Federal government CRM spending to reach $500 Million

The U.S. federal government will increase its spending on customer relationship management systems and services at a compound annual growth rate of 17.5 percent between 2001 and 2006, according to a market research report released Jan. 17.

The report by Input, a Chantilly, Va., IT and electronic business information and marketing services firm, said federal spending on CRM will increase from $233 million in fiscal year 2001 to $522 million in FY 2006.

The 1998 Government Paperwork Elimination Act is a major driver of growth in the federal CRM marketplace, said Payton Smith, manager of Public Sector Market Analysis Services at Input.

Federal agencies must comply with GPEA by the end of fiscal year 2003. The law requires agencies to provide electronic options for paper-based processes, including transactions with customers, such as citizen bill payments.

Another driver is the President's Management Agenda, which calls on agencies to use e-government to improve agency efficiency and cost-effectiveness. The benefit CRM vendors have to offer is the cost savings that can be realized through improved management of customer relationships, the report said.

Spending on CRM systems and services will be highest among civilian agencies with large customer service obligations, such as the Internal Revenue Service and the Social Security Administration, according to the report. Input predicted that the Treasury Department, home to the IRS, will increase its CRM spending from $93 million in 2001 to $242 million in 2006. The Social Security Administration will increase its spending from $24 million to $50 million in the same period, the report said.

Privacy concerns could be a significant obstacle to growth in the federal CRM marketplace, but with attention and planning, federal agencies will be able to use CRM applications to collect and share information without damaging the public trust, the report said.

"With the potential benefits that CRM solutions promise for the U.S. government, Input expects federal agencies will work quickly to address privacy concerns and overcome any potential barriers," Smith said.

Input's public sector group provides IT intelligence to U.S. federal, regional and state and local government communities.