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Ovum: Businesses need eCRM to survive

Adopt electronic Customer Relationship Management (eCRM), or risk falling by the wayside within the next five years, warned London-based consulting firm Ovum.

SINGAPORE--Adopt electronic Customer Relationship Management (eCRM), or risk falling by the wayside within the next five years, warned London-based consulting firm Ovum.

"If your competitor has deployed it (eCRM) effectively and you haven't, you are on the way to being history," noted Ovum lead analyst for eCRM, David Bradshaw, in a whitepaper released last week.

eCRM is said to entail the integration of online media (such as customer service Web sites and email) with traditional channels such as call centers and direct sales agents.

By contrast, companies adopting an eCRM business strategy would thrive, retaining customers with more personalized services, he noted, citing the example of US-based Dell Computer.

"Dell has burned almost all the competition here in the US, simply by having superior eCRM. You can configure and order your computer online, and refer to an agent if you have any questions...exactly what eCRM is supposed to do," he explained in a telephone interview yesterday.

Competitors like Compaq and Gateway are suffering not because their products are worse, but simply because their eCRM is inferior, he added.

Frost and Sullivan's director for Asia Pacific, Manoj Menon, concurs with the need for companies to adopt eCRM. He conceded that Ovum's five-year time frame was a "reasonable" one, but added that the urgency to adopt eCRM would vary from industry to industry.

"The Internet has so dramatically changed the way we live and conduct business that it is beyond a doubt that eCRM will play an important role in a company's business strategy," said Menon. "The question is when."

Market growth
In the report, Ovum predicted brisk growth for the eCRM market in the next four years. Globally, eCRM revenues are expected to increase from US$3.45 billion last year to US$10.5 billion in 2005.

Growth will be flat this year, although the consulting firm sees a huge jump in 2002, to a growth of 41 percent.

Leading the charge in 2002 and 2003 would be the North American market, growing 50 percent and 40 percent, respectively. Ovum expects this market to expand from US$2.1 billion in 2000 to between US$4 billion and US$6 billion in 2005.

The European market is expected to grow from US$1.1 billion in 2000 to US$4.4 billion in 2005, while Asia Pacific is forecast to expand from US$170 million in 2000 to just over US$1 billion in 2005. However, Ovum's Bradshaw noted that these figures were derived prior to the terrorist attacks in the US last week.

Driving overall growth in the market would be the need for enterprises to adopt the technology--not only to help win customers, but also to help cut cost and achieve quick returns, said Bradshaw. According to him, the greatest advantage of eCRM is in providing a means for identifying and matching customers with the cost of servicing them.

The same market pressures are believed to be working in the Asia Pacific region. Growth rates for the eCRM market remains high this year and the next, at 53 percent and 42 percent, respectively.

However, Bradshaw pointed out that the Asia Pacific market is different from North America in terms of its diversity and levels of economic development. These factors will affect the adoption of eCRM, and cause the markets here to be relatively small compared with other regions.

"On the one hand, you have some relatively prosperous nations such as Japan, South Korea, Singapore, Australia and New Zealand...(and on the other hand) you have some very large, populous countries that are much poorer, such as India and China. That will affect the rate of adoption."

Industries that are most likely to feel the need to adopt eCRM would be ones where companies have to directly and continually deal with a large customer base, he added. These sectors include the utilities, telecommunications and banking.

"eCRM also opens up the door for innovators to bypass their channels--airlines (for instance) are increasingly doing this," Bradshaw said.