Study Shows CRM Spending to Rise in 2003

This year's CRM outlook looks to be much rosier than last year's, when spending on CRM slowed and users focused on highly publicized failure rates, according to a recently released report by the Aberdeen Group. The report, titled "CRM Spending and Satisfaction," claims that CRM spending will increase in 2003, and that CRM users are generally more satisfied with their sales force automation applications than with customer service and marketing CRM applications. Also, that more businesses are considering hosted CRM as an alternative to traditional CRM solutions, and that most users feel that the difficulty in deploying a CRM solution is outweighed by its rewards. Responses for the study came from companies across a variety of industries, with revenue ranging from less than $10 million to greater than $1 billion. Responses included users at all levels of decision making authority, from C-level officers to directors. Just 16 percent of respondents say their CRM budgets will decrease from 2002, while 52.6 percent are increasing CRM spending and 31 percent say there will be no change. Seventy-eight percent of respondents had 2002 CRM budgets below $500,000, while 10.4 percent spent between $500,000 and $1 million on CRM in 2002, and 11.4 percent had CRM budgets of more than $1 million last year. Denis Pombriant, vice president and managing director of Aberdeen's CRM practice and author of the report, says that total CRM spending in 2002 was $13.74 billion, relatively flat from 2001. Spending is expected to reach $15 billion for 2003. The bulk of growth is expected in the mid-sized companies, according to Pombriant, who defines mid-sized as companies with $50 million to $1 billion in revenue. He also expects most of that spending to occur in the second half of 2003. The Aberdeen Group also offered some good news about levels of customer satisfaction with CRM systems: Most users fall between satisfied and somewhat satisfied, with SFA applications garnering the highest levels of satisfaction (2.7 on a scale of 1 to 5, with 5 being the high level of satisfaction). Pombriant attributes that score to the fact that SFA modules are often the first CRM components implemented and are twice as prevalent as marketing modules in most companies. He adds that the research highlighted an interesting gap, which appeared between people looking to buy CRM and users of CRM. Those interesting in buying CRM expected the primary benefit to be increased market share and increased revenue. However, 23.8 percent of those using CRM say the primary benefit of their systems was increased productivity, followed by improved analysis and reporting (19.4 percent). Other benefits include cost control (18.4 percent) and revenue enhancement (15 percent). "What that tells me is that productivity is an early benefit of CRM," Pombriant says. "It is an enabler of benefits and not an end in itself, and...you have to go through some productivity and other milestones before getting to the ultimate goal of increased market share and increased revenue." In addition Pombriant says the research shows that acceptance of hosted CRM solutions is on the rise. More users are willing to consider an ASP solution and those already using online CRM solutions are looking to buy more. Finally, survey respondents say there are areas where CRM is in need of improvement. Twenty-six percent say it is too expensive to implement, while 18.2 percent say it's too hard to maintain and upgrade. Slightly more than 17 percent claim it's too hard to use. "CRM is a work in progress and it's starting to deliver the benefits," Pombriant says.