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  Mid-Market CRM: A Good News / Bad News Story
 
Which do you want first: the good news or the bad news?
 
Okay, we need some good news. Customer Relationship Management (CRM) really works in the mid-market. AMR Research has spoken to many customers using SalesLogix, Applix, Onyx, Pivotal, Goldmine, and Salesforce.com, and the consensus is that the project lived up to expectations and delivered value across multiple departments. In contrast, enterprise CRM users say they struggle with extending across departments, projects that are over budget, and dealing with ongoing, significant problems with integration and data management. The reason for the difference is obvious: it is far easier, from a technical and cultural standpoint, to implement CRM technology among small and midsize businesses. So, the good news for users is that CRM lives up to its promise in the mid-market, and users should not to get caught up in the negative news related to CRM projects, because it's not relevant to the scope and complexity of their deployment.
 
One would think this would translate into a huge growth opportunity among the 1.2 million companies with between 50 and 500 employees. But it hasn't.
 
So here is the bad news: most midsize businesses are not risk-takers, and the economic uncertainty and the perception of risk associated with the application has dramatically decreased the number of companies evaluating or prioritizing CRM. In our quarterly interview with Information Technology (IT) and business executives on priorities, CRM has dropped dramatically in the past year. In 2Q01, 64% of midsize companies planned to increase their CRM budget in 12 months, while only 32% plan to do so in 2Q02. However, importance has increased slightly, from an average of 6.73 to 7.04. In our annual application spending study, the results were similar: the percentage of mid-market companies evaluating CRM dropped to 20% to 30% from 36%. Overall, these numbers are worse than the buying trends among larger companies, which are more willing to invest for the long term.
 
While CRM's success in the mid-market and the continued high importance of the projects are great signs, the only way to reverse the negative trend is to help mid-market companies eliminate the following three types of risk:

• Financial Risk--To lower financial risk, vendors should pursue new pricing models that collect all or part of the software license fees after the implementation is complete or offer pay-as-you-go, subscription-based pricing as an option.
• Implementation Risk--Fixed-price and highly template-based deployments are extremely attractive to mid-market buyers.
• Product Risk--The size and scope of CRM can be intimidating to many buyers, and offering a simpler packaging of product and demonstrations for a subset of the package will help reduce the appearance of risk.