Companies must rethink their CRM strategies: Forrester

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Consolidation of leading customer relationship marketing vendors, intensified competition from well-capitalized business applications players, and the rise of new software-as-a-service deployment options mean companies must rethink their CRM solution strategy.

These were key ideas presented in a report from Cambridge, MA-based Forrester Research called "CRM Market Size And Forecast, 2006 To 2010."

The Oct. 20 report, which was written by Forrester analyst William Band, also said enterprises will continue to make significant investments to improve their customer-facing capabilities.

However, "the need to extract additional value from past expenditures and a lack of game-changing innovations from vendors will result in moderate market growth," Mr. Band said in the study.

The report said that decisions about new spending on CRM must take into account the following:

· Significant consolidation of CRM vendors: The report pointed out that Oracle  acquired PeopleSoft and then swallowed Siebel. SSA Global acquired Epiphany and then was acquired by Infor. M2M Holdings has recently announced that it will acquire Onyx.

· Microsoft and SAP's continued push into the CRM space: SAP ( continues its drive to become the leader in the CRM space through enhancements in functionality and aggressive marketing to the SAP user base, the report said. Microsoft is making a renewed effort to win a bigger piece of the enterprise applications market through the launch of Microsoft Dynamics CRM 3.0.

· Software-as-a-service for CRM gaining acceptance and shaking up the market: and RightNow Technologies have posted impressive sales gains as buyers increasingly adopt the software-as-a-service (SaaS) deployment option, the report said. This forced existing CRM vendors to develop their own SaaS offerings, as Siebel did with Siebel CRM On Demand, as Oracle did through its acquisition of Siebel, and as SAP is now doing with the launch of its own CRM SaaS offering.

As a result of all of these changes, the report said e nterprise buyers should invest selectively in high-value upgrades, focus on customer-process optimization and demand support from vendors to optimize existing CRM infrastructures.

IT vendors, on the other hand, should stretch harder to innovate, focus on distribution and support, and add value in new offerings such as CRM advisory services, hosting and SaaS.

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