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Customer services on the rise--eventually

Research firm IDC forecasts growth for customer relationship management services, but first the industry will have to get over the hump that's expected in the next two years.

Companies that help businesses manage customer relationships will likely see their coffers grow, but first the industry will have to get through two years of stormy weather.

According to an IDC report released Monday, the customer relationship management services industry is expected to grow 11.3 percent, on an annual compounded rate, to $101 billion by 2007, but analysts caution that much of the growth for this year and next will be moderate.

Customer relationship management services include in-house services, such as consulting, training and support, and outsourced services, such as customer call centers.

In the short term, sales of CRM services will be affected by the war with Iraq, a weak economy and longer sales cycles, said an analyst with IDC. As a result, sales growth will be moderate through 2005.

"I don't think we'll see a spike in demand. It will be a more gradual increase two years out," said Brian Bingham, an IDC program manager for CRM and customer care services.

Customer care services are expected to reap the lion's share of the revenue growth for customer relationship management services. Companies will be looking to maximize the CRM software that they already have, Bingham said.

Other industry analysts share that view. Forrester Research in March issued a report that companies are spending less on CRM consultants and directing more of that money toward hiring contractors to handle call centers overseas.