Innovation Is Sadly Lacking In A Disillusioned Market

Sydney Morning Herald

Tuesday April 10, 2001

DOROTHY KENNEDY

Even in the healthy CRM sector, what's on offer is merely more of the same.

The customer relationship management (CRM) market is about to get more confusing, crowded and hype-driven than ever before. According to US e-commerce analyst AMR Research, the CRM wave is peaking, early innovators such as Siebel Systems and E.piphany are now market leaders, and packs of new players are scavenging for CRM budgets that have now been cemented into corporate strategies.

The message for customers is: tread carefully, because vendor hype is reaching its zenith and innovation is on the way out. ``In 2000, the CRM market grew by 59 per cent; and even in the face of a possible economic downtown, a recent AMR Research study shows that 87 per cent of companies plan to leave budgets for CRM initiatives intact or even increase them," writes AMR analyst Joanie Rufo, ``But a closer look at the market reveals a characteristic of this growth phase that you won't hear in a vendor sales pitch innovation in CRM is dramatically slowing."

AMR reckons that the market cycle will soon move from maturity to decline, pushing growth rates down to 12 per cent by 2005: ``Of the nearly 500 CRM vendors in the market today, AMR Research expects that by the middle of this decade only 15 per cent will still be recognised as viable CRM providers." In this environment of market consolidation, customers need to apply due diligence, and beware of untested vendor claims.

For customers who want to buy leading-edge technologies, it's already time to look for something beyond traditional CRM offerings. ``Key areas to watch include revenue management, demand chain management, private trading exchanges, sell-side applications, and true Internet architectures such as those based on J2EE," AMR advises.

Testing this analysis of the CRM market in local waters is no small feat. Australian buyers have shied away from enterprise-wide CRM applications and have instead focused attention on call centre and sales force automation projects. ``One of the things that's a little bit surprising to me is how damaged the term CRM has been in this country," says Paul Rodwick, vice-president of market development and strategy with leading CRM analytics company E.piphany. On a recent visit to Australia he found that corporate awareness of botched CRM jobs was fairly high, and senior executives were generally cautious about investing in sophisticated implementations.

In this sense, Australia lags behind the US, where CRM projects are attracting real funding and companies are beginning to report returns on investment. It is possible that, due to small market size, adverse economic conditions and different corporate cultures, Australia will never emulate US enthusiasm for the finer points of CRM, but in terms of call centre implementations, US market comparisons can be useful.

``Every time we measure it, we find we are probably a snick behind the US, and we are some way ahead of Europe,"says Martin Conboy, managing director of local industry tracker callcentres.net. The company's most recent valuation of the local call centre industry is $8.8 billion, with $540 million of this attributed to software licences and $1.6 billion to integration tasks.

Call centre growth, in terms of seat numbers, has reached a plateau of 14 per cent per annum, but call centre transactions are growing at a healthy 25 per cent a year, an indication that something is going right.

But case studies of profitable CRM projects are still thin on the ground, a grim signal for IT managers still smarting from enterprise resource planning (ERP) projects that cost a lot more than they delivered. ``I'd just like to see one CRM site that's been fully implemented and the company is measuring benefits," says Conboy. ``The cynics are now starting to say that CRM is database marketing with a new coat of paint. We've come to the view that CRM is an important business philosophy but it's incredibly difficult."

dorothy-kennedy@hotmail.com