CRM Spending: IT Execs Learn from Past Mistakes

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Earlier this month, I offered a roundup of recent analyst forecasts that have 2008 shaping up as a banner year for CRM spending. Datamonitor, KensingtonHouse, CSO Insights and Gartner are among the companies with an optimistic outlook on CRM.


Add AMR Research to the list. According to a destinationCRM.com story about a newly published study, customer management software revenues increased 12 percent in 2007 to hit $14 billion. Among dominant vendors, the growth was far higher, at 28 percent. And looking ahead, AMR Research predicts the market will reach $22 billion in 2012.


In one of the those nagging discrepancies that drive me crazy, Gartner put the CRM market at $8.1 billion in 2007, a jump of 23 percent from 2006. This is likely due to differences in how the analysts define the category. Gartner and AMR were more consistent in their opinions of top vendors and of trends influencing CRM.


AMR research director Rob Bois, who authored the report, calls CRM "the growth engine" for vendors like Oracle, SAP and Microsoft. Web 2.0 capabilities and customer analytics are among areas that should see strong growth in coming months, notes Bois.


There was a steep drop in CRM spending around the beginning of the decade following the dot-com bust, says Bois, followed about a year later by a decline in customer satisfaction levels. He says:

There was about a one-year lag between the drop in customer management spending and the drop in customer retention, but it did happen -- and it took much longer for companies to recover those customers after [they resumed] CRM spending. Most of the executives remember that era, so they might behave differently this time.

Bois' observation lends credence to advice offered by Bob Suh, Accenture's chief technology strategist, earlier this year. Suh urged IT organizations not to scale back IT spending too dramatically, especially for customer-facing technologies. Most IT spending this decade has been devoted to back-office financial systems, says Suh, leaving many CRM systems in sad shape. Like Bois, Suh says organizations that skimp on spending risk losing customers.