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November 02, 2007

CRM Software Market to Hit $6.6 Billion by 2012

By David Sims

TMCnet Contributing Editor

A new Datamonitor report, “Economic Outlook: Customer Relationship Management,” finds that, in 2006, the global CRM software market was worth just under $3.6 billion in license revenue alone, and is expected to reach $6.6 billon by 2012 — a compound annual growth rate of 10.5 percent.

CRM license revenue and maintenance revenue together are expected to surpass the $10 billion mark globally by 2012, with maintenance revenue reaching approximately $3.6 billion.

Among the study’s findings and projections are that, by the end of 2007, the global on-demand CRM market will be worth $1 billion, and such applications will drive CRM adoption, particularly within small to medium enterprises.

The composition of the CRM market is also changing, in terms of the typical size of enterprise deploying CRM, Datamonitor finds, noting that CRM was “once a preserve of very large organizations.” In 2006, CRM application spending by enterprises with fewer than 1,000 employees accounted for one-third of all licenses sold, and by 2012, that sector is projected to account for over 42 percent of the market.

Because of their reliance on subscription revenues and service capabilities, the Telecommunications industry will remain the heaviest investor in CRM technologies, followed by along with Energy & Utilities and Financial Services, Datamonitor thinks.

Datamonitor also expects CRM investment by the Healthcare, Public Sector, and Life Sciences sectors to exceed the rate of growth in the Telecommunications sector, fueled by the adoption of a customer-oriented approach to public sector services and the relative success of applications supporting a relational, not transactional, approach to customers.

“Vendors offering on-demand CRM solutions will differentiate themselves by investing in advanced feature-sets, data-center hosting efficiencies and by integration with their own on-premise versions of CRM so that their customers will be able to seamlessly migrate between the same vendor’s hosted and more traditional editions,” said Vuk Trifkovic, Datamonitor technology analyst and author of the study.

In August, Datamonitor released a report titled, Decision Matrix: Selecting a CRM Vendor, assessing the strengths and weaknesses of leading CRM vendors. The report found that Oracle and SAP (News - Alert) will continue to rule the roost — and that of the two, Oracle is the market leader.

“Although the CRM applications market is very competitive and there are plenty of players who can challenge the current leaders in specific circumstances, only two vendors, Oracle (News - Alert) and SAP, can be considered as market leaders,” says Trifkovic.

Datamonitor has developed a methodology they call “Decision Matrix,” billed as “helping businesses select vendors based on their technology strength, reputation among customers, and impact in the market,” according to company officials. Conclusions are “based on a quantitative assessment of end-user sentiment, the capabilities of the business intelligence products on offer and technology features.”

According to Datamonitor, both Oracle and SAP provide complete products replete with functionality, integrate CRM with new communication technologies and offer full flexibility of deployment options, from conventional on-premise, through to variations of hosted and on-demand products.

David Sims is a contributing editor for TMCnet. To see more of his articles, please visit his columnist page.

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