IT experts are projecting that there won't be a big increase in spending on enterprise applications in the coming year, with the notable exception of customer relationship management.
After nearly a year of recurring tales of failed CRM implementations, this may sound surprising. However, industry analysts predict that businesses will look to expand on investments they've already made in CRM systems.
"Organizations are calling CRM by any other name, but it is CRM nonetheless," said Erin Kinikin, vice president and research leader of enterprise applications at Giga Information Group in Cambridge, Mass. "Now there is a real focus on revenue growth, or how to truly build incentives for customers to buy more."
Kinikin said that many companies are planning new investments in existing projects built primarily around marketing, Web analytics and sales force automation. Kinikin said enterprise resource planning (ERP) is another applications arena that will see "revitalized investment" as organizations continue to struggle with the integration of data from legacy systems.
According to a preliminary study by Forrester Research Inc., also located in Cambridge, overall spending on IT will rise by 1% over the next 12 months in North America. The firm also agrees with the prediction that there will be growth on the horizon for both the CRM and ERP markets as businesses continue to look for greater return on investment (ROI) from the applications they already own.
"We're expecting some renewed life for ERP, CRM and even management consulting," said Forrester analyst Tom Pohlmann at a recent press briefing. "Most of this growth is coming in the form of deferred investments put off by the economy."
Pohlmann said Forrester is also projecting growth in several related markets in 2003, including IT integration services and application outsourcing. Pohlmann said he doesn't think many companies will invest in enterprise application integration (EAI) tools, although some will attempt homegrown integration projects. Pohlmann echoed Kinikin's sentiment that many of these projects will revolve around legacy systems.
Another trend in enterprise applications over the next year will be a greater user push for modular software, said Kelly Ferguson, senior analyst at the research firm Current Analysis Inc. in Sterling, Va. Ferguson said that even software makers with traditionally packaged applications, such as CRM market leader Siebel Systems Inc. of San Mateo, Calif., will continue to create ways to let customers use only the applications that they want, rather than forcing them to use an entire suite of tools.
"The concept of IT looking at broad organizational issues still applies in areas like financials," Ferguson said. "But CRM may now do well to have a departmental rollout, using a customer-facing pilot before deploying company wide."
Another industry analyst who predicts a strong showing for CRM in 2003 is Dennis Wayson, chief analyst at Dataquest, a unit of Stamford, Conn.-based researcher Gartner Inc. Wayson also sees a good year ahead for IT consultants. "Companies are hunkered down, trying to get the value proposition out of the stuff they installed over the past couple of years," he said. "I wouldn't expect a lot of new software sales, but for the big consultants, this could be good news."
Wayson named Computer Sciences Corp., Electronic Data Systems Corp. and IBM Corp.'s Global Services unit as several of the potential beneficiaries of this trend. Wayson added his belief that after 2003, the enterprise software market will again see consistent growth, though not at the 20% rate of increase it enjoyed in 1999.
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