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By Lisa Miller CRM: Trickle-Down Tech When it first hit the market, customer-relations-management software was embraced by Corporate America. Now, smaller outfits are riding the wave As customer-relationship-management (CRM) software emerged in the 1990s, major corporations gobbled it up, along with so many of the other "must have" products offered by IT vendors in those heady days. Amid promises that it would provide a 360-degree view of customers and their buying habits, CRM was mistaken by some for a magic talisman. If you listened to its wilder-eyed advocates and promoters, it could seem that the mere act of loading the software was enough to prompt a revolution in enhanced profitability. Alas, reality intervened. After the hype came the disappointment, as outfits struggled to integrate CRM into their existing business structures -- all too often without success. Meanwhile, small and midsize businesses (SMBs) remained mostly on the sidelines, congratulating themselves for not getting caught up in the excitement in the first place. How times have changed. Today, CRM is evolving, and SMBs are well-positioned to benefit this time around. When big companies shut their wallets after the tech bubble's rupture, IT vendors rushed to tap the underserved SMB market, with varying degrees of success. And, while SMB spending has helped keep the tech industry as a whole afloat, small outfits have remained reluctant to adopt CRM. Fewer than 28% of U.S. businesses with less than 500 employees used CRM applications in 2003, according to a Yankee Group survey. TECH FOR ALL. CRM vendors are keen to boost that number. Accordingly, they are developing new products designed specifically for smaller outfits -- an important shift in approach. While customer relationships have long been of vital concern to SMBs, CRM offerings have tended to be either "too simple, or too complicated," says Helen Chan, a senior Yankee Group analyst. Contact-management software, for example, offered to little, but moving to the next level often entailed buying complex software applications that most SMBs simply didn't need. Now, with more vendors paying attention to what smaller outfits want, products are being tailored accordingly. Hosted applications also are on the rise, and they tend to attract SMBs more than larger players. With hosting, users pay an application service provider (ASP), such as Salesforce.com, a monthly fee based on how many employees access the service. This approach gives outfits the flexibility to add or remove "seats" as their workforces expand and contract, while allowing them access to advanced CRM solutions they might not have the infrastructure to run out of their own offices. Hosting will account for 13% of the CRM software market by 2007, up from 3% in 2002. According to Tom Topolinski, a Gartner Research vice-president, this growth that will come largely from the SMB side of the market. "The SMB market is now being catered to," says Topolinski. Worldwide, he estimates that SMBs will spend a total of $966 million on CRM in 2007, up from $741 million in 2002. (North America and Europe account for about 85% of the global CRM market; Gartner defines North American SMBs as businesses with under 1,000 employees, and European SMBs as those with up to 250.) At the same time, larger enterprises will reduce their CRM spending somewhat, from $2.07 billion in 2002 to $1.97 billion in 2007. Though large firms will still account for the bulk of CRM revenues, Topolinski stresses that the SMB segment offers "huge potential" for growth. Vendors, he says, "have to participate, or be left behind."
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