As the macroeconomic market and business conditions continue to slide on into 2008, a "great deal of uncertainty about the future surrounds most enterprise software markets," notes a new AMR Research report. That includes customer relationship management.
On one hand, the report, "The Customer Management Market Sizing Report, 2007-2012," details the comeback that CRM systems (or what AMR calls "customer management" software) have made of late. AMR analysts Rob Bois, Marianne D'Aquila and Karen Carter note that the customer management software market returned to double-digit growth rates "that haven't been seen since the dotcom boom."
However, it's important to remember just how many CRM projects were painful failures for enterprises during and right after the dotcom bust. Could we be seeing it all over again?
"Looking back at the last economic downturn in the 2001 to 2003 time frame, the customer management market suffered as projects were cut and vendors were acquired or went out of business," write the AMR analysts. "However, the effect on would-be buyers was even more devastating as customer satisfaction ratings plummeted for years after the economy recovered." (For a look at one company's CRM system selection, see "Inside Pitney Bowes Choice for a Mobile CRM/ERP Solution.")
While the AMR analysts concede that funding for customer-enhancing systems can be tight in a down economy, smart organizations will continue to invest in CRM systems because of the wealth of insights such systems can provide.
Here's what the analysts think will be the major drivers of growth during the next four years (and will elevate the CRM market from $14 billion in 2007 to $22 billion by 2012) and what are the potential inhibitors to continued CRM expansion. In addition, the analysts predict which vendors will be thriving in 2012. (See "Report Ranks Top 10 CRM Vendors" for more on these vendors.)
What Will Drive CRM Growth
CRM systems have grown up a lot since the late 1990s. And customers have come to expect a high level of technology-based customer service in 2008. That trend will only increase.
"An almost universal trend around customer-centricity and customer experience management will fuel continued customer management investments regardless of economic conditions," write the AMR analysts. Those organizations that "streamlined operational and supply chain efficiencies through the last economic downturn, leaving the customer experience as the most important potential competitive weapon," will drive even more investment in CRM systems.
As to corporate funding, the analysts write that while some customer management projects have been delayed briefly, few have been cancelled outright. "Some application categories, such as marketing analytics, become even more critical in more challenging economy as insights into customer behavior provide better visibility into future demand and the effect of promotions and campaigns," states the report.
In addition, marketing organizations "are feeling more pressure from executives to demonstrate better insight into return on marketing investment," the analysts write. "Today's marketer needs to rely more on technology to aggregate demand data, analyze customer behavior and close the loop on campaigns. Marketing automation categories, such as campaign management and marketing analytics, will help support continued growth for the overall customer management market."