InformationWeek

Companies are using CRM to move from treating customers as income sources to be exploited to treating customers as assets to be nurtured. This is a critical trend because it represents the use of knowledge-management practices to care for customers from end to end, and to build long-term relationships with customers.

CRM technology is also changing rapidly from back-office sales-force automation tools to front-office customer care. Technology is being used to make CRM more of a technology-centered retailing science.

CRM software is becoming more multifunction and vendors are forming partnerships and integrating CRM suites with existing applications such as enterprise resource planning systems. The availability of CRM services is causing some customers to move to Web-based functionality for cost savings and technology flexibility.

It's important to note that the overall trend is toward the ability to care for a customer from order to receipt. CRM software that can provide a customer with specific answers to questions about an order status will provide many companies with the ability to create meaningful business success measurements, which is critically lacking in today's feature function set.

Web-based CRM services for small companies or companies that are interested in application hosting is also an emerging trend. The application service provider market is growing very quickly, as companies discover that renting applications are often more cost-effective than buying. IT industry conditions are driving suppliers of CRM systems to consider new delivery channels and leading buyers to consider new IT operational models.

Emerging ASPs hold the potential to make the best CRM technology available to even the most resource-constrained companies. For CRM application suppliers, the ASP will be a new channel, complementing direct sales and other models. CRM vendors who host their own applications will also encounter competition from value-added resellers and generic, multiapplication ASPs.

The CRM ASP is different from a reseller, however, in that it will operate as a one-to-many model, servicing many companies through a centralized operation, rather than implementing its solutions at each customer site.

The CRM ASP also differs from traditional outsourcing companies by providing value beyond "operational efficiency." Successful ASPs will help drive a shift in the market, moving competition beyond software features and operational efficiency to the total business solution.

An opportunity exists for CRM ASPs to change the structure of the CRM application industry as we know it. Vendor-side initiatives and evolving buyer-side perceptions over the next 12 to 24 months will be critical indicators.

CRM market value and growth estimates vary widely. International Data Corp. expects it to be worth $8.7 billion worldwide by 2003. AMR Research predicts that the CRM market will hit $5.42 billion in 2000--and will keep continue to grow at an annual rate of nearly 50%.