Customer relationship management vendors are struggling to capture new business, and enterprises in the market for CRM software stand to benefit from their tribulations, according to a report released this week by Gartner.
"The global economic downturn has intensified its grip on the vendors within the CRM software market. The real winners are the buyers of CRM software," says Thomas Topolinski, Gartner vice president, in the report.
Cash-conserving enterprises are focused on proven revenue-generating IT projects and therefore slower to commit to CRM software. This hesitancy - and its negative effect on vendors' revenue - gives the enterprise buyer a leg up when it comes to license negotiation. "Opportunity for the enterprise comes in the form of strong negotiating position in terms and conditions, including price," Topolinski says.
Demand for CRM software will continue, but growth will be slow, Gartner predicts. The research company's estimates for 2001 new license revenue show an 8 per cent drop over 2000 new license revenue - which was up 89 per cent over 1999 figures. Growth in 2002 is forecast to be flat at US$3.7 billion. In 2003, Gartner expects new license revenue to climb 10 per cent to $4 billion.
For enterprises that want to take advantage of this favorable buying climate, Gartner offers these recommendations:
-- Focus on return on investment and ask CRM vendors for references to actual ROI experiences.
-- Consider CRM suites, even if you're only looking for a point product. Some CRM software vendors are willing to unbundle packages to sign a new account, Topolinski says.
-- Exercise caution in vendor selection. "Many software vendors have viability issues because of economic constraints and are open to potential merger, acquisition or even demise," Topolinski says.
-- Pay close attention to a vendor's application license revenue, not just its total revenue. "The enterprise's future support of the product and evolution of the technology is directly related to the vendor's ability for long-term revenue growth, indicated by new license revenue."