CRM Market Grows for Fifth Straight Year

In a year filled with of bailouts, credit crises, and "toxic assets," the worldwide CRM market nevertheless extended its growth streak to a fifth consecutive year, according to new research from Gartner.

The report, "Dataquest Insight: CRM Software Market Share Analysis, Worldwide 2008," estimates that the overall CRM market grew by 12.5 percent last year, from revenue of $8.13 billion in 2007 to $9.15 billion in 2008. While the growth rate is lower than 2007's 23.1 percent explosion, Sharon Mertz, Gartner research director and author of the report, explains that she was still "delighted, because the second half of 2008 was so tough for the vendors.… Things became very difficult starting in September [2008]. Despite that, many vendors did very well."

The top five vendors in terms of 2008 market share are:

• SAP.....................22.5 percent
• Oracle.................16.1 percent
• Salesforce.com.....10.6 percent
• Microsoft...............6.4 percent
• Amdocs.................4.9 percent

SAP saw a slight decline in revenue growth, down 0.8 percent from 2007. "SAP didn't do as well as I had anticipated," Mertz says. "The company is pretty focused on [integrating] BusinessObjects this year, and the company's CRM offering is more well-received than versions in the past. The user interface is far improved and people seem to like it much better, so we'll have to wait and see if it helps SAP in the upcoming year."

Two of the other top-five vendors, Salesforce.com and Microsoft, realized large explosions in revenue growth from last year, 42.7 percent and 75 percent, respectively. Mertz credits investments by the two companies in technologies focused on customer retention, analytics, and software-as-a-service (SaaS) solutions for helping to drive the growth.

SaaS continued to push the overall CRM market forward yet again this year, Mertz says, representing approximately 20 percent of total CRM software market revenue in 2008, an increase from 15 percent in 2007. "SaaS is still really strong, and I don't see that abating in the near future," she says. "People expect a bit of dropout this year because of businesses consolidating and layoffs, leading to fewer users, but as a model it's exceptionally viable."

Another area Mertz deems "disruptive" for the CRM industry is social networking, which has only increased in influence since its mention in last year's report. She explains that, in 2007, more than a third of vendors told her social software or social networking was top-of-mind for clients. In 2008, that grew to half. "It's gaining more traction because more consumers are becoming involved in social networking and vendors really can't ignore it," she says. "They have to understand how these different platforms, communities, and forums will impact their clients' strategies and how they can use that data most effectively in CRM."

As CRM continues to weather the economic storm, Mertz says it is important to keep an eye -- and realistic perspective -- on any future growth in the overall market. "People are buying things in smaller, more-focused chunks, so the smaller deal sizes can have an impact," she says. "This year there is a different tone, because in the last four years the market had high growth. We see positive signs, but clearly growth is not going at the trajectory it had in the past."

News relevant to the customer relationship management industry is posted several times a day on destinationCRM.com, in addition to the news section Insight that appears every month in the pages of CRM magazine. You may leave a public comment regarding this article by clicking on "Comments" at the top; to contact the editors, please email editor@destinationCRM.com.

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