• March 18, 2004
  • By David Myron, Editorial Director, CRM and Speech Technology magazines and SmartCustomerService.com

What CRM Downturn?

The bloody-but-unbowed CRM industry is starting to stand tall again, according to a report released yesterday by TowerGroup. Specifically, the IT consultancy states financial services institutions worldwide will increase their CRM investments to $7.1 billion by 2008, up from $5 billion in 2003. The report, "IT Spending on Customer Knowledge Technologies: Healthy Increases Across Most Regions," states the compounded annual growth rate (CAGR) of customer-knowledge technology investments by financial services firms worldwide will be 6.2 percent from 2003 to 2008. This will slightly outpace the 5.8 percent CAGR of overall IT spending globally over the same time period. Over the past two years commercial banks have been spending less than that on overall IT, says Kathleen Khirallah, senior research analyst at TowerGroup. She adds that the 5.8 percent increase in overall IT spending will be driven largely by investments in customer knowledge technology. Investments in core banking systems, such as deposits and loans, are only growing at 3.8 percent annually, she states, which are merely "keeping up with the rate of inflation." She also says: "In customer knowledge there are new projects starting in small and midtier banks for the first time. And, some of the large banks are now making additional investments to round out their previous investments," Khirallah says. TowerGroup breaks up customer knowledge technologies into five subcategories: data repositories, data manipulation and business intelligence, decision support, sales support systems, and specialized marketing. Data repositories, the largest subcategory, will grow from $1.737 billion in 2003 to $2.335 billion in 2008, at a 6.1 percent CAGR. Business intelligence applications, which include data mining query and reporting tools and online analytical processing tools, are expected to grow at a 5.1 percent CAGR from $867 million in 2003 to $1.113 billion in 2008. Decision support applications, which include various applications for customer profitability, predictive modeling, decision engines, real-time decision engines, and optimization, is expected to grow at a 7.5 percent CAGR from $1.095 billion in 2003 to $1.570 billion in 2008. The growth rate is high for this category, the report states, due to the current low level of investment. Among commercial banks, the three major IT spending categories include customer knowledge technologies, customer interaction technologies, and core processing systems. Customer knowledge technologies represent 6 percent of total IT spending, while customer interaction represents approximately 40 percent, and core systems 50 percent. Investments in customer interaction solutions significantly outweigh those of customer knowledge technologies, but TowerGroup maintains that a successful CRM business strategy requires investments in both areas.
CRM Covers
for qualified subscribers
Subscribe Now Current Issue Past Issues