AMR's CRM Spending Report

Frenzied spending in the early days of CRM has come to a halt, as companies now are focused on real cost savings and improved efficiencies without sacrificing customer service. At least this is the theme behind a newly released study, The CRM Application Spending Report, 2002-2004, by AMR Research. Indeed, the CRM market has matured. Forty-three percent of companies use a CRM applications. And even conservative industries and small to mid-sized businesses (SMBs) are finally opening their wallets to CRM. The manufacturing industry, for instance, is taking a hard look at CRM and investing in incremental projects. The sector accounts for roughly half of all CRM dollars, according to AMR. To be sure, the slump in IT spending and current economic woes have cast a pall over CRM in the short term. Also, CRM continues to struggle with the backlash of failed implementations. Still, two industries -- pharmaceutical and healthcare -- have emerged as bright spots in the CRM spending community. Despite the high saturation rate and a tight-fisted economy, CRM's future looks rosy. Early adoption came from business-to-consumer companies, but this is about to change. Business-to-business companies, whose sales-per-customer ratio dwarfs the ratio from their B2C counterparts, will drive spending through 2004. A number of B2B industries, such as oil and gas, plan to install CRM software within the next year. The move from B2C to B2B will send tremors throughout the CRM landscape, says Joanie Rufo, research director at AMR. "It's not a matter of B2C's customer churn or customer analytics on a large scale, rather B2B's vendor-managed inventory and increased services," she says. "The issues are very different, and CRM vendors have to learn a whole new language.... it's a leg up for ERP vendors selling CRM wares because they already know how to speak this language." AMR predicts the CRM market will grow at a CAGR of 19 percent, with a mini-peak in CRM spending in 2004. Even the public sector will move toward CRM to decrease costs by serving constituents online. Thirty-three percent of companies undertaking CRM initiatives cite efficiency as the top driver. Service organizations, though, claim competitive advantage as the most important goal of CRM. Customers in general will seek out scaled-down, incremental CRM solutions. "Despite so much negativity, there's still opportunities out there," says Rufo. "People are still focused on the customer-facing front." AMR's report is based on more than 500 interviews with IT and business leaders and spans 14 vertical industries.