CRM Spending Seen Slowing In Financial Sector

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The great CRM spending spree appears to be over, at least among financial institutions.

New research shows spending on customer relationship management implementations leveling off in this year and without significant uptick in spending till 2004.

Spending on retail CRM implementations--including customer information systems, front-office channels, data warehouses and decision support applications--will remain at about the 2001 level of $6.7 billion, according to Meridien Research, based here.

Meridian surveyed both retail and wholesale financial institutions on their actual and planned spending. Meridien had expected spending in this sector to hit the $6.8 billion last year.

Spending on corporate CRM by institutions like commercial banks will hang steady at $3 billion this year. Spending will slow as these customers take a hard look at the return on investment (ROI) they are getting from already-purchased CRM technology, according to the survey. Meridien bases its estimates on spending by 55,000 institutions.

Among the reasons for the spending downturn is "the slowdown or reduction in corporate revenue for some lines of businesses such as investment banking and asset management," according to the survey.

Meridien Research doesn't expect spending to increase until 2004. Part of the reason is the widely reported disappointment many corporations have expressed about costly and hard-to-implement CRM. In theory, CRM gives companies a total view of customer activity that includes information in back-end systems like ERP and inventory, as well as data gathered about service calls, purchases and outstanding orders. The goal is to retain current customers with better service and attract new customers.

The researchers said total spending on front-office CRM in wholesale financial companies hit $656 million last year, and will rise to $675 million next year and to $723 million in 2003 for a ten percent compound annual growth rate. But growth rates for customer-centric workflow, as well as datawarehouse/datamart infrastructure and decision support applications will be just 5 percent per year, they said.

Meridien expects to see more consolidation among vendors in the CRM space going forward. "Smaller, independent application vendors will face a high level of attrition and the new pipeline of CRM startups will dry to a trickle," according to Meridien's CRM Spending Update, released Wednesday. Specialty CRM consulting firms will be under pressure while larger firms will be "opportunistic acquirers," the report said.

CRM had been a hot area in the late 1990s as companies struggled to better serve customers across all sorts of sales and support channels ranging from telesales to the Web. Siebel Systems, San Mateo, Calif. is the market leader in CRM implementations, but has seen encroachment on its turf by Oracle, PeopleSoft, E.piphany and other players.

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