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Study: CRM software gaining momentum

Customer relationship management software is gaining in popularity among major U.S. and European companies as a tool to attract and retain customers, a study has found.

Customer relationship management software is gaining in popularity among major U.S. and European companies as a tool to attract and retain customers, a study has found.

The survey, conducted by Cap Gemini and International Data Corporation, of 300 enterprises reveals that companies are using CRM tools primarily to enhance, protect and retain relationships with current clients.

CRM software, sold by Siebel Systems, Vantive, and other makers, has grown in popularity in recent years as companies seek to extend their business applications to manage complex sales, marketing, and customer service functions. The software is in many ways an extension of Enterprise Resource Planning (ERP) applications popularized by companies such as SAP and Peoplesoft.

The study, released Wednesday, also found that large companies engaged in CRM projects spend an average of $3.1 million on CRM hardware, software and services, and expect annual revenues to grow by eight percent within one year of CRM implementation.

"The study confirmed what we have been hearing from our clients in the field," said Andrew Wilson, CRM director at Cap Gemini America.

Spending is focused on a step-by-step integration of CRM-related elements within organizations, such as the field sales force, call centers, Internet/Web sites, and other so-called front office applications.

"Companies are being pretty cautious with CRM compared to the big bang approach they took with ERP," said Wilson. "Underlying this caution appears to be the confusion many companies have of what CRM is. A lot of our clients are having a difficult time figuring out all the different products that fall into CRM."

The top four reasons cited by enterprises for implementing CRM are: gaining customer fidelity; providing personalized service to customers; acquiring better knowledge of customers; and differentiating from competition, according to the survey.

A majority of companies planning CRM investments within two years already have major building blocks in place. Seventy-three percent of the surveyed companies have call centers, 69 percent have Web sites and 61 percent operate front office software applications, such as sales, marketing and after-sales support automation.

More sophisticated CRM technologies, such as interactive Web sites, data warehousing and computer telephony integration systems are on the CRM "wish list" for the next two years. Notably, 79 percent of enterprises plan to construct interactive Web sites within the next two years, and 68 percent are planning to implement data warehousing.

"Customer-focused enterprises now realize that success in CRM is contingent upon successful data warehousing and data mining," said Wilson. "More than two-thirds of the companies we surveyed will invest in decision-support technology within two years."

As companies continue to move to the Internet, CRM-specific functionality will be broadened within organizations, although new electronic tools will not replace traditional channels. The survey suggest that the role of traditional channels will begin to emphasize direct marketing and support functions while communication and order processing responsibilities will begin to migrate to the Internet.

A few companies indicated some difficulties when implementing a CRM strategy. Banking and insurance firms outlined barriers with integrating legacy data throughout operational divisions, while manufacturing and utilities companies face obstacles in calculating the appropriate budget size and expected return on investment from a CRM project.

The survey was jointly sponsored by IDC and Cap Gemini. It was completed by 200 European companies and 100 U.S. companies in the following industry sectors: banking, insurance, wholesale and retail commerce, utilities, automotive, life sciences and telecommunications. Companies participating in the study employ at least five hundred people.