CDI spending to take off in '05

A recent report said spending on customer data integration projects rose over 100% at Global 2000 companies. It's only going to grow more next year.

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While recent reports suggest the midmarket will be a major focus of CRM in the coming year, customer data integration (CDI) initiatives are grabbing the attention of enterprise companies.

In fact, more than two-thirds of Global 2000 companies surveyed by the CDI Institute of San Francisco are evaluating CDI applications. A typical Global 2000 enterprise expects to spend more than $1.2 million on CDI in the next year, the survey said.

"We all have the problem of trying to achieve a universal view of the customer," said Aaron Zornes, chief research officer at the CDI Institute. "Very large companies have that problem many times over because they grow by mergers and acquisitions and have separate systems. It lowers the quality of service."

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The CDI market consists of technologies that recognize a customer at any touch point, while aggregating data about that customer and providing usable, up-to-date information. The technologies are based on a service-oriented architecture to tie together data such as customer records, products and suppliers.

There are two main forces driving investment in CDI, according to the report -- centrally managing privacy policies and creating a competitive advantage. Current privacy regulations, such as "do not call" and the Can Spam Act, require tracking across multiple channels and systems. A company like Citi Cards, for example, would rather have all its privacy measures accessible in one location so it can prove to regulators it honors privacy and has a centralized system, Zornes said.

Global 2000 companies are also focused on improving the customer experience throughout all business processes, the survey said. For example, a call center agent dealing with a customer might want to know the customer's last five transactions, any complaints made, whether bills were paid on time and how profitable the customer is. Aggregating and analyzing customer information in one system of record "is the Holy Grail of CRM products such as Siebel and SAP," the report said.

Many firms have utilized homegrown applications to integrate their customer data, but are outgrowing them. In fact, 95% of the Global 2000 financial services and life sciences companies are looking to replace homegrown CDI systems, the report said. Vendors are beginning to answer that need, Zornes said.

From 2003 to 2004, spending on CDI technology and services grew 135% from $85 million to almost $220 million, the report said. As a result, large application vendors saw their CDI revenue leap.

"When you have Oracle touting since January that the Customer Data Hub is one of their big initiatives and Siebel is calling the Universal Customer Master one of their significant revenue generators, it's going to get some attention," Zornes said.

Along with Redwood Shores, Calif.-based Oracle Corp.'s launch of the Customer Data Hub, 2004 saw the launch of Identity Hub from Initiate Systems Inc., in Chicago, and Germany-based SAP AG's acquisition of Los Angeles firm A2i to bolster its Master Data Management application. Consolidation in the industry should slow down as things start to sort themselves out, Zornes said, but it is difficult to determine which vendor will last.

Systems integrators like IBM Global Services and Accenture are seeing even more of the CDI revenue, earning $8 to $9 per every software dollar, Zornes added. In 2005, Zornes expects the number of deals to increase.

Expected to suffer are external service providers like Acxiom Corp., in Little Rock, Ark., Experian Information Solutions Inc., in Costa Mesa, Calif., and Harte-Hanks Inc. in San Antonio.

Major corporations need to spend this money, Zornes warns. While most have infrastructures based on the platforms of companies like Oracle, PeopleSoft, SAP and Siebel, more than 75% of executives surveyed are considering purchases "outside the family" to connect customer facing applications and processes, according to the report.

"If integrating all those systems doesn't work, they're hosed," Zornes said "They've got to get it right, it's got to be well performing and it's got to be reliable. This is mission critical infrastructure."

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