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CRM Remains a Fertile Market
New research points to explosive growth in CRM adoption across every segment -- especially on-demand CRM.
Posted Nov 2, 2007
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Forty-two percent of U.S. companies are using CRM, according to new market research from the consulting firm KensingtonHouse, and the percentage just keeps on growing. 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 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 the survey, 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. Eighty-seven percent of survey respondents were either small or midsize businesses (SMBs), but Moriarty says that the preference for on demand extended to the enterprise segment as well. The research, sponsored by Microsoft CRM partner T.H.G. Sales Automation, canvassed 437 respondents representing a population of 20,000 companies with a degree of accuracy of plus or minus 5 percent. On demand is succeeding because of both its low cost and its simplicity, Moriarty says, adding that KensingtonHouse estimates the model can lower the cost of a CRM deployment by as much as 60 percent while also offering an increasingly user-friendly experience. "Customization is so easy now that you don't have to be a bits-and-bytes guy to go in and create all kinds of different fields, reports, and dashboards," he says. While on-demand initiatives may be easier to implement than on-premise ones, adopters of either variety should still be aware of the significant 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." While this sounds like an inordinately high number to industry outsiders, Moriarty emphasizes that it has to be taken in context. "Three years ago, that number would have been 75 percent," he claims.
The good news is not only that the ecosystem of CRM consultants and systems integrators has matured through continued CRM implementation success, but also that CRM adopters can control their own fates by making CRM an institutional priority. The recent Management Tools and Trends 2007 report from management 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. In the Bain survey, those companies who 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. That data point alone should convince any CRM adopter aiming to maximize return on investment to enter into the implementation prepared and willing to put in some heavy lifting. "You have to maintain the quality of data and make sure to load a good set of business rules that specify how the system is going to be used," Moriarty counsels. "You have to do the work."

Related articles: CRM Numbers Grow, But Also Mislead The customer management applications market rose 8 percent in 2006, as it did in 2005; SAP and Oracle continue to lead, but their revenue figures don't tell the full tale. Oracle's Smaller Slice of CRM's Bigger Pie The worldwide CRM market grew 11.5 percent in 2006 to just under $6.5 billion in revenue; Oracle Corp. sees both its revenue and its market share slip. The CRM Market Is Still Strong [March 2007] The market continues to expand, albeit at a moderate pace, as vendors achieve strong growth in SaaS applications and vertically focused solutions. Midmarket CRM Grows SaaS and open-source CRM offerings are replacing contact managers and spreadsheets as the systems of record for medium businesses. Enterprise CRM Is Three Sheets to the Wind A new Forrester Wave on enterprise CRM finds Oracle and SAP to be riding at the crest, while a number of competitors stock the sea with solid options. CRM Is Back on the Glory Road The market experiences its second consecutive year of growth and enters its "second wave," according to one industry analyst. CRM Sticks to the Growth Track New license revenue continues to rise in the industry, with marketing applications predicted to be the top performers through 2009, despite mergers and economic pressure. Back to Double-Digit Growth There will likely come a time when not one, but all vendors in the large enterprise category offer a hosted solution. CRM New License Revenue Grows Again A shift from penny-pinching to business growth and the appeal of hosted solutions are contributing to a license-revenue upswing.
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