February 22, 2008
By Phillip Britt, technology writer

Is CRM Recession-Proof?

Whether or not the worldwide economy is in a recession -- defined by two straight negative quarters -- is a subject of debate that typically won't be settled until Gross Domestic Product figures are available in future months, but most analysts agree that the economy is certainly weaker than it was last year or the year before. With that in mind, most businesses may be tempted to put off any long-term technology projects, but will still continue to increase spending on projects expected to produce positive return on investment within a year, according to Gartner principal analyst Chris Pang. A new Gartner survey has found that 44 percent of respondents expect their budget for CRM initiatives to increase this year, with another 30 percent expecting their budgets to remain the same. License and maintenance revenue in the European CRM software market was an estimated $2.5 billion in 2007, according to Gartner. That figure is expected to grow to $2.8 billion in 2008. The survey -- involving more than 250 business and technology leaders who influence CRM strategy in their enterprises across Europe, the Middle East, and Africa -- reveals that though some technology spending may be postponed during a slowdown, the industry won't see a sharp technology-spending downturn like the one that followed the burst of the dotcom/tech bubble at the beginning of the decade. CRM initiatives tend to have a high priority among technology projects, survey respondents said. The key business issue driving CRM is the need to move toward or improve a customer-centric strategy. The main challenge for most companies is how to integrate CRM systems with other business applications and with customer-interaction channels. An economic slowdown will mean that companies will be more likely to put any large, far-reaching initiatives -- CRM and otherwise -- on the back burner, according to Pang. "CRM is a large market," he says. "In terms of a downturn, anything considered a discretionary project will likely be delayed. But some projects are strategic

, like customer service or projects that enable better self-service. Those projects will be fine in an economic downturn because they play to a company's strategic needs of reducing costs." Quick-to-implement analytic and business intelligence projects as well as technologies that will aid customer retention will be among those that companies will continue to pursue, he adds. Therefore, line-of-business users trying to build a business case for CRM initiatives -- and CRM vendors looking to cater to those needs -- should focus on projects that are strategic rather than transformational in nature, the kind that will provide quick, measurable returns, Pang recommends. Vendors, he adds, "should target customers that are likely to spend [on CRM projects] within a year's time. They should mine their customer base to look for [CRM spending] patterns or trends rather than [pursuing] a massive, broad marketing campaign."

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