After two years of deep slumber, the CRM market is about to re-awaken. They call it the Trough of Disillusionment--a two-year period during which companies froze their spending on CRM (Customer Relationship Management) software. Instead of the near 100 percent growth rates that marked the giddy years from 1997 to 2000, new license revenue declined sharply last year by 6 percent and by the end of this year will have dropped another 2 percent. Even Siebel, the kingpin amongst CRM vendors, saw its new license revenue shrink last year by 4 percent. Yet at this fall's Gartner CRM Summit in Chicago, there was a sense of renewed optimism. The CRM vendors in particular were buoyed by the fact that the market is poised to rebound, albeit at a more modest compound annual growth rate of 10 percent over the next four years.
While they no longer have quite the swagger they did a few years ago (mercifully), they see plenty of room for growth in the mid-market which remains mostly untapped. But where the greatest attitudinal turnaround has occurred is in the user community.
In the beginning, when CRM applications first began to emerge out of the tidal pools of contact management and sales force automation (SFA) software, companies were enthralled by the idyllic possibilities depicted by the vendors.
Here, all shrink-wrapped and ready to go, was the antidote for their customer service ills. All they had to do was install the software, train their staff and (presto!) they'd be able to cut costs and create happier customers at the same time.
The early adopters immediately discovered it wasn't that simple. No one warned them that patching together disparate systems in order to create a consolidated view of the customer--without which a CRM application is effectively neutered--was going to be so traumatic.
And despite the lofty promises made by the vendors, the software often had to be heavily customized, causing major cost overruns. On top of that, project custodians often failed to set performance baselines in their rush to make the system operational. So when it came time to report on the payback being achieved, no one had any credible answers.
Then last year, Gartner inadvertently caused a panic in the market when they estimated that through 2006 more than 50 percent of CRM implementations would be deemed failures. What they were actually referring to was SFA projects which often encounter fierce user resistance.
But that distinction was lost on potential buyers already spooked by the fiasco in the dot-com sector. Planned spending on CRM applications suddenly dried up as companies retreated to the sidelines in wait of more substantial proof that the investment was warranted.