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Customer management spending on the rise

A recent survey finds that customer management applications are grabbing a bigger piece of the technology budget.

There is good news and bad news for the CRM industry coming out in a report from AMR Research Inc.

Spending is expected to rise more than 8% next year, but AMR doesn't call it CRM anymore. Instead, the Boston-based research firm refers to it as customer management.

On the downside, CRM vendors are forced to pursue more modular applications to deal with the backlash from the failure of broad CRM.

"Customer management covers all the components for managing customer business processes," said Rob Bois, senior research analyst. "It's a lot of the same categories and business processes, but it complies with the way customers are buying modularly instead of in broad CRM suites."

It includes technology like price management and inquiry-to-order applications not historically associated with CRM.

There's also the matter of the widespread failures associated with broad CRM rollouts several years ago.

However, CRM buyers are once again making purchases, needing to increase revenue and profitability, Bois said.

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According to the report, 91% of companies will either increase their customer management budgets or keep investment constant in 2006, making it one of the top technology investments. The weighted average of budget change for customer management applications has risen from 2.3% in 2004-2005 to 8.2% in 2005-2006.

Web self-service applications top the list of application priorities with 34% of respondents planning on investing in the technology. That was followed by online sales and e-commerce technology. Customer service applications were a much lower priority, with 45% respondents claiming they already had that technology in place.

The survey was given to 211 companies, both enterprise and small and midsized businesses, with SMBs accounting for more than half of respondents.

"Typically, we've found SMBs are a lot less penetrated with customer management than large enterprises," Bois said. "They're increasing spending and there's still a lot of opportunity to sell into that market segment."

Vendors are rushing to capture that new investment. Traditional enterprise vendors like San Mateo, Calif.'s Siebel Systems Inc. and Germany's SAP AG are targeting SMBs.

Companies are no longer investing in big company-wide CRM implementations.

"Most inquiries we see are around specific business processes rather than large suites," Bois said. "A lot of that is a backlash to the big-bang implementations a few years back. People are buying software much more pragmatically."

The broad CRM suite vendors have also adjusted to the demand for modular CRM deployments by moving to service-oriented architectures to allow them to sell applications components, Bois said.

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