The customer data platform (CDP) industry continued its rapid expansion during 2021: the CDP InstituteOpens a new window estimates that revenues will increase 25% to reach $1.6 billion. The forces driving CDP growth will remain strong in 2022: data-dependent digital transformation programs, privacy-driven focus on first-party data, and customer demands for a more personalized experience. Vendor funding, expansion, and acquisitions will also continue as investors and software companies recognize the need for unified customer profiles is here to stay.
So, what does 2022 hold for CDP makers and users? Continued growth, for sure. But it won’t simply be more of the same. Some of the changes we expect to be prominent include:
1. Expansion Beyond Marketing
CDPs have always been used outside of marketing departments. Indeed, some of the earliest CDP vendors provided lead scoring for sales teams and unified profiles for customer success managers. But digital transformation and integrated customer experiences have highlighted the need to share customer profiles across all departments of the enterprise. At the same time, increasingly stringent privacy regulations have made every use of customer data an enterprise-level concern. The result has been an increase in buyers who treat the CDP as an enterprise resource. These are often a chief data officer or chief analytics officer. While corporate IT departments have always played a role in CDP deployment, this role is also increasing as CDPs are more tightly integrated with other enterprise systems.
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This change impacts the CDP requirements. Enterprise-level CDPs need to handle larger volumes and varieties of data than marketing-focused CDPs. They need to connect with more source and destination systems. They need to support more analytical processes and meet higher standards for security, reliability and performance. They must adjust more quickly to changes in data and user requirements.
On the other hand, enterprise-wide systems are less likely to need departmental applications such as marketing campaign execution. This may mean that CDP vendors with their roots in marketing automation or message delivery systems find themselves relegated to those roles while relying on an enterprise CDP to assemble their data. This has advantages since many CDPs are stronger at one of these than the other. Such dual-CDP configurations are already more common than often recognized.
Even if CDPs specialize as either profile building or departmental applications, the change leaves customer experience orchestration as a territory where they overlap: experience orchestration is an enterprise-wide function but requires advanced applications for journey analytics, campaigns and interaction management. Adding to the confusion, there’s no widespread agreement about the organizational home of customer experience: candidates include operations, customer service, IT, and marketing, each of which often sees itself as in charge. Look for new software categories, including customer experience platforms and digital experience platforms, to attempt to occupy this space, with contestants including CRM systems, marketing clouds, communications platforms, and content management systems. Nearly all of these will have the equivalent of a CDP lurking under the hood.
2. Build Options Increase
The greater involvement of enterprise IT departments with CDPs means that more firms will consider building their own CDP equivalent. Needless to say, CDP vendors argue this is a bad idea: they correctly state that CDPs are much more complicated than the databases, data warehouses, and data lakes many companies already have in place. Differences include the number and complexity of data connections, the need to maintain persistent customer profiles, and requirements for real-time access. CDP vendors have invested many years and millions of dollars in meeting these needs effectively, while most corporate IT departments would be starting from scratch. There have always been exceptional companies with mature customer data systems in place, especially in financial services and telecommunications. But, in most cases, a purchased CDP will meet company requirements more quickly, at a lower cost, and with less risk than a custom-built project.
But this calculus is changing. The same digital transformation, privacy, and customer experience projects that have spurred the acquisition of CDPs have spurred software developers to provide better tools to IT departments. New software categories, including data pipelines, data preparation, identity resolution, and data observation, have emerged with capabilities needed for a CDP. Cloud databases such as Snowflake, Databricks, Amazon Redshift, and Google BigQuery provide native performance that older systems could only achieve through advanced design and processing techniques. In-database processing enables developers to execute many functions without moving the data to external systems, further improving performance and security while reducing cost.
At some firms, these changes will shift the balance far enough to justify building an in-house solution. At many more, the advantage will remain with purchased CDPs. An increasing number of firms will find themselves working with a mix of solutions, buying some data management components while relying on a CDP for specialized processes. That CDP will often be an intermediary between the enterprise data store and specific applications. This role includes the customer experience orchestration functions that sit between enterprise and departmental systems.
3. Buy Options Increase
Even if a few resource-rich companies build CDP equivalents, the number of vendors selling packaged CDPs will continue to grow. Most new entrants will specialize in particular industries, such as financial services, health care, hospitality, and telecommunications. They will often be companies whose core business is an operational system, such as hotel reservations. Such firms add a CDP to make their products more appealing to current and potential clients while also blocking potential competitors from gaining a foothold. Industry-specific CDPs have substantial advantages over general-purpose competitors, including specialized data models, prebuilt connectors to common industry systems, standard features tailored to industry use cases, and staff who are industry experts. Because the CDP is often a small part of their full package, many of these companies may not position themselves as a CDP vendor. We will also see a corresponding trend of general-purpose CDPs adding industry-specific packages with a similar collection of prebuilt connectors, data models, functions, and expert staff. This will grow as the largest general-purpose CDP vendors gain experience with pilot clients in each new industry.
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4. Vendors Offer Pre-packaged Programs
CDP buyers often struggle to take advantage of CDP data. The problem isn’t that the CDP fails to build customer profiles as promised, but that users cannot create marketing or customer support programs to use those profiles. In fact, CDP Institute research shows that organizational readiness is the top problem faced during CDP deployment, and the time and skill of marketing staff is the biggest obstacle to all types of customer data utilization CDP vendors have long provided training and educational materials to help buyers identify use cases in advance. Many are now taking the next step of creating pre-packaged programs that include data models, process flows, content templates, standard reports, and other components. These are especially common among industry-specialist CDPs.
While these trends are important, none will alter the fundamental nature of customer data platforms. As the CDP Institute definition states, they remain “packaged software that creates a persistent, unified customer database that is accessible to other systemsâ€. The details of who buys CDPs, how they’re used, and what is sold along with them will continue to evolve. But so long as companies need unified customer profiles, they will need the CDPs that provide them.
What trends do you think will affect the CDP industry in the coming year? Let us know on  FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window