The customer relationship management (CRM) software market grew from $7.4 billion in 2001 to $8.8 billion in 2003, and will grow by another 10% in 2004, according to CRM market analyst firm Hewson Group. This does not mean big profits for all suppliers however: key platform companies have experienced falls in revenue as new entrants have emerged, adds Hewson.

The need to improve customer service will continue to be the main driver of CRM investments in 2004, says Hewson. If anything, this requirement has grown stronger since organisations cut back on customer management measures during the IT downturn.

Hewson says that, as user companies grow more familiar with CRM, they are finally earning significant returns on their software investments. They are also seeking to build an IT infrastructure that links customer-facing CRM programs with back-office systems. CRM applications ‘hosted’ by third parties are also becoming more common.

CRM systems help companies introduce transparency into the sales process, a characteristic that is helping them to comply with new business regulations, such as the post-Enron Sarbanes Oxley Act in the US. Hewson says this will be an important driver of CRM analytics products in 2004 and 2005.

E-government is another driver. In the UK, for example, e-government targets have forced many local councils to invest in CRM systems. And as CRM becomes cheaper – thanks in part to the entry of companies such as Microsoft into the market, as well as a growing army of CRM resellers – greater numbers of small companies are also investing in CRM, says Hewson.