Customer Relationship Management Spending in Asia-Pacific

By Cindy Payne, Managing Director
Asia-Pacific Connections Pte Ltd

February 2002

According to International Data Corporation's (IDC) recent survey of 900 information technology (IT) professionals in major geographies, Customer Relationship Management (CRM) solutions are the top priority IT investments across Asia-Pacific.

IDC forecasts that the market for CRM software, hardware and services in Asia-Pacific (excluding Japan) is growing at a compound annual rate of 30% and will reach US$5.7 billion by 2005. In 2001, the Asia-Pacific CRM market grew 16% and was valued at US$1.8 billion, with Australia, South Korea and Singapore comprising 75% of the regional spending. In 2001, Australia was the largest CRM market in the region, comprising 43% of Asia-Pacific CRM spending, with revenues of US$719.4 million. Between 2000 and 2001, the Australian CRM market grew 18.7%. In 2001, Korea's CRM market was valued at US$218.8 million, followed by Singapore at US$213.3 million. China's CRM market was valued at only US$76.7 million in 2001, but IDC forecasts that the Chinese CRM market will boom and register a compound annual growth rate (CAGR) of 107% by 2005. Similarly, in India, CRM spending in 2001 was valued at only US$84.2 million, but IDC expects the Indian market to register a CAGR of 44% by 2005.

In addition, IDC reports that Asia-Pacific boasted a total of 64 million Internet users in 2000, but enjoyed only lackluster e-commerce revenues of US$18 billion. China leads the region with 17 million Internet users, followed by South Korea with 16 million users, Australia with 8 million users, Taiwan with 5 million users and the Indian sub-continent with 4.5 million users. The rest of Asia-Pacific had a scant 14 million users in 2000. However, IDC estimates that by 2005, Asia-Pacific (excluding Japan) will surpass the United States with more than 200 million Internet users. By then, an estimated 21% will use the Internet to shop and these more seasoned Internet users will require world-class customer service before they part with their money. Hence, first-rate CRM solutions are critical to capture the advancing e-commerce opportunities in the region.

According to research compiled by Call Centre Research, 94% of all call centres in Asia-Pacific currently offer customer-service related activities. IDC sizes the global 2001 call centre marketplace at US$37.6 billion, with a CAGR of 24.4% between 2000 and 2004. The U.S. currently leads with 53% of call-centre spending, followed by Western Europe with 28%, 4% in Japan and 4% in the rest of Asia-Pacific. Asia-Pacific call-centre spending in 2000 was only US$1.2 billion, but is expected to grow at a CAGR of 26% until 2005, when it is expected to reach US$4 billion. IDC also forecasts a significant increase in independent call centre operators providing total contact-centre solutions, including innovative CRM options, by 2005.

Wireless transactions are also set to grow in Asia-Pacific. Research analysts, Datamonitor, forecasts that global sales of mobile CRM, or mCRM, solutions will grow from US$118 million to US$1.7 billion by 2005. A 2001 study of the Asia-Pacific mobility market by the Meta Group shows that wireless and mobile transactions will account for nearly 20% of B2B transaction volume and 25% of B2C traffic in the region by 2003. Research by IDC shows that SMS revenues in the region reached US$950 million by the end of 2001, and that this growth was driven mainly by consumers. Yankee Group estimates that at present there are approximately 124 million mobile device users in Asia-Pacific (excluding Japan). Wireless enablement of CRM applications is still in its infancy but Asian organisations must invest in order to provide comprehensive service in an increasingly competitive landscape. However they are delivered, CRM solutions must be creative and supported by robust technology. Depending on the creative element, SMS marketing response rates are known to be as high as 20%, with 85% of customers responding with 24 hours.

Singapore and Hong Kong are both vying to be the customer relationship marketing hub for the region due to their exceptional IT infrastructure. To achieve this position, both know they must focus on tapping into China, the world's largest mobile phone market. In addition, the CRM services and solutions offered must be top-notch as Asian companies typically look at the dollar value of CRM implementation and want a guaranteed return on investment by way of increased revenue or increased operational efficiencies.

A recent study by Gartner Group estimates that 80% of all sales executives who have just adopted CRM tools rate the technology as a failure. However, says Don Peppers, the acclaimed CRM guru, the main reason for this is that companies tend to think that CRM is a technology, when it is really a business strategy. Robin Giang, Senior Analyst at IDC, comments, "From a purely strategic perspective, every business wants to maximise the depth, length and breadth of its relationships with its customers. By doing so, it will enable the business to maintain sustainable growth through higher levels of customer satisfaction and retention. The main appeal behind CRM investments today is their ability to facilitate enterprises in providing their clients with consistent customer information across sales, marketing and service touch points, regardless of whether the transactions are via voice, e-mail, the web or wireless devices."

Companies just implementing CRM solutions have the benefit of learning from the successes and failures of the early adopters. They can also learn from previous dotcom blunders, when many companies embarked on new technologies as a panacea. In reality, CRM is an evolutionary process, whose tools must be integrated into the company's everyday plans and strategies to be effective, and must be accepted by all management ranks. Therefore, in a market like Asia-Pacific, where companies have been forced to move away from price-centric business models, the strategic implementation of CRM solutions will be crucial to survival.