Investment in customer relationship management (CRM) is set to decline as companies look to get more business value from their existing implementations, according to new research from analyst Forrester Research.
The technology binge of the late 1990s, corporate downsizing and the general economic downturn means that the total CRM market, including services, is set to fall by 5.4 per cent in 2002 to $42.8bn before assuming a modest compound annual growth rate of 11.5 per cent, reaching $73.8bn by 2007.
Meanwhile companies will seek to squeeze value from existing systems by improving channel integration, redesigning processes and using front-office applications to continuously tune the channel and customer mix.
The market shift is potentially good news for consultants and speciality data integration firms, as more companies look to assemble a complete view of their customer relationships by combining scattered data from a range of diverse customer channels.
At the same time, the slowdown in CRM suite licence sales will continue to drive software vendors deeper into niches as they tailor once horizontal products for specific industries, the report says.
But the decline in CRM sales also highlights ongoing user disillusionment with such investments.
Rival analyst Gartner predicted that by 2006 more than 50 per cent of CRM projects will have failed, and that the majority will have underestimated costs by between 40 and 75 per cent.
CRM consultant Neil Robertson indicated that end user confusion about what CRM could realistically achieve had fuelled disillusionment.
"Under the surface there are a lot of companies that haven't derived as much benefit as they would have liked from CRM," he said.
Massive consultancy fees and total business reengineering has meant that most companies have found CRM very difficult to digest, Robertson added.
He predicted that the price of CRM systems would continue to drop as customers moved away from highly tailored designs and built projects based on packaged applications.
The report highlights the need for resellers to focus on business benefit and return on investment as the cornerstones of their sales strategies.
Forrester also suggested that more CRM software suppliers will turn to web services as a delivery mechanism, and subscription-based applications, in an attempt to smooth out revenue streams.
But as CRM users get past the process redesign stage, the analyst predicted a growth in demand for practical analytical tools.
"SAS and SPSS will appeal to the statistical elite, but Microsoft will run away with the mass market and dominate the fast growing marketing automation category through its broad Office user base, its .Net-enabled product portfolio and its user interface skills," said Forrester.
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