Two competing misconceptions are commonly voiced by Gartner clients: 1) Siebel Systems owns, or will own, more than half of the customer relationship management (CRM) application space, and 2) CRM suites will play the most-critical role in assisting enterprises to execute on a CRM strategy.The complexities of enterprises' needs will preclude any vendor, including Siebel, from delivering more than 25 percent of CRM application requirements for an enterprise through 2004. Siebel will remain the broadest of the suite vendors through 2003; however, it will represent less than 15 percent of a total solution. At the same time, even with the diminished foothold it will have in enterprise CRM, Siebel will remain the dominant vendor, as measured by CRM revenue, influence on senior executives and the evolution of the market through 2004 (0.7 probability).A number of interlocking situations make the selection of a CRM suite as the single software solution impractical and dangerous through 2003. These are:Through 2004, CRM suites will not address more than 25 percent of the CRM requirements of a large enterprise (0.7 probability); they will be bound to a core set of sales, service and marketing functions. By 2006, a CRM suite could serve as an application operating system for an ecosystem of related applications, in which the suite also drives logic, business rules, security and workflow for the associated applications (0.6 probability). As Web services evolve through 2006, CRM application suites will be less compelling than advanced integration and messaging among best-of-breed applications and application components (0.7 probability). Web services are loosely coupled software components delivered over the Internet through standards-based technologies, such as XML. They have several basic requirements: 1) a mechanism for locating services and discovering what they do, 2) a description of the inputs and outputs the services recognize, 3) transport (i.e., the means of sending messages between services) and 4) the environment (i.e., the facility for developing and deploying the services). In time, they will also have a mechanism for broadcasting notable changes in the service environment, which is known as "event notification. The effect of Web services on the need for a single-source CRM suite will be profound, but it is currently impossible to predict the direction of that impact.The Scope of CRM Application Suites Will Remain Limited Through 2006Even the briefest look at large-enterprise CRM suites reveals the obvious: they are systems that have good sales and service functionality, but only the most-elementary capabilities in: 1) enterprise-level analytics, 2) partner\/community collaboration and learning, 3) self-service, 4) service resource\/interaction management, 5) content management, 6) enterprise application integration and 7) online retailing. 1. Enterprise-Level Analytics: The needs of most enterprises, from governmental to business organizations, require them to access ever-larger quantities of data from disparate systems in near-real time. An industry such as healthcare, for example, shows a growing need to more speedily access terabytes of data stored in multiple locations, to extract that data, validate, run pattern recognition, perform fraud analysis and test hypotheses, using tools that a person of average technical ability can manipulate. Often, as in healthcare, the user requires medical or scientific training to make the cross-correlations and the statistical analyses. Software is only beginning to simplify these tasks, which generally fall to high-end companies, such as Ab Initio Software, SAS Institute, Sand Technology and Seisint. Enterprises requiring these capabilities cannot afford the illusion that the existing CRM suites will provide these capabilities during the next three years.2. Partner\/Community Collaboration and Learning: Solutions from enterprises as diverse as Centra Software, Emmperative, Motive Communications (ServiceNet), Quiq.com and Vividence are enabling businesses and their internal employees, customers and partners to collaborate in environments that foster distance learning and problem solving (Centra), marketing collaboration (Emmperative), proactive and collaborative service and technical support (Motive and Quiq.com), and collaboration with customers to improve their experiences with the business on the Web (Vividence). These areas will emerge as key environments through 2004.3. Self-Service: Self-service and proactive service technologies will also remain outside the suites, and two of the many gaps are worth specific mention: speech and proactive service. In the emerging area of speech recognition, manufacturers such as IBM, Nortel Networks, Phillips and SpeechWorks International will continue to be add-ons. Speech recognition continues to be a critical component of CRM suites. An overlooked, but important, aspect of the CRM suite vendors is that they do little original technology research, devoting themselves instead to development. Enterprises can expect the CRM suites to lag well behind in responding to the competing standards, such as Microsoft's Speech Application Language Tags (SALT) and voice XML (VXML). Partnering with original equipment manufacturers or other vendors is expected to be common in this space.In proactive service and technical support, where the need is to enable companies to remotely diagnose and repair equipment and software, enterprises such as Motive, Previo, Quiq.com and Support.com give end users context-specific access to experts, software patches, advice and solutions for their applications or devices. None of the CRM suite vendors will close the self-service gap through 2004 (0.7 probability).4. Service Resource\/Interaction Management: Assigning the correct level of Customer Service & Support (CSS) resource (self-service or assisted service) is algorithmically more complex in a multi-channel environment. Enterprises are struggling to add to the "old world" workforce management measures of real-time agent adherence (vs. offline metrics), staffing and exception reports. Service resource management is the ability to integrate true business-driven performance measurements into CSS efficiency metrics that focus on the workforce, as well as measure and plan for economic results, such as the effects of interactions on retention, frequency of purchase, size of purchase and use of channel.Vendors such as Blue Pumpkin Software, Eyretel, Performix Technologies and Nice Systems are extending the work done by Aspect Communications, Genesys and IEX to include these business metrics. Service resource management will not emerge as a core CRM suite capability through 2005 (0.7 probability).5. Content Management: Content technologies and systems will evolve as crucial elements in the delivery of CRM. These will include document management, imaging, Web content management, digital asset management, and document archiving and retrieval systems. No large enterprise can thrive in the coming decade without some form of virtual repository from which to manage word processing documents, HTML pages and rich media (e.g., streaming video). Even the database vendors are "architecting" products with XML to focus on document and content-centric applications.This is an unstable market. Vendors such as Documentum, divine, iManage, Interwoven, NCompass Labs (acquired by Microsoft) and Vignette are likely sources for these vital solutions, rather than the suite vendors.6. Enterprise Application Integration: CRM applications are mostly data-centric and, on their own, do not dynamically support business events (e.g., change of address or posted purchase order) and will need to be re-engineered through 2005. CRM vendors that are able to build in support of these business events carried through connected systems as tagged messages will emerge as leaders. By 2006, all CRM suites will have to support application servers that include provisions for event management (0.6 probability).Enterprises must understand the loosely coupled middleware technologies and, more importantly, the architecture implications that the model of an event-driven enterprise implies before they lock themselves into monolithic CRM suites.7. Online Retailing: Vendors such as Blue Martini Software and BroadVision have been the most aggressive in delivering solutions to one of the most-critical CRM elements: end consumers on the Web. Web-based retail solutions require a combination of specific functionalities for merchandising, capabilities for event notification, merchandise alerts, promotions, personalization, returns management, shopping carts, integration with credit card systems, fraud detection, catalogs, POS devices and integration with supply chains (real-time inventory and ability to promise). Although some of the suite players have elementary capabilities in this area, none will excel during the next 24 months.With the Limited (but Key) Role of CRM Suites, Siebel Will Remain the LeaderGiven the CRM application license footprint, a rough market analysis would give Siebel 50 percent of the current CRM suite market, 35 percent of the packaged CRM application market (suites plus point CRM applications), and between 5 percent and 15 percent of the CRM application solutions market (suites plus point CRM applications plus the pieces defined above). Siebel will hold its own in terms of CRM revenue growth; however, it will lose market share percentage through 2004 (0.6 probability).Bottom LineEnterprises are best served by a focus in which CRM suites map to their core business model; they can complete the solution with best-of-breed products. Through 2003, the immaturity of enterprise application architectures and the CRM suites themselves will make reliance on a CRM suite a poor and potentially dangerous stand-alone solution. Siebel's smaller CRM market numbers mask the position that the company will have in the market through 2004. Among vendors, it will provide the direction and business leadership that will shape the dialogue concerning CRM solutions. The other large-enterprise CRM suite vendors (for example, Oracle, PeopleSoft and SAP) will have increasing appeal that closely matches each of their installed bases.For more information about CRM, please visit Gartner's Focus Area.