February 25, 2011, 10:54 AM — Spending on customer relationship management software is expected to see the largest increase of all the application software markets this year, according to a survey from analyst house Gartner.
Overall, 31% of firms expect an increase in application software spending in 2011. In comparing their 2011 fiscal budgets with 2010, 42% of survey respondents indicated they expect to increase spending on CRM in 2011. This compared to 39% on office suites and 36% on enterprise resource planning, which ranked second and third respectively.
Gartner surveyed over 1,500 IT leaders of organisations in 40 countries, which concluded in July 2010. The goal was to determine software spending in 2010 and predictions for 2011.
"We're expecting the CRM market to recover gradually as buyer confidence returns and as businesses begin refocusing on growing revenue as opposed to just reducing costs," said Hai Hong Swinehart, a Gartner analyst.
Swinehart said areas of investment are expected to include the online channel, software-as-a-service (SaaS)-based deployments, and technologies enabling customer loyalty management, cross-sell/upsell opportunities, and more-targeted levels of customer service.
Swineheart added that buyers of CRM continue to focus on investments that promote customer retention and enhance the customer experience, and they are increasingly interested in technologies that encourage development of customer communities and social networks.
SaaS within the CRM industry is expected to exceed $4 billion in total software revenue in 2014, representing more than 32% of the overall CRM market.
Marketing automation remains the market segment with the strongest growth, with the greatest demand coming from campaign and lead management and analytics.
Heather Rutherford, director at IT services provider 2e2, said of the Gartner research, "Today's CRM applications need to focus on the newer channels of communication to allow for more targeted customer service.
"However getting it right is not easy. We see a lot of businesses using the likes of Twitter claiming it will be a customer services medium only for it to become a marketing channel with very little direct engagement with customers."
In order to make the most of going online, said Rutherford, businesses need to ensure their CRM applications link their growing online presence with the more traditional customer communication channels, which will allow for more targeted levels of customer service.