Published in AustralianIT, July 22 2003

LAST year was not good for CRM, according to industry watchers.

Analyst Gartner says global licence revenues for CRM declined for the second year in a row, dropping 24.7 per cent to $4.1 billion. And a META Group report says part of the problem is ongoing discontent with CRM systems.

"CRM business initiatives are still largely, and often inappropriately, driven by technology," according to the META report.

"The technology centred approach, often carried out at the expense of business and cultural transformation, must be tempered by understanding the breadth and value of enterprise CRM capabilities across people, process and technology."

Dissatisfaction could increase if buyers wake up to the fact they're purchasing too much CRM software.

A Gartner survey finds 41.9 per cent of CRM licences are never used.

That, in turn, may help explain a broader trend in CRM: the growing popularity of subscription services.

A study of the global CRM market by Aberdeen Group finds standard licence revenues will decline to just $3.6 billion by 2006, but subscription revenues will grow from $360 million last year to $4.1 billion over the same period.

Many existing CRM users have switched their focus from acquiring new customers -- a commonly promoted concept in many early projects -- to ensuring that existing customers don't defect elsewhere.

"Protecting existing customers is becoming more important for companies, as competitors become more sophisticated and aggressive about stealing profitable customers through discounts on commodity products," says James Brooks, managing director of call centre software specialist Genesys.

"Organisations have realised CRM is not just about selling to the customer. It is about servicing the customer in a way that will improve cross-sell rates, increase loyalty and ultimately increase profits," says Craig Morrison of communications and media systems specialist Teradata.

CRM systems are also expected to handle more than telephone transactions.

"While the telephone or mobile is still the predominant method of contact, many customers are increasingly using email or the internet," BT Asia-Pacific director Simon Burke says.

Market watchers say CRM's reputation may be tarnished, but the fundamental issues it tackles affect every business.

"In spite of the image of CRM in general receiving a battering from failed, high-cost projects and nebulous returns, the underlying imperative to align the business, people, processes and products towards the customer remains," says Robin Adams, general manager of integrator CRM Solutions.