The cost of CRM implementation is set to increase as Australian enterprises move to comply with the new privacy act, which comes into effect in December.
Analysts warned this week that the new privacy regime will make CRM initiatives more expensive to implement at a time when the amount of data collected on customers is doubling every year.
Gartner research director Steve Bittinger said CRM is central to effective compliance with the new legislative requirements, as companies must demonstrate how they will handle, store and maintain information to ensure it is accurate and accessible by each individual.
Under the act, a company must respond to requests by individuals to view information held about them within 14 days and provide the information within 30 days.
Despite the increased expense, Bittinger believes companies that combine CRM, privacy and security initiatives successfully will be tomorrow's marketplace winners.
He said consumers' willingness to divulge details about themselves is the lifeblood of CRM and is based on trust - a belief that the information is secure, private and well-managed.
By the year 2006, there will be 30 times more data to be managed than there is today, which is why Bittinger believes companies will increase CRM expenditure.
"I have seen a jump in CRM investment recently. Tying privacy and CRM together is not a routine IT project with a cost and deadline framework; it is a series of projects we call an endeavour, involving a fundamental change in company culture and behaviour to survive," he said.
"Put simply, it's about leadership and strategy. The new trend in enterprise is based on trust, strong security and customer confidence collecting information. Five years from now, successful organisations will be those with strong privacy compliance on a global best practice level."
According to Deloitte Touche Tohmatsu, only one in 30 Australian enterprises are ready for the Privacy Amendment (Private Sector) Act.
The company's intellectual property and privacy national director, Ulysses Chioatto, said Australian companies are increasing CRM expenditure but paying little attention to effective data-privacy management.
He said only 19 per cent of organisations have a dedicated database-management mechanism and, as a result, 89 per cent of spam, junk mail and telemarketing is wasted.
Meanwhile, research released this week by the Federal Privacy Commissioner, Malcolm Crompton, found that more than 90 per cent of respondents want businesses to seek their permission before personal information is used for marketing.
This is in contrast to the companies surveyed, who rated information security fourth in importance after quality of product/service, efficiency and price. However, 95 per cent of businesses agreed there should be laws to protect customer information.
More than 80 per cent of companies were aware of the new legislation but only 19 per cent had started preparing for its introduction later this year.
The Australian Privacy Compliance Centre (APCC) director, Mark Sumich, said companies slow to act will lose customers and revenue, pointing out that compliance is too complicated to leave to the last minute.
Sumich said that in some cases organisations will need to completely re-engineer their data collection and handling procedures.
"This does not happen overnight but firms which make the effort will turn a compliance issue into a competitive advantage," he said.
"Come December, consumer interest groups will be looking for some showcase examples of privacy in different businesses and the current regulatory climate in Australia is unforgiving of corporate malfeasance."
APCC is a division of eTick, established to assist the private sector become compliance-ready.