CRM spending to weather uncertain economy

Gartner estimates that spending on customer-relationship management software will remain strong due to the need to upgrade systems
Written by Cath Everett, Contributor

Despite rocky times in the financial markets, spending on CRM software is expected to remain buoyant over the year ahead as organisations attempt to retain existing customers and find ways to sell them more goods and services.

According to a study undertaken by analyst Gartner in October 2007, the European CRM software market is predicted to grow by up to 12 percent during 2008, valuing it at $2.8bn (£1.4bn) by the end of the year. This compares with a growth rate of 8.2 percent in 2006 and of 14 percent in 2007 when contrasted with the previous year.

"We're in the process of revising our forecasts, as there's a bit more caution in the air, but overall growth will only be reduced by a small percentage and, barring any major disaster, the outlook is pretty positive," said Chris Pang, a principal research analyst at the market research company.

The analyst's positive outlook is reflected in the fact that two thirds of the 250 business and IT leaders questioned in Gartner's survey indicated that CRM initiatives would be one of their top three priorities over the year ahead.

One of the key drivers for revenue growth is that many enterprises are about to upgrade to their second- or third-generation CRM system, having either implemented their first applications or last undertaken a major overhaul in 2000.

Large corporates are also adding to existing CRM packages deployed in customer service and support areas, said Gartner. As a result, companies are rolling out more sales-force automation (SFA), marketing and analytics software, all of which are "relatively young" as sub-sectors of the market.

CRM analytics is a particularly fast-growing area at the moment, with organisations keen to exploit the information they already have more effectively, the analyst claimed.

"You need to offer the right product and service to the customer at the right time. For example, it's no good offering a mortgage to a teenager as they're not at the right time in their lives to [have] one. So it's a case of optimising the process and, in general, I'd say that there's a lot of room for improvement here," said Pang.

Another "perennial" problem is integrating CRM applications with other back-end systems, such as finance, in order to obtain a 360-degree view of the business and its customers. Although this has been a preoccupation of many companies for many years, the work is still incomplete and will need to be undertaken again anyway should a major upgrade take place.

Companies operating in the mid-market and below are also starting to purchase CRM applications in some numbers, which is likewise driving growth. Interest is particularly high in SFA in this sector as organisations move away from spreadsheets and home-grown systems. Their aim here is to obtain a more accurate view of cash flow in order to inform budgeting and forecasting activities more effectively.

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