With brighter days forecast on the economic horizon, companies are expected to shift their CRM focus in the coming year.
"This is going to be a critical year for CRM," said Erin Kinikin, a vice president of enterprise applications with Cambridge, Mass.-based Forrester Research Inc. "It's like the nine lives of a cat. We've used up about eight of them. This is the time we need to show we can use it to make a profit."
That means turning away from the cost-cutting mode of the past couple years and move toward revenue growth. In particular, companies will return to the tried and true method of direct mail and an emphasis on point-of-sale marketing, said Scott Nelson, a vice president and distinguished analyst with Stamford, Conn.-based Gartner Inc. Within the Web environment, organizations will focus on self-service applications and how to improve site designs.
Many analysts and surveys agree that battle for CRM will be waged most fiercely in the small and medium-sized business (SMB) market. Siebel Systems Inc.'s announcement last month that it is ramping up its marketing and adding a channel partner program is just one recent example. Hosted CRM applications have also found a sweet spot in with SMBs, but the market will certainly not be limited to that delivery model.
"The big thing in 2005 is that the hosted versus licensed question is going to be like paper versus plastic," Kinikin said. "It will be a preference rather than a reason to buy one application. Hosted apps have demonstrated the power of ease of use and ease of administration. Everyone else has to match it."
While both Kinikin and Nelson agree on the focus on growth in CRM for 2005, they differ on the future of open source.
"Open source will become much hotter," Nelson said. "It will still be a small percentage of solutions and clients, but we'll see a lot more buzz about it. It will be a difficult thing for the large vendors to figure out what to do about in the short run."
Kinikin, on the other hand, doesn't see much of a direct impact from open source.
"Cynically, I think one of the big trends in enterprise software is the software is free," Kinikin said. "What you pay for is the ongoing support and enhancements. I'm not sure it has to be free and or flexible to be what open source delivers."
The license discounts revealed during last year's antitrust trial, which offered Oracle and PeopleSoft customers breaks up to 90%, point to the lack of importance vendors are placing on license fees.
In the Web environment, 2005 promises continued investment in self-service applications, according to Nelson, a trend Siebel seems to be predicting with its purchase of Edocs and the merger of Kanisa and ServiceWare. Organizations will also be simplifying the way customers find their products online, Nelson added.
Though widespread adoption of chat technology remains a ways off, the contact center will continue its transformation from a cost center to a revenue generator in other ways, the analysts agreed. Marketing initiatives will focus on multichannel campaigns, Kinikin said. For example, companies will send out Web links in their direct mail materials.
Kinikin also sees companies purchasing full CRM suites, rather than piecemeal buys, as they look to make bigger purchases to support processes that cross sales and marketing or sales and service.
Finally, data initiatives will see big investment in 2005. A December Forrester report predicts a 9% increase in demand for BI and more than two-thirds of Global 2000 companies are evaluating customer data integration initiatives, according to a CDI Institute survey.
"Companies have to move from 'spray and pray' to targeted offers based on what customers are looking for," Kinikin said. "You have to know what customers want and what they already have."