CRM Market Set to Double

Recent studies predict the global CRM market will double within six years, and suggest explosive growth in CRM adoption across every segment -- especially on-demand CRM.

by Joshua Weinberger, with reporting by Demir Barlas and Jean Thilmany

Good news for CRM vendors: CRM software investment, adoption, and product revenues are all set to rise, according to a recent report from market analysis firm Datamonitor.

Though Datamonitor estimates the 2006 global CRM software market was worth just under $3.6 billion in license revenue alone, the research firm's analysis finds the market hasn't yet matured. In fact, less than half of U.S. companies -- 42 percent -- are using CRM, according to new research from the consulting firm KensingtonHouse. Datamonitor predicts a compound annual growth rate of approximately 10.5 percent through 2012, nearly doubling in size to $6.6 billion.

Datamonitor attributes that predicted growth to increasing deployment of CRM in new vertical sectors, such as healthcare and life sciences, as well as to a high degree of flexibility in deployment that will bring smaller-size end users on board.

Even more notable, in terms of current and future growth, is the fact that CRM's "market fertility" -- the percentage of companies deploying, upgrading, or actively considering a CRM purchase -- stands at 38 percent, according to the KensingtonHouse report.

The market-fertility figure is the metric KensingtonHouse chose to highlight, as it reveals a record number of companies deploying or planning to deploy CRM. "This is significantly above what I've seen historically, which has been 18 to 25 percent fertility," says Thomas Moriarty, the consultancy's president.

According to KensingtonHouse, the main reason for the current wave of CRM popularity is the maturity of the on-demand delivery model and functionality set. Fifty-five percent of respondents expressed a preference for on-demand, with a mere 14 percent nominating on-premise and 31 percent undecided. Though 87 percent of survey respondents were either small or midsize businesses (SMBs), Moriarty says that the preference for on-demand extends to the enterprise segment as well. (The research canvassed 437 respondents representing a population of 20,000 companies with a degree of accuracy of plus or minus 5 percent.)

On-demand's benefits include its low cost and its simplicity, Moriarty says: The model can lower the cost of a CRM deployment by as much as 60 percent while also offering an increasingly user-friendly experience.

While on-demand can be easier to implement than on-premise, adopters of either variety should still be aware of the risks of project failure. Gartner recently predicted that, by the end of 2008, "25 percent of CRM projects will be postponed or canceled because of the CRM skill shortage in consultants and systems integrators." Moriarty suggests that figure be taken in context. "Three years ago, that number would have been 75 percent," he claims.

A recent report from the consultancy Bain & Co. revealed that companies that put more effort into CRM up front (including long-term planning, unwavering executive sponsorship, and diligent change management) get more out of the technology. Those companies that put a "major effort" into CRM reported a 4.17 satisfaction score on a five-point scale, while those putting in a "limited effort" were only able to achieve a 3.53 score.

More companies now consider CRM critical to their enterprise application portfolio, according to Datamonitor: "As the increasing number of organizations understand the importance of positive customer experiences and strong customer relationships, the market for [CRM] applications continues to expand."

The report found the CRM sector increasingly segmented by enterprise size. Whereas CRM was once primarily for large companies, Datamonitor estimates that companies with fewer than 1,000 employees made up one-third of all CRM licenses sold last year; by 2012, that sector will hold 42 percent of the market.

But Datamonitor's analysis found that many end users are cautious when considering CRM for fear of facing adoption issues. These companies reported several "adoption inhibitors," including software complexity; high total cost of ownership; and lack of strategic support for CRM installations.

On-demand software has become a credible alternative, but report author Vuk Trifkovic, a technology analyst at Datamonitor, doesn't expect it will significantly alter the CRM market in coming years. (The report estimates the present-day global on-demand CRM market to be approximately $1 billion.) Trifkovic expects to see a substantially more competitive on-demand market, with established on-demand vendors facing pressure from smaller ones -- and both competing against traditional on-premise vendors that now offer on-demand editions.

The on-demand application model -- in which the vendor hosts the CRM software on distant servers -- removes the end user's headache of daily maintenance and technical operations. Such applications will drive CRM adoption, particularly at small and midsize enterprises that have held back due to concerns about implementation issues, the report says.

"Although [the on-demand] method does address certain adoption inhibitors, CRM on-demand, alone, cannot transform the market," Trifkovic writes.


Top 25 CRM News Stories of 2007

As 2008 arrives, a look back at the most popular online stories of last year.

by Editors of CRM magazine

Heading into 2008, awash in predictions and guesses about what the year ahead is likely to bring, we thought it was a fine time to step back and take a moment to reflect on the 25 stories viewed most often by visitors here at destinationCRM.com.

It's important to note, of course, that stories posted recently haven't had the benefit of extra time to trickle through the series of tubes we call the Internet, so it's no surprise that any list such as this would skew heavily toward the first quarter of the year -- it's impossible to guess what this list will look like a few months or even a year from now. (If you've got an algorithm for accurately weighting popularity as a factor of time, we'd love to hear about it.) If history is any guide, articles eventually develop lives of their own, spiking in popularity weeks or even months after they're first written -- as companies change, products are introduced or updated, and related trends emerge.

Consider some of the major headlines from the year that aren't yet on this list:

All these stories were major events in 2007, stories likely to have repercussions in the year ahead -- and none of them has yet cracked the Top 25.

That said, the articles that do currently comprise the Top 25 have been popular for a reason, and they reflect a wide range of subject matter -- from research reports to trend analysis, from vendor announcements to product launches. What's really amazing is the sheer breadth of the CRM industry reflected in this list -- 18 of the 25 headlines mention a CRM vendor by name, with only two vendors appearing more than once. We take that as a sign of how democratic the marketplace truly has become (and perhaps a sign that we're doing a fairly decent job being representative of that marketplace).

But enough dragging out the suspense -- here are the Top 25, as of Dec. 31, 2007:

#1 - SAS Tops Gartner's BI Magic Quadrant (2/1/2007)
#2 -
Verint: Can I Get a Witness? (2/12/2007)
#3 -
Gartner Combines Two Magic Quadrants (2/14/2007)
#4 -
Midmarket CRM Grows (2/23/2007)
#5 -
Beagle Honors the Wizzes in the Biz (3/6/2007)
#6 -
High-Tech Wages Are On the Upswing (1/3/2007)
#7 -
Infor Is the Top Performer in Performance Management (1/22/2007)
#8 -
SPSS Refreshes Its Data Mining Software (1/16/2007)
#9 -
Microsoft Brings Analytics to the Desktop (2/14/2007)
#10 -
A Dot KANA Solution (1/22/2007)
#11 -
Omniture and Salesforce.com Take a Meeting (9/11/2007)
#12 -
What's in a Lead? (1/9/2007)
#13 -
Centric CRM Updates Its Offerings (3/9/2007)
#14 -
An SFA Wave Hits a Crowded Beach (5/3/2007)
#15 -
NetSuite Moves Up the E-Commerce Ladder (2/15/2007)
#16 -
SugarCRM Adds Spice (1/29/2007)
#17 -
A New Flavor of Microsoft Dynamics CRM (1/10/2007)
#18 -
Business Objects Makes Baby's First BI (2/5/2007)
#19 -
Siebel Continues to Fly Solo as a Leader (3/7/2007)
#20 -
RightNow Delivers on Voice Commitment (2/5/2007)
#21 -
Offline-Level Service Is a Must-Have in the Virtual World (1/8/2007)
#22 -
Avaya Begins an Ascent (1/15/2007)
#23 -
Yahoo! Is the New E-Biz Satisfaction Leader (8/14/2007)
#24 -
Salesforce.com Makes a Vertical Splash (2/28/2007)
#25 -
Oracle's World of Unlimited Possibilities (1/31/2007)