The SMB market is the next hot spot for CRM.
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With large corporations expected to continue to keep a close rein on IT investments this year, small and midsize companies will be the hot spot for enterprise software, specifically CRM applications.
Executives at midsize companies say that during the next six months they plan to invest in software and services in the areas of accounting and financial management, CRM, and e-commerce storefronts, according to a recent report by Jupiter Media Metrix titled "Enterprise Software Adoption in the SMB Market."
The report found that 26 percent of the respondents at 563 companies with a range of 10 to 500 employees plan to make their IT investments in CRM, either in improving those systems or getting new systems. Specifically, small-to-medium business (SMB) spending on CRM software will reach $651 million and comprise 19 percent of the market by 2006, up from 10 percent in 2001.
The reason? As the relationships between small and medium businesses and their customers become more complex through the evolution of multiple channels, these companies will begin to evaluate and implement software and services to handle those relationships, according to the Jupiter study.
These findings should send a signal to CRM vendors to produce software with enterprise-rich features, not stripped-down versions of large-enterprise software for the mid-market, says Marc Harrison, senior analyst and research director at Jupiter Media. "Software vendors should take note that midsize businesses are looking for full-featured software packages that have some interconnectivity without a great deal of costly customization or integration," he says.
Overall, the SMB market is a hot spot for the entire tech industry, and is expected to spend $3.4 billion by 2006 for enterprise-grade applications. "Midsize companies are showing strong demand for enterprise software," says Harrison, adding that CRM will play a big role in the bulk of these dollars spent.
Mid-market CRM and ERP vendors like Front step also see a groundswell of interest from midsize businesses. "CRM is the hottest thing in the mid-market. [These businesses] are interested in knowing their customers better, both end-users and suppliers," says Bill Lilegon, director of front office products at Front step.
But despite these expectations, the SMB market is often overlooked by many top CRM vendors as well other enterprise software developers, says Natalie Burdick, vice president of Goldmine, Front Range Solutions. "The reality of that market is that it is so underpenetrated," she says.
And it may take a while for many of the larger CRM vendors to serve up a robust application for this market with enterprise functionality at an affordable price.
"The requirement of CRM in the mid-market is that it must be easy and functional. That takes huge investments in time and resources," says Peter Chase, CEO of Scribe Software, a maker of software that connects CRM to legacy systems.
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