During 2000, the customer relationship management (CRM) industry experienced an increase in the number of vendors offering CRM as well as increases in software use, software and marketing partnerships, and high-profile acquisitions.

So what can we expect from CRM in 2001? According to the industry experts, the demand for CRM will still be prevalent, but the market itself will tighten. In this article, three industry specialists offer their predictions on where CRM is headed this year and beyond.

Enough with the hype
Excitement for CRM escalated in 2000. More organizations were investing in CRM, using the technology, and creating CRM business plans. With CRM in place, it became more efficient to collect and classify customer data, gauge customer behavior, and interact with customers.

CRM vendors added to the enthusiasm by pitching products that promised to deliver the mind of a customer on a platter. Now some of the industry analysts believe the excitement is waning, and organizations are buckling down to see if CRM really works.
The hype surrounding CRM will end as organizations look for solid results and uncomplicated solutions. Vendors will respond by offering products that focus on client needs.
“The dilettantes have cashed out, and in 2001 those pursuing CRM—under whatever name—will cash in,” said Bob Thompson, founder of CRM consultancy Front Line Solutions, in an article for his online newsletter, CRM.Insight.

Vendors are also shaking off 2000 and focusing on CRM solutions that are not only reliable but also easy to install, operate, and maintain.

“There’s a big issue with client expectations right now,” said Scott Simmer, an independent CRM consultant in Vancouver, British Columbia. “The marketing coming from all the different CRM software makers promises a lot of things that the software back-ends don’t deliver reliably,” Simmer said.

The vendors who found CRM to be a hard sell are moving on. “You know the hype is fading when vendors selling customer-related stuff start saying, ‘Oh, we’re not a CRM vendor,’” said Thompson.

Going forward, vendors with reputations for difficult implementation or limited functionality may face some difficult years.

According to Gartner, “About 500 enterprises claim to sell CRM software, but only 200 actually do so. Of these, we believe 50 will survive to 2004.” (TechRepublic is a subsidiary of Gartner.)

Consolidation will be high
The CRM market of 2000 witnessed a number of acquisitions: Nortel bought Clarify, Siebel purchased Jana, and PeopleSoft went after Vantive. Acquisitions are expected to continue in 2001 as large vendors look to acquire products from smaller vendors to fill functionality gaps in their own product suites.

“A lot of what has prevented consolidation from occurring up to now will have changed enough to encourage a high point of consolidation over the next year or two,” said Robert Kugel, an industry analyst with FAC/Equities.
CRM vendor acquisitions and market consolidation will grow.
Kugel explained that many small vendors have developed solutions to satisfy one piece of CRM and that these solutions were adopted by many organizations. Larger vendors will favor purchasing the smaller vendors with high market penetration. Consolidation can also be a product of a slowdown in the economy.

What a slow market means for CRM
Economic uncertainties will leave a mark on CRM, but organizations will continue to push for CRM adoption. “CRM continues to be one of the highest priorities of spending in the enterprise,” said Kugel.

Kugel believes that CRM funding at the board level will remain strong, but more organizations will demand concrete results from CRM projects. “I think the support for CRM is going to remain very high, but what will evolve over the year is people at the board level are going to be asking about the benefits they see from CRM initiatives,” he said.
Negligent spending will stop, and solid, planned investments will prevail.
“People are going to be taking a much more considered and strategic view on what they’re doing. That’s not necessarily going to have a severely negative impact on the growth of the category (CRM) but will cause companies to have bigger things in mind when they’re buying,” he continued.

Organizations using or considering CRM will no longer throw cash at an implementation to make it work. The importance of the return on investment (ROI) of CRM projects will pressure vendors to listen and react to customer input.

Trying year ahead
During 2001, vendors will have to show organizations they can deliver user-friendly, yet diverse applications, and organizations will have to demonstrate that they can deliver timely and thorough service to their customers.

“This is no longer a hair on fire market, but that’s not to say it isn’t a high priority that people are going to be throwing money at,” said Kugel.

This opinion is good news for IT executives and managers because the CRM projects they are working on will remain viable. But Kugel said the honeymoon is over, and what’s coming in 2001 may add up to what sports announcer Dick Vitale would call a “Maalox Masher Year.”
What do you think CRM will bring in 2001? Let us know how the market will impact your CRM projects this year by dropping us a line or starting a discussion below.