Double-Digit CRM Growth -- But Double-Digit Failures and Double-Digit License Limbo, Too

Spending on customer management software will see a double-digit increase in 2008, according to a report released today by AMR Research. While companies continue to express interest in adding CRM applications to their technology stack, what's particularly disturbing is that nearly one-third of companies have experienced implementation glitches that thwarted attempts to even get the software up and running. "The Customer Management Spending Report, 2007-2008" is based on AMR's survey of 190 IT and line-of-business executives: 110 from companies with less than $1 billion in revenue and the remaining 80 from companies with revenues of $1 billion or more. Customer management software expenditures will grow 16.3 percent next year to $1,900 per employee. "It's still a scenario where the front office has been underserved by enterprise applications relative to ERP and supply chain," says Rob Bois, a research director at AMR Research and co-author of the report. "IT has already thrown a lot of money at call center and contact center applications, but they still have another wave to go when it comes to sales and marketing applications." Unsurprisingly, according to the research, midmarket companies are poised to see the strongest rise in spending -- 21.7 percent -- while enterprise-grade companies will increase outlays by 9 percent. It's not smooth sailing just yet, though. Twenty-nine percent of respondents admitted experiencing difficulties that kept their deployments from going live, down two percentage points from 2006, but 13 percentage points higher than in 2005. "IT is still primarily the part of the organization that's running CRM deployments," Bois says. "They were really good at ERP, for example, where it's very process- and transaction-oriented. User adoption is never an issue. CRM is a very different animal. The priorities in customer management applications are much more around usability, easy reporting and analytics, and tight integration to desktop productivity tools rather than the transaction-related metrics that [IT] dealt with before." Sales and marketing in particular, he adds, "will go off and use something else if it's easier." What's more, 25 percent of all licenses are not deployed, according to the report. Along with the user-adoption component, Bois notes that many companies tend to buy CRM applications along with an ERP upgrade--well in advance of when they were actually planning to implement the CRM software. Meanwhile, the report also polled end users on the customer management applications that they are currently using. Interestingly enough, Amdocs/Clarify and Microsoft Dynamics are deadlocked for the top spot, with each pulling in 45 percent. With regard to Amdocs in particular, it's worth noting that of the 190 executives surveyed, 86 of them were services respondents, Amdocs's sweet spot. (Of the remaining 104 participants there were 48 process respondents and 56 discrete manufacturing respondents.) The other vendors whose customer management applications are being used include:

• SAP: 44 percent
• Oracle (including PeopleSoft and Siebel Systems): 43 percent
• Aspect Software: 36 percent
• Onyx/Consona: 33 percent
• Infor/Epiphany: 30 percent
• Pivotal/CDC Software: 27 percent
• SAS Institute: 27 percent
• Sage Software (including ACT!, Sage CRM, and SalesLogix): 27 percent
• Salesforce.com: 24 percent
• RightNow Technologies: 21 percent
• Other: 3 percent

Look at the list of vendors that end-user companies' plan to add in the next 12 months, though, and the ordering looks particularly different: RightNow and Sage were tied for first place, each with 24 percent, trailed closely by Salesforce.com and Oracle, each with 23 percent. These vendors were followed by other top choices for the coming year:

• Infor/Epiphany: 19 percent
• SAP: 19 percent
• SAS Institute: 19 percent
• Microsoft Dynamics CRM: 18 percent
• Pivotal/CDC Software: 17 percent
• Onyx/Consona: 16 percent
• Aspect Software: 13 percent
• Amdocs/Clarify: 10 percent
• Other: 8 percent

When comparing the first set of rankings to the second, "you see a lot of the software-as-a-service [SaaS] vendors who were at the bottom of that list now bubble to the top," Bois says. SaaS is "viewed as a lower-risk, quicker ROI model," he adds. In addition, the report includes the results of AMR Research's survey of companies, asking who they consider their primary vendor. Somewhat surprising, Microsoft Dynamics CRM led all competitors with 25 percent. "When you ask a company what their primary CRM vendor is, often times the response relates to whichever one they spent the most money on or it may be whichever one has the most seats deployed, Bois says. "To some degree asking companies what their primary vendor is, is somewhat subjective." Bois continues, "There's still so much Microsoft Access, Outlook, and Excel that's being used as CRM, and as much as we try to be very explicit that we're just talking the package CRM application, a lot of companies [consider an Access database as their] primary CRM vendor." Rounding out the list of "primary vendors" are:

• SAP: 17 percent
• Oracle (including PeopleSoft and Siebel): 13 percent
• Amdocs/Clarify: 12 percent
• Pivotal/CDC Software: 6 percent
• Aspect Software: 5 percent
• Infor/Epiphany: 4 percent
• Onyx/Consona: 4 percent
• SAS Institute: 4 percent
• Sage (including ACT!, Sage CRM, and SalesLogix): 4 percent
• RightNow Technologies: 2 percent
• Salesforce.com: 2 percent
• Other and "Don't have a primary vendor/Don't know": each with 1 percent

Overall, Bois maintains that CRM has to move further away from IT and more into that sales operations department. "As software-as-a-service continues to be more pervasive, you don't need IT to do a lot of tweaking of the application like you did in the past," he says. "IT is still going to have a supporting role. But [the sales operations group] can't keep pointing the finger at IT. Hopefully that will be the correct reaction to the data we saw in this report. If not people are just going to start throwing up their arms, pointing the fingers at IT and at their software vendors, and we're going be in the same boat we were in 1999 or 2000." Related articles: Sizing Up the CRM Situation Software-as-a-service, focus on customer retention and acquisition, and verticalization are factors enabling the market's healthy growth. The Dynamic Duo: SAP and Oracle Still Lead, But Oracle Offers More Yet another market-share report tags the two vendors as the market's only leaders--but this one gives Oracle the edge in product quality. Overall, the CRM arena remains competitive. CRM's Expanding Horizon Gartner predicts CRM software revenue will grow 14 percent this year to exceed $7.4 billion, as SaaS, sales, and foreign markets continue to drive the market.

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