CRM License Sales Down 25 Percent in 2002

The CRM industry suffered a second year of declining new-license revenues in 2002, according to a recent Gartner report. In 2002 total CRM new-license revenue was $2.8 billion, a 24.7 percent decline from 2001 revenue of $3.7 billion. The market declined 6.4 percent in 2001, compared to 2000. "Things have changed greatly compared to years prior to 2000, where we saw rapid growth rates of up to 89 percent," says Tom Topolinski, vice president for Gartner's worldwide software applications group. "The reality is that people are basing their decisions on return on investment models and are looking for proof of solid returns. Also, as opposed to several years ago when companies underwent much bigger implementations, CRM projects are now smaller and tactically focused, which has changed the market size as well." Topolinski adds that price discounting has also affected the market in a negative way. "The vendors whose products have been selling the least have been discounting their software significantly, which accounts for further loss of market share and a drop in market size," he says. Siebel Systems topped the list in terms of market share this year with 24.9 percent share. However, this was a 3.6 drop in share points from 2001. Siebel recently had a very bad quarter, but Topolonski says the future of the company is not in jeopardy just yet. "They are a solid company with a solid product, it will take a few more quarters to see if Siebel is in a state of permanent decline, or if the company's sales will level off and possibly climb back up again," Topolinski says. SAP AG holds the second-highest share at 15.9 percent, which is a 5 percent increase over 2001. SAP was the only company in the top five to make significant gains. PeopleSoft, which came in at number three made slight gains, coming in a 4.3 percent share compared to a 3.9 percent share in 2001. Oracle and Amdocs round out the top five, with 4.3 percent and 3.2 percent respectively, and both saw market share declines in 2002. Topolinski says the potential Oracle takeover of PeopleSoft will not have any major effects on the total CRM license landscape in 2003. "If the two combine, they are still a solid third place and do not unseat SAP or Siebel," he says. "It would not really change the total amount of sales in the marketplace."