April 16, 2001, 2:44 PM — THE ECONOMY'S downturn and a consolidation in the CRM (customer relationship management) market are forcing companies looking to broaden their CRM systems to take a hard look at the bottom line, now more than ever.
CRM projects have been plagued by runaway costs, but the tight fiscal times make the search for hard ROI even more critical. CRM vendors are feeling those tougher expectations, and some are combining forces to offer broader functionality and adapt to the economic environment.
Last week's merger of Kana and Broadbase, two financially ailing CRM companies, underscored the current market mandate to unite to create a more complete software package.
"A lot of [customers] are very nervous about where the economy's going and are hesitant to lock down their 2001 budgets, and that's affecting all CRM vendors across the board," said Paul Rodwick, vice president of markets development and strategy at CRM vendor E.piphany, in San Mateo, Calif. "Our advice is to think big, start small, and act quickly."
Analyst firm Meta Group this week issued a preliminary report urging companies to proceed with caution in CRM deployments, saying a slow, deliberate rollout is the best way to ensure ROI. That puts companies deploying CRM in a tricky spot because another CRM tenet dictates that they implement a product suite enterprisewide in order to ensure their customers get the best possible service across all channels.
"The dark side of CRM is that most projects are not financially justifiable, so companies take a leap of faith [to do them]," said Aaron Zornes, executive vice president of application delivery strategies at Meta Group. "There is a chill across America as IT budgets are getting scrutinized."
In its survey of 800 businesses and IT officials, Meta also found that nearly two-thirds of CRM projects are designed to improve the company's workflow, rather than enhance the customer's experience. That approach is short-sighted, Zornes said, because it works against the ultimate goal of CRM, which aims to keep buyers loyal and attract new ones.