• January 28, 2002

AMR: CRM Slow and Sure

Sales expected to pick up in first half of 2002.

By Tom Kaneshige

Riding the coattails of a recovering economy, CRM software will post steady growth beginning in the first half of this year, predicts AMR Research. This and other CRM-related findings released today gave the CRM community a much-needed boost after a brutal 2001, highlighted by massive failure rates of CRM projects.

AMR believes CRM sales will enjoy a modest but healthy 20 percent growth rate this year. Already, IT budgets are being freed up, says Kevin Scott, analyst at AMR Research, and so deals stalled for the past 12 to 18 months now have a chance of getting signed. Scott was especially upbeat given surprisingly rosy Q4 2001 figures from CRM vendors, in particular, a 12 percent increase in revenue from sector leader Siebel Systems.

But the growth rate is tempered by cautiousness throughout the sector, says Scott. For the most part, CRM customers will be looking for modular rollouts rather than multi-million dollar, enterprise-wide systems. Among CRM's many modules, sales force automation, marketing automation, customer analytics, contact center and Web self-service are the best bets this year. A relative newcomer to this group, enhanced lead management, is also gaining traction. "The challenge for CRM vendors will be to take a more phased approach, as well sell to the C-level executive that's now involved in the buying process," says Scott. "The horror stories of yesteryear didn't help any."

So what's on executives' minds when it comes to CRM? At least in part, the answer is security. In a recent report, Gartner Group found that "40 percent of enterprises that have already installed CRM solutions will rethink them, with an emphasis on balancing privacy with increasing pressure to support personalization."

Scott also advises CRM vendors to key on certain vertical industries, in part to speak to the business-savvy executive and to maximize sales. For instance, vendors of sales force automation software tuned to the chemical industry stand to prosper over generalists. In AMR's survey, 54 percent of overall respondents said they were considering sales force automation software; but virtually all chemical-company respondents said they were looking at a sales force automation system.

The emphasis on vertically-focused modules bodes well for best-of-breed vendors, says Scott. But these smaller vendors remain vulnerable to being gobbled up by CRM's bigger suite vendors. Earlier this month, for instance, PeopleSoft bought Annuncio, an e-marketing software specialist. Consolidation will continue in the first half of this year, says Scott, while companies are still considered undervalued. Campaign management and analytics software vendors are other big acquisition targets because their applications' functionality can be integrated relatively easily into larger offerings, Scott says.

Unlike other e-business initiatives that were swept up in hype only to fall from lofty heights, CRM has staying power, says Scott. Then again, anything that promises to boost the top line has sex appeal. On the flip side, cost-cutting software such as supply-chain management and e-procurement has "lost a bit of the glamour, hitting middle-age" with attendant sags and wrinkles, says Scott, adding, "With CRM, though, we're seeing interest across the board in both customer size and industry, from conglomerates to $30 million manufacturers of pig troughs."

Tom Kaneshige writes for Line56 magazine as well as destinationCRM.com. Click here to visit www.Line56.com

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