CRM Spending Paradox
economic times get tough, companies need to cozy up to their customers.
That's the advice of many consumer business experts, including Dr.
Howard Rubin, executive vice president and research fellow with
Meta Group. Rubin told CRMDaily.com
that this is why those companies that have invested in CRM infrastructure
and applications will continue putting money into CRM even during
the current recession. "The people who have bought are expanding,"
Meta Group recently released its yearly IT spending report, "Worldwide
IT Trends and Benchmarking Report 2002." The research showed
that IT spending worldwide will decline an estimated 2 percent to
5 percent next year. However, Rubin said that CRM spending made
the strongest showing of the application categories, remaining just
about level. ERP, on the other hand, showed the sharpest drop. No
category showed a predicted increase.
Adopters Stay the Course
to Meta Group's research, IT spending peaked in 2000 at an average
of 7.5 percent of companies' gross revenue. This year, Meta Group
predicts that IT spending will end up at about 3.9 percent of revenue
-- nearly a 50 percent drop. Fortunately, companies with foresight
put a good portion of last year's expenditures into CRM systems
that will serve them well in the current, highly competitive economic
are trying to hold onto their customers," Rubin said. "They
may be a little cautious about increasing their investment. But,
while you can put your IT department on an austerity budget, you
can't put your customers on austerity service."
and Mean, But Customer-Friendly
predicts Meta Group, CRM will hold steady during a year when 40
percent of chief information officers (CIOs) said that they intend
to cut their budgets by more than 20 percent. In addition to operating
costs, 53 percent of CIOs said they are cutting staff.
surprisingly, pay rates for those staffers are up only 9 percent
this year. However, the biggest jumps came for folks likely to work
on CRM-related projects -- project leaders, business analysts, and
View the Field
to Rubin, companies that had not begun CRM projects before the recent
economic downturn are unlikely to do so until well into a recovery.
"This will create a pent-up demand among late adopters,"
companies are sitting on the CRM sideline, doing their research
and measuring their competitors' CRM outcomes. While they may be
comforting themselves with high-profile stories of projects run
amok and huge CRM implementation cost overruns, Rubin thinks they
will come around soon enough.
is probably a bad investment to put on hold," he said. "In
a tight economy, how you are going to compete is by getting tight
with customers. People think that the solution is cost-based, but
it's really service- and value-based."
the bright side, Rubin believes that the pent-up demand created
by this IT spending hiatus might mean better CRM applications for
those who wait. "It might be better in some way," he said.
"They'll hit the market when it's ready for prime time."
it is a catch-22 for those who believe in the competitive power
of CRM, but have delayed investing and are now caught in the cost-cutting
crunch. Rubin summed it up this way: "Companies have put themselves
into a CRM paradox."