CRM will eclipse all other technology spending, Jupiter reports

Developing and maintaining customer relationships will be the major focus of technology spending over the next two years with businesses investing more in CRM systems and solutions than in supply chain management or web content management, researchers Jupiter Media Metrix reports.

Jupiter’s survey, which just came out today, says 26% of businesses will spend $500,000 or more on customer relationship management over the next two years, while 23% are planning to spend that amount in web content management and 19% on supply chain efforts.

Jupiter expects CRM spending will rise 70% to $16.5 billion in 2006, up from $9.7 billion last year. Spending by retailers will nearly double during that time from $1.7 billion in 2001 to $3.2 billion in 2006.

Jupiter forecasts that the percentage of service contacts made online will quadruple from 2% in 2001 to 9% in 2006. The number of contacts will grow from 870 million to 4.7 billion.

Jupiter analysts have found that although most companies plan to increase CRM spending, few realize the benefits of improved customer intelligence.

"The overarching theme spurring CRM investments is the desire of businesses to cost-effectively improve customer satisfaction," said David Daniels, Jupiter senior analyst. "However, businesses must realize that investing in CRM technology does not alone ensure that they will be able to implement the organizational changes needed to gain a competitive advantage. To execute a CRM strategy effectively and strengthen relationships with customers, businesses must appoint a senior-level CRM guru who reports to the CEO and coordinates all CRM activities."

According to the Jupiter CRM Spending Model, growth in CRM technology for operational contact centers -- which makes up 54% of CRM spending -- will remain constant over the next five years, but will slow in 2006 as the market matures. Spending on analytical CRM software -- which includes marketing-centric applications -- will grow from $5.2 billion in 2001 to $8.7 billion in 2006 and will ultimately account for 53% of the CRM market. Jupiter analysts have found that companies investing in analytical CRM applications will benefit from a consolidating vendor landscape, which will bring improved standard features at slightly lower costs.

While 97% of respondents to a Jupiter Executive Survey said they are planning on boosting their CRM spending across online and offline segments of their business within the next 24 months, just 7% indicated that their planned spending increases are aimed at improving profiling and targeting of their customers. Moreover, 26% expect that heavy short-term investments in CRM will lead to long-term cost savings. Jupiter analysts warn that rallying around CRM to reduce costs will not ultimately improve customer satisfaction -- increasing the ability to meet customers` needs through better profiling and targeting will.