IDC Validates Hot CRM Service Market

IDC released findings from a study this week that predicts worldwide CRM services will surpass $45 billion by 2006, growing at a blistering 18.6 percent compound annual growth rate. Similarly, Dataquest, a business unit of Gartner Group, forecasted earlier this month that the CRM service market would reach $47 billion by 2006, up from $25.3 billion this year. Indeed, the need to keep customers happy continues to drive CRM sales. And CRM software requires a lot of follow-on services. "CRM is an overarching, customer-facing strategy that encompasses an entire business," says Brian Bingham, program manager of CRM and customer-care research at IDC. "It requires professional services to tie in various customer touch points and databases. The integration is very similar to ERP." Not surprisingly, a chunk of the market -- more than $18 billion -- will come from the U.S. The growth of the U.S. CRM services market dwarfs the overall U.S. IT services market, which has a CAGR of 12 percent. But the U.S. will lose market share to faster growing regions such as Asia-Pacific and Western Europe. IDC reported that the top vertical industries for CRM services revenue in the U.S. last year were communications and media, discrete manufacturing, and banking. The fastest-growing opportunities this year include insurance; government; transportation services; and utilities. While this is good news for CRM vendors and service providers, alike, it should also be noted that worldwide CRM services revenue has decreased significantly from previous IDC forecasts. The CRM project landscape has also shifted, as companies move from revenue-generating initiatives to cost-savings initiatives. Along these lines, CRM planning activities over the next couple of years won't grow as fast due to current economic conditions. Moreover, the slowdown in CRM application license revenue over the past year will sour the CRM implementation services market in the latter half of this year. On the upside, pent-up demand for CRM will re-energize the market by 2004. For this year, IDC found a renewed effort among companies to implement and integrate contact center technology, particular as customers continue to adopt various means of communicating with customer-service representatives, such as telephone, fax, e-mail, electronic chat, voice-over-IP and Web-based self-help. On the heels of CRM services, customer-care outsourcing will also likely surge. Customer-care outsourcing, as defined by IDC, is the provisioning of customer interaction, fulfillment, logistics services and, critically, CRM hosting services. Customer-care outsourcing and CRM consulting services should reach $90.3 billion by 2006, up from $34.9 billion last year. The big winners, of course, will be the armies of consultants and integrators whose service offerings are tuned to CRM technology. A word of warning though: The services market is crowded, competition will be fierce. To this end, IDC offers a few tips on what CRM customers should look for in an integrator. The best integrators will be able to balance long-term vision with modular implementations that bring quick returns on investment. They'll be experts in a given industry, and thus know how to build certain business processes into the CRM system. And they'll be receptive to partnering -- that is, willing to take some of the risk of investing in a CRM system. Tom Kaneshige also writes for
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