The future of CRM

Santosh Kumar Sinha of Frost & Sullivan describes why there is growing demand for CRM applications.

“Today, the customer is demanding more personalised products and an individualised relationship with the company they choose to do business with”

The phrase “the customer is king” has never been more apt than in the current market scenario. Global slowdown has forced companies to revisit their strategy and devise ways to boost their relationships with their customers. Companies are focusing more on retaining existing customers and increasing their loyalty to fight the economic slowdown. Getting more out of existing customers by identifying their individualised needs has become even more important. Concentrating on key customers in order to enjoy their continued loyalty is the strategy of companies across the globe. All this has brought Customer Relationship Management (CRM) services to the limelight.

Global Market Landscape
The CRM market has witnessed healthy growth rates in the past couple of years and the trend is expected to continue. In 2008, the market registered a growth rate of 12 to 15 percent and reached a value of €7 billion despite economic meltdown. SAP has maintained its leadership in CRM followed by Oracle. Both the companies experienced higher growth in their on-demand software compared to that in their on-premise software. Riding on the increasing demand for Software as a Service (SaaS)-based CRM software, Salesforce.com has strengthened its market position further. There has been a significant increase in the demand for and acceptability of open source CRM software as well. North America and Western Europe are the largest markets for CRM software. Regions like the Middle East, Africa, and Eastern Europe have also registered high growth in the CRM market. In the Asia Pacific region, both India and China are attracting more CRM vendors due to long term growth prospects in these countries.

Recent Trends
Higher bargaining power and the demand for personalized products by end customers, the advent of new technology like Web2.0 and cloud computing, strong focus on the ROI of CRM software, and untapped demand for medium and small segment businesses have prompted CRM vendors to look for new technology and innovative business models.

On-demand CRM
Under this model, companies generally purchase a license to use the software and the service provider manages the logistics and hosts the infrastructure at his premises. Companies can even choose to rent a solution and then decide whether to purchase the solution at a later date. With the software running at a centralised remote location, on-demand solutions provide lower software implementation and customisation costs as well as faster implementation.

Open source CRM
Open source CRM software has gained strength in the last two to three years. Ownership of code and the liberty to tailor different aspects of the software apart from a significantly lower price level has attracted many small and medium business houses to adopt such solutions. The number of open source CRM projects are on the rise with more than 350 projects being listed on SourceForge Inc.

Social CRM
Earlier, CRM was more operational in nature. Customer insights were used to increase the employees’ effectiveness in managing the relationship with customers. Today the customer is demanding more personalised products and an individualised relationship with the company they choose to do business with. CRM products have undergone remarkable transformation to meet this rising demand. Social tools such as wikis, blogs and enterprise mash-ups have been incorporated into CRM solutions.

CRM on mobile
Quite a few vendors have tried to make CRM applications available on mobile. However, the complexity in providing such functionality on small screen thumb operated mobile devices and slow networks has hindered the success of such attempts. With new devices coming into the market and greater adaptation of 3G as standard for mobile devices, vendors are expected to achieve a higher success rate in their efforts. The focus on platform interoperability is also expected to increase the penetration of such applications in future.

Future Outlook
The future holds the promise for a high demand for CRM solutions. However, clients’ increased focus on ROI and investment requirements for such solutions are going to increase in the coming years. Customers are likely to demand more clarity on pricing and a stringent case for the return on their CRM software investment. Reduced funds are expected to increase interest in on-demand or SaaS-based models. This is expected to prompt more vendors to offer such services and experiment with unique pricing models, such as connecting the application’s cost with the customer’s profitability to gain market share.

Santosh Kumar Sinha is Industry Analyst – Information & Communication Technology Practice, South Asia and Middle East at Frost & Sullivan.