Making the Most of CRM Investments in 2004
Making the Most of CRM Investments in 2004
By Donna Fluss
Welcome to the New Year, one that may prove decisive for business investments in Customer Relationship Management (CRM) technology. As many of us cautiously toast improving economic news, its tempting to assume good tidings for enterprise CRM spending.
But, if the last few challenging years have taught us anything, it is to shrewdly plan business investments no matter what the leading economic indicators are saying.
To predict how enterprise investments in CRM will play out in 2004, its important to look first at the past few years, for businesses cant and shouldnt shake off the lessons of the recession, which will continue to dictate business expenditures through at least the first quarter of 2004.
For the past two years, most companies were preoccupied with survival. That meant that new investments were put on hold and anything that could be cut, was. The business reality is that most companies will enter 2004 with conservative baseline IT budgets from 2003. But baseline is much better than a further reduction.
Companies will continue to postpone all but essential investments as they wait to see how the first quarter ends. Those results hold the key to investments for the rest of 2004 if strong then expect to see an increase in targeted investments with quantifiable and proven payback, in these technologies:
- IP-enabled infrastructure.
- Speech recognition.
- Performance management.
- Quality assurance and logging.
- Text categorization.
- Real-time analytics.
- Business intelligence.
- Campaign management.
- Partner relationship management.
Six Key Trends
Companies need to stick with the basics that the economy forced them to confront during the past couple of years. Fundamentally, businesses need to generate revenue and profits, which means preference for programs that increase sales and control expenses. If an investment cant be directly attributable to either increased revenue or expense reduction, then it isnt likely to get approval in 2004. Therefore, we can expect to see these significant CRM business trends in 2004:
- Emphasis on Return on Investment (ROI) from existing investments: CRM in the late 1990s laid the foundation for positive changes in corporations – such as improving the customer experience and boosting customer yields – but they werent fully realized due to the recession. It takes 3 to 5 years to truly exploit new applications and most organizations had just gotten their new applications up and running when the economy stopped new investments.
Its time to revisit these systems and figure out how to get the greatest return from them. In some cases, this is going to mean additional system investments to complete an initiative. In others, it will involve business process management to modify the processes surrounding an application. And, it will often involve both systems changes and modifications to the business processes in order to realize the returns from existing projects.
- Total Cost of Ownership (TCO): ROI will remain important to justify investments, but we will see increasing emphasis on (TCO). The reality is that both are important: ROI to determine which investment to make and TCO to manage the cost of the infrastructure.
- Integration Applications: Even a relatively small investment in new integration software, may yield a significant return from prior expenditures. These applications can be painful to implement but can yield terrific results in the long term. Thanks to the recent recession, companies still dont have the stomach to engage in major systems efforts that last more than 9 to 12 months. Many companies arent willing to take long-term risk when there are shorter-term investments such as in integration applications that they can make that yield positive returns.
- ASPs vs. Licensing: The Application Service Provider (ASP) hosting market is going to continue growing for a few more years. Essentially, businesses know its a cost-effective way to make a major investment without the usual financial and organizational investment or risks associated with licensing. Hosting effectively lets companies try before they buy.
- Offshore Outsourcing: Financial constraints are not going to disappear overnight, so offshore outsourcing will continue as a serious option. A few years ago, Indian developers were 5 to 6 times less expensive than American developers were. However, the benefits are decreasing and, whether were discussing developers or call center agents, by early 2005 expect to see the cost differential shrink to just 3 times less expensive. Offshore contact centers will also be increasingly susceptible to some of the same problems that have plagued US contact centers for years, such increasing agent attrition and maintaining high levels of service quality.
- Vendor Consolidation in the CRM Marketplace: Expect to see growing CRM vendor consolidation as part of the industrys normal evolution. The recent acquisition fight for Pivotal is a prime example (with early suitors Oak Investment Partners and Onyx giving way to Chinadotcoms CDC Software). There has also been significant consolidation in the eService marketplace (think Firepond, which bought Brightware, who was recently acquired by Jaguar Technology Holdings).
Fundamentals dont Change
Whether youre a buyer or a provider of CRM technology and services, you know you can count on market changes, but one thing doesnt and shouldnt change: the importance of your companys bottom line. In 2004, companies that keep a shrewd eye on the CRM industry trends weve covered here will be better positioned to maximize CRM investments, boost sales, and cut costs, all of which make good business sense in any economy.