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Financial Firms Tap Breaks On CRM Spending
Financial Firms Tap Breaks On CRM Spending
For the rest of the March 2002 issue of CRM magazine please click here
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While spending on CRM implementations are expected to flatten out in the near term in some industries, robust growth is still expected in others. Specifically, the financial industry is expected to curb spending on large IT projects such as CRM technology for the next year, according to a recent study from Meridien Research. "There is a flight to safety going on in the financial institutions. That is what happens when things slow down," says Tom Richards, an analyst at Meridien. "A lot of financial institutions got into CRM without thinking about what it meant from a strategic orientation, and getting close to the customer." Richards echoes similar sentiments from industry analysts who say companies want to leverage the investments that they have already made. This year many companies are expected to put off upgrading to the next software version, he says, adding that instead they will look at how much more can they get out of their current call center and other systems. The hardest hit will be the retail financial sector. The Meridian study found that retail CRM technology solutions have not hit their mark and that spending in this area including front-office and analytical CRM initiatives came in around $6.7 billion in the U.S. last year, down from an estimated $6.8 billion in 2000. Looking forward, Richards says that CRM sales in this sector will grow this year and in 2003 but at a more modest rate than its previous 24 percent per-year rate. There are many financial institutions that have done well with decision support, data warehousing, and analytics and those institutions will continue to invest in those systems, he says. Financial institutions are expected to also spend more money on personalization technologies to capture customer behaviors to improve cross-selling points, according to the study. And while the report says it expects flat spending through 2003, commercial banks are expected to pick up their corporate CRM spending at a rate of about 6 percent per year through 2006. On an even more positive note, the insurance sector is expected to spend at a higher rate on CRM than banking institutions over the next four years, Richards says. "They have big legacy systems and they are now starting to pick up the pace in the CRM arena," he says.
Insurance companies are not buying call center technology, but are investing in infrastructure, application integration, and component-based CRM software, Richards says. The Meridien study, titled, "CRM Spending Update: Hitting the Wall or Taking a Time-out?" is based on 55,000 financial institutions that include banks, nonbanks, insurance companies, broker/dealers, and asset managers in the large and medium-to-smaller categories based around the world. It covers external IT spending for hardware, software, and services. While spending on CRM technologies will trend on the flatter side, the report sees a growth spurt on such spending in 2004 to 2006. --Jerry Rosa
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