Gartner: Don't focus on CRM failure

The firm that popularized the message of CRM failure said that the market is now thriving, thanks to Web 2.0, smaller innovators and worldwide economic growth.

HOLLYWOOD, FLA. -- CRM has received a bad rap over the years and, according to the keynote speaker at Gartner's CRM Summit, it's no longer deserved.

Scott Nelson, managing vice president with the Stamford, Conn.-based research firm, took to the stage here to point out that the failures of the early days of CRM, when Gartner research revealed 60% of CRM projects were viewed as failures (80% for sales automation projects), are over. It's a belief that Nelson played no small part in fostering.

"This issue of failure and CRM has become a real problem," Nelson said. "One magazine named me 'the person who killed CRM.' So many people were focusing on failure rates that the CRM space wasn't as robust as it had been. That's not the point of talking about failure. CRM doesn't exist in a vacuum."

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Rather, CRM fell prey to a focus on technology above strategy and a global economy that forced organizations to focus on cutting costs rather than growing their business. Times have changed. In fact, a recent Gartner survey of CEOs determined that building closer relationships with customers will be the top strategy for growth over the next three years, beating out "performance improvement initiatives," "developing the market in your home country," and "entering and/or developing markets overseas." A CRM project requires more than just an inclination to connect with customers, however.

"The problem [is that saying] you're going to build closer relationships with your customers is only the start of a CRM project," Nelson said. "For some, that means buying technology. If you just emphasize the software and the technology, you're not going to change the way you interact with customers."

That will just lead to a new definition for CRM, Nelson quipped -- "Consultants Raking in Millions." Organizations need to organize their processes and think beyond just the technology.

The CRM market is in fact quite healthy. In its annual survey, Gartner predicts that the global market for CRM software will exceed $7.4 billion next year, up from $6.5 billion in 2006 -- a 14% increase.

As CRM grows, CRM practitioners, the people who put together the product plan and budget, are still going to need to show cost reductions to justify CRM investments, Nelson said, but they should also be prepared to show how CRM aids growth.

Predicting CRM's future

Nelson shared a few more predictions for the coming market. Organizations are going to see a shortage of manpower in coming years. Through 2008, 25% of CRM projects will be cancelled or postponed because of the skills shortage in consultants and systems integrators, he said. Analytics skills particularly will see a significant skills shortage, and many marketers are unprepared to capitalize on Web 2.0.

Because of the shortage, CRM buyers should anticipate that CRM consulting fees will rise, Nelson said, and they should adjust their budgets accordingly.

Moreover, reports of the demise of CRM innovation have been greatly exaggerated, he said. While the market has seen a wave of consolidation, it is still vibrant.

"Many people have the idea that the CRM space has collapsed into itself and there isn't any innovation anymore," Nelson said. "The CRM space is still very dynamic. There are a lot of new ideas coming out. CRM is actually still in a really nascent stage of development and not as mature as people outside would like to think. It hasn't been reduced to buying a suite."

While 35 CRM application vendors have merged in the past 18 months, Gartner still tracks 50 sub-segments of the market, Nelson said. CRM buyers should weigh vendor viability more carefully but still consider smaller vendors, he advised. In addition, companies that don't necessarily develop CRM technology are having a huge impact on the market.

"For many of you, your biggest competitor is Amazon.com," Nelson told attendees. "Amazon allows customers to understand what can be done in a Web environment. When they come to your website, they ask: 'Why doesn't your website give me recommendations?' "

Organizations should look beyond sales, service and marketing to lesser-known areas of CRM technology that often provide the greatest benefit -- areas like incentive compensation management, marketing resource management, and word-of-mouth marketing, according to Gartner.

Ultimately, those looking toward the future of CRM need to look at today's consumer.

"This is going to be one of the biggest areas CRM has seen," Nelson said. "Investigate it now. If you as an individual have not played with mySpace, Facebook, Flickr and other sites of the same ilk, you need to understand the way consumers are interacting with their organizations."

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