applications by 2005.
But this market moves fast. Channel integration, for instance, will diminish by 2005 as most firms achieve it. And growing interest in offshore labor will affect contact-center infrastructure over the next five years. On the other hand, Web services-enabled portals will continue to be a futuristic technology next year, then quickly ramp up and hit its peak by 2005. With the CRM market shifting, software vendors need to provide more bang for the buck. Expect them to blend supply and demand-side applications, according to Forrester. Siebel's focus on vertical industries will push the company toward order fulfillment and supply-chain visibility. The Forrester report predicts Siebel will pick up a collaborative design vendor like Alventive; or a supply-chain visibility application like Viewlocity; or contract management from diCarta. And then there's Microsoft looming. As CRM users reach out for practical analytical tools to make better use of customer data, many will turn to Redmond. SAS and SPSS will appeal to the statistical elite, says Chatham, but Microsoft will run away with the mass market. "Looking out five years from now, Microsoft will be in the top three CRM vendors overall," he says.
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