Commentary: Spending less on CRM consultants

By Bruce D. Temkin, principal analyst

Executives at large North American companies say that when it comes to their efforts in the area of customer relationship management, they're satisfied with consultants but plan to spend less. And in 2003, more of what money is spent will flow to outsourced and offshore call centers.

Forrester surveyed executives from 111 large companies in North America about their CRM activities. Among the earlier findings: Analytics and self-service top companies' spending plans for CRM in 2003, and 75 percent of companies are satisfied with their CRM efforts.

The survey also asked about CRM consulting and outsourcing services. Here's what was found:

• Most companies like their consultants but plan to spend less. Respondents use systems integrators and consultants three times as often as they use consultants from software companies as their primary service provider. More than 75 percent of these consulting customers say that they are either somewhat satisfied or very satisfied with their service providers. But even with this success, more than 40 percent of respondents expect to cut back on their CRM consulting purchases this year.

Forrester's take: We expect that the total IT consulting and systems integration services market in North America will grow by a modest 5.3 percent in 2003. Looking ahead to 2007, the IT consulting segment will reach $33.5 billion (an annual growth rate of 9 percent), while the systems integration sector will hit $111.5 billion (6 percent annual growth).

• Vertical expertise matters--much more than price. When asked about the factors driving their CRM consultant selections, 61 percent of executives cite industry knowledge--a far greater proportion than the 40 percent who pick either an existing working relationship or domain knowledge. Only slightly more than 25 percent of these respondents selected price as an important decision criterion.

Forrester's take: The success of CRM projects hinges less on the installation of applications and more on the nontechnology components of a project, requiring a higher degree of industry expertise. Companies need to look for consultants who can balance people, process and technology--using an approach that Forrester calls "synchronized deployment."

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Forrester's take: Consultants need to intensify their focus on the back end of engagements. Companies don't get much value, even with the most elegantly designed application and business process, if users don't get on board.

• Call center outsourcing gains momentum. While only 24.3 percent of companies plan to offload any of their call center operations this year, this represents more than a 50 percent increase in the number of companies that say they were outsourcing last year.

Forrester's take: We expect that this demand will continue to increase--fueling the North American market for IT outsourcing service to hit $184 billion in 2007.

• Users of offshore call centers are addicted. Less than one-sixth of respondents plan to use offshore call centers this year. But 90 percent of the companies that are already using overseas facilities plan to increase this activity.

Forrester's take: Over the next 15 years, 3.3 million jobs will move offshore to lower-cost regions like India, the Philippines and China. While many of the initial efforts focus on cost reductions, most companies using overseas providers are pleased with the quality. Companies looking to dip their customer service toes offshore should start with e-mail and chat.

© 2003, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.