2006: Customer Management Spending Will Rise Again
Customer management spending will grow more than 8 percent in 2006 compared to 2005, according to "The Customer Management Spending Report, 2005-2006" released by AMR Research last week. "Our belief is that company IT spending will be more focused on growing revenue than cutting costs," says Rob Bois, AMR senior research analyst and co-author of the report. "Customer management is the place to go to increase the profitability from customers."
Within customer management, the top focus among companies is customer service, Bois says. "Making customers happier will make them spend more with you." Part and parcel of this is price management, giving the best price to the customer at which the company can still earn a profit; companies are spending more on order inquiry systems that track orders from initial lead to actual delivery. "We're also seeing growth around online commerce, which is another sales channel within customer management. It ties back to the CRM notion of having a single view of the customer regardless of what channel you're selling through."
About half of the 211 companies surveyed will increase customer management technology spending in 2006, according to the survey, with about 41 percent maintaining spending at 2005 levels. Year over year, the weighted average budget change for customer management applications has increased nearly 6 percent (2.3 percent from 2004 to 2005 to 8.2 percent from 2005 to 2006), according to AMR. Customer management spending now accounts for 27 percent of the overall average IT budget--a marked increase from 16 percent in 2003 and 18.5 percent in 2004. Additionally, hosted solutions will continue grow, with 49 percent of all companies using them by 2006, up from 40 percent in 2005.
The largest increases for customer management spending will be in manufacturing companies, with 56 percent planning an increase in 2006 compared to 34 percent in 2005. Only 9 percent of manufacturing companies plan a decrease in 2006, as opposed to 21 percent in 2005. According to the survey, the money will be spent on Web self-service, inquiry-to-order, online sales/e-commerce, Software as a Service (SaaS), and IT outsourcing.
According to Bois, the spending increase is due to the manufacturing industry's slower adoption of these technologies. Now IT budgets in manufacturing firms are starting to open up, so they're starting to add these technologies. The emergence of SAP in providing CRM in this space is also helping this investment, because the vendor has a stronger presence in the manufacturing industry than other CRM vendors.
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