What does a recession mean for CRM spending, deployments?

With indicators pointing at the very least to a downturn in the economy, organizations may want to re-evaluate CRM initiatives or even spend more in some areas.

With indicators across the globe pointing to an economic downturn, IT spending is expected to take a hit, but CRM should fare better than other technologies, according to analysts.

In the past month, a number of analyst firms have adjusted their forecasts for IT spending in 2008. Cambridge, Mass.-based IDC forecasts that IT spending will grow5% this year, down from 6% last year. It has forecasts similar to Forrester's for IT spending in the U.S.

Things don't look quite so bad for CRM, however. According to the Forrester report, investment in software will do better than average, with global purchases growing 8% in 2008.

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"We're not in a recession, but definitely there's a slowdown," said Bill Band, vice president and research analyst with the firm. "We do see a softening in the marketplace. Software is just a little bit stronger than overall spending."

However, Forrester clients have yet to come crying that they're suffering, Band said. Organizations may want to adjust plans if they start to feel the economic downturn, but there's not a lot a company can do if it's in the midst of an implementation.

"These aren't things you can turn on and off easily," Band said. "There's not many ways to maneuver, but you can still be hard-nosed around setting priorities."

Adjusting priorities

Band suggests taking a firmer stand against vendors' pleas for upgrades or new projects. Companies should always be re-examining their implementation plans, but this becomes even more important in tough economic times, he added.

"You want to look at anything where there are near-term, quick-hit opportunities," he said. "In a recession, you really go after the low-hanging fruit aggressively."

Projects that reduce costs, such as customer self-service initiatives, also become popular during hard times, and companies need to look harder at their Web marketing and corporate websites to make sure they're yielding results. On the other side of the equation, organizations should take a hard look at projects that are underperforming and put them on the backburner.

The marketplace has yet to catch up with analyst forecasts and media coverage, however.

A recent survey from Stamford, Conn.-based Gartner Inc. found that 44% of respondents expect their CRM budget to increase this year, with another 30% expecting it to remain the same.

New York-based AMI Partners Inc. also sees less reason for concern with CRM.

"We do have a better growth forecast for CRM than we do for other enterprise applications," said Laurie McCabe, vice president of SMB solutions with AMI. "Companies look at where [they] can … apply money that's going to have the biggest possible impact. For many, CRM is going to be a pretty logical choice."

This is particularly true for the SMB market, which is still under-penetrated in terms of CRM adoption, McCabe added. While there's been a lot of focus on the midmarket by CRM vendors, there's still a lot of confusion on the part of CRM buyers who don't understand how CRM can help their business, or they find the technology too complicated or time consuming.

"At a basic level, even though some of the terminology may be confusing, they do realize [that] to compete more effectively, to build business and maintain customers in times of a downturn, they need to do things better," McCabe said.

The CRM mantra that "it's cheaper to keep a customer than acquire a new one" holds particularly true during difficult times. In fact, AMI research has found that companies that deploy CRM have higher revenues per employee than those that don't, about $306,618 compared with $229,025.

"That's a pretty significant difference," McCabe said. "There are higher average revenues too. The revenue per employee is more telling, in that it shows across the different-sized businesses and holds very consistent."

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