Raising the Stakes

BI and CRM vendors face off in customer analytics arena

For smart companies, the next phase in CRM software implementations involves developing sophisticated customer data analytics to better direct all aspects of product development, marketing, distribution, and service. However, CRM vendors will face competition in the analytics field from already established BI players who are raising the stakes with in-demand capabilities such as predictive analytics, real-time performance, and solutions tailored to vertical segments.

According to Forrester Research Inc.'s July TechStrategy Report, "CRM's Future: Humble Growth Through 2007," the CRM market is set for a comeback after losing more than $2 billion in 2002. Forrester estimates that the market will grow 11 percent annually to reach $73.8 billion in 2007, with application revenues of $20.6 billion.

"During this period, users will shift from integration to continuous optimization," says lead Forrester CRM analyst Bob Chatham, who predicts, "after mastering multichannel infrastructures, CRM users will wield analytics to tune their customer and channel mix." Forrester also thinks Microsoft will "dominate the mass market for analytics."

Companies will also deploy CRM analytics to amplify other customer initiatives, such as online self-help and customer support, according to another Forrester report, "Mastering Online Customer Service" (July 2002). This report forecasts that 50 percent of firms will expand e-service spending by 2004 to reduce close to 23 percent of incoming service calls and save money. However, companies will not realize big savings unless they use CRM analytics to "target Web-based solutions at receptive customer segments," according to Forrester.

Better customer intelligence is particularly important in the emerging vertical CRM market, according to AMR Research Inc. analyst Joanie Rufo, author of the AMR Research Report, "Evaluating Vertical CRM — It's About Risk Mitigation" (May 2002). AMR found that in 14 vertical industries, customer data analytics is the application area with the highest spending priority (84 percent). The need for CRM BI capabilities spans a variety of sectors. Industries that will spend the most on customer BI include chemicals and retail (100 percent each), financial services and telecommunications (92 percent), and utilities (90 percent).

A number of companies have already flung vertical analytic solutions into the ring. In June, NCR Corp. integrated its Advanced Store@General Merchandise point-of-sale (POS) software with its Teradata division's CRM solution. Teradata CRM's Touchpoint Server links POS data with marketing communications programs and other retail customer interaction channels.

Another example from the BI side is Informatica Corp., which also launched in June the Informatica Solution for Healthcare. This vertical tool integrates patient data for compliance with the U.S. Health Insurance Portability and Accountability Act (HIPAA), laying the foundation for real-time analytics via Informatica PowerCenterRT, Informatica Analytics Server, and HIPAA Business Components.

Real-time analytics are essential for CRM BI, according to Robert Blumstein, IDC's research director for CRM analytics and marketing applications. In a recent report, "In the Nick of Real Time: CRM Analytics and the Decision Process" (June 2002), Blumstein says that real-time analytical capabilities contribute to CRM success.

"Successful CRM companies should concentrate not only on minimizing clock time but also on the more elastic, perceived delays that lower the chance of successful CRM analytics usage," Blumstein says.

CRM analytic applications also must "demonstrate business process support, the separation of function, and use time-oriented, integrated data from multiple sources," according to IDC. Time-oriented analytics require integrated historical information as well, currently a problem for some CRM vendors, Blumstein says.

Moving beyond real time, the next analytical frontier is foretelling the future. In late July, Business Objects added Kxen Inc.'s predictive analysis engine to BusinessObjects Application Foundation 3.0. Customers will be able to apply Kxen's technology to other BusinessObjects packaged apps to analyze enterprise customer data for demand forecasting, relationship modeling, and other high-end CRM operations.

The battle for CRM dominance can only intensify as the best BI and CRM companies continue to add advanced analytical capabilities to flagship products and new offerings.

— Claudia Willen

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