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Huge potential for CRM industry in 2001, analysts say

CRM has become increasingly important to companies as they deploy more Web-enabled systems for customer interaction. Dataquest Inc., a unit of Gartner Group, Inc., has said that the worldwide CRM services market is on track to reach $19.9 billion in 2000 as companies realize the importance of having a CRM initiative in place.

According to Dataquest, this year's CRM market has made an increase of 28% over 1999 revenue. And the spending plans for CRM initiatives among end users show that, on average, companies budget more than $1 million for their CRM initiatives, which will double over the next year.

The market is being driven by increased Internet use, the growing importance of CRM as a strategic initiative, the growth in e-commerce driving the use of Web channels for CRM, and the growing need for scalable CRM products, according to Debashish Sinha, senior analyst for Dataquest's IT services worldwide group.

"The CRM solution as a strategic initiative has been picking up steam in the past couple of years based on the e-business space," he said. As e-businesses took shape, traditional companies realized that their own relationships with customers were in jeopardy, Sinha added.

"The primary impetus for creating CRM initiatives was in customer retention strategies," Sinha said. "Organizations have begun to mature and understand that, by integrating [their CRM processes] across the enterprise and providing one view of the customer, they can better serve the customer."

There are apparently wonderful market opportunities, yet the CRM services market has been impaired by a lack of skilled resources. Many enterprises can benefit from CRM initiatives, but there is a lack of expertise, Sinha said.

Resource constraints will begin to show themselves in implementation services and the enterprise's ability to handle the volume of customer interaction, Sinha said.

Dataquest divided the CRM services market into two segments: maintenance-related services and professional services. Maintenance-related services include hardware and software maintenance and support services.

Professional services, meanwhile, are broken into six major market segments: consulting, development and integration, education and training, IT management services, transaction processing services and business management services.

"The maximum investment in the CRM space... has been in the area of Web-based customer interaction systems and analytical CRM tools," Sinha said.

In previous years, spending on sales force automation (SFA) was a key CRM initiative for most companies, but this year, the focus seemed to be on developing customer retention strategies and integrating Web-based interaction with call centers, he said.

"I understand the necessity of going from a customer support and service initiative to a comprehensive CRM strategy, Sinha said. After implementing SFA, companies noticed that, without a strong customer database and the ability to provide customers with support leads to low customer satisfaction. The SFA tools ended up being more sales management and reporting, rather than true CRM, he said.

Yet while this year's growth is on pace, Meridien Research, a financial industry technology analyst firm, has predicted steady, yet slower, growth in financial services industry spending on CRM technology in the next five years.

Meridien has predicted that global retail CRM spending will pass the $6.8 billion mark in 2001 and is rising at 13% per year. This is led by spending in analytical solutions, such as data warehousing and decision support. Meanwhile, corporate CRM spending, influenced by commercial banks, will exceed 3.1 billion in 2001, rising at 8% per year and led by front-office initiatives, such as operational customer information and interactive selling.

More financial institutions will launch CRM programs, but it will just be at a more moderate pace and rate of spending than in 2000, according to Tom Richards, research director at Meridien. Richards said that it reflects a slower-than-hoped-for adoption rate by consumers, as well as management's scrutiny of CRM return.

This comes just a week after Peppers and Rogers Group and Roper Starch Worldwide released a study, stating that CRM is key in the retail financial services sector, especially when it comes to luring and retaining customers. That study noted that $700 million is lost annually by commercial banks and financial institutions because of missed profit opportunities.

Meridien's estimate covers external IT spending for hardware, software, consulting and implementation services for all financial industry segments.

For more information, visit

Dataquest's Web site and Meridien's Web site.

Also check out SearchCRM Best Web Links: CRM Implementation: Costs

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