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SAP Retains Market-Share Lead in CRM
Market intelligence from Gartner shows the Wonder of Walldorf still on top in CRM, ERP, and supply chain.
Posted Aug 4, 2008
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The market for enterprise CRM software remained strong in 2007, as did those for supply chain management (SCM) and enterprise resource planning (ERP), according to a trio of reports released last week by research firm Gartner. "Strong" is really strong in this case: CRM revenues grew 23.1 percent to $8.1 billion in 2007; SCM grew 17.6 percent to $5.96 billion; and ERP grew 16.7 percent to $17.76 billion.

Excellent performance marks each of the three related industries, and so does one other thing: each has Walldorf, Germany-based vendor SAP leading in market share by a comfortable margin. The company held a 25.4 percent share of worldwide CRM revenues in 2007, a slight decline from 2006's 25.6 percent but still well ahead of runner-up Oracle (16.3 percent in 2007, up from 15.5 in 2006). SAP's share of the SCM market grew 2.4 percentage points to 22.4 percent, again topping Oracle's 16 percent. In ERP, SAP beat out its nearest rival -- Oracle again -- by nearly two-to-one, 27.5 percent to 13.9 percent.

SAP is certainly a company to be reckoned with, and its market-leading positions are hardly a surprise, but casual discussion of enterprise CRM, SCM, and ERP vendors rarely seems to begin with SAP -- it's often "the other company" mentioned after Oracle, in fact. Why?

"Bear in mind there's a lot of currency effect in market share," says Sharon Mertz, research director for CRM with Gartner. "SAP reports in euro; we calculate in euro and then convert to dollars. Given the weak dollar, it makes [SAP] look a little larger." That's not the complete answer, though; Mertz notes that Oracle, among other vendors, also benefits from this effect because much of its revenue comes from outside the United States.

SAP has also performed well since 2006, a year when Oracle was still struggling with one of its highest-profile acquisitions. "Oracle didn't do well in 2006, since it closed the Siebel acquisition in January of that year," Mertz says. A product line often suffers when acquired by a rival, and the rivalry between Siebel Systems and Oracle was a famously bitter one. SAP, however, had the good fortune to compound its own internal growth in that period with the continued success of Business Objects, a 2007 acquisition that was immediately accretive to SAP's bottom line. "SAP did well both organically and from the Business Objects line," Mertz says. "Usually you slow down after an acquisition, but both were strong."

While some continue to criticize the slow development of SAP Business ByDesign, the company's midmarket software-as-a-service (SaaS) offering, Mertz says SAP is wise to take it slow and "focus on making sure it's robust, with top quality and high profitability," as releasing a bad product can be worse than making customers wait for a good one.

The markets themselves remain healthy as well. "Last year, nearly everyone did very well; it was a matter of a rising tide that floats all boats, and even weaker performers benefited," Mertz says. "This year, budgets are being managed more closely, and customers can be more discriminating with their spending." This translates into continued popularity for CRM, as companies struggle to hold onto the customers they have.

Overall in the CRM space, Gartner saw revenue and market share continue to consolidate among the top vendors. In fact, several of the top-five CRM vendors outpaced the overall market in terms of revenue growth, with Oracle seeing an increase of 29.8 percent, Salesforce.com enjoying a rise of 49.8 percent, and Microsoft celebrating a whopping 88.6 percent year-over-year increase in revenue; SAP's minuscule slip in market share notwithstanding, Amdocs was the only one of the top-five firms to see its market share significantly decline, from 5.6 percent in 2006 to 5.2 percent last year.

Company        2007          2007 Market     2006        2006           2006-2007
                       Revenue     Share (%)       Revenue   Share (%)  Growth (%)

SAP...................2,050.8          25.4              1,681.7       25.6            22.0
Oracle................1,319.8          16.3              1,016.8      15.5            29.8
Salesforce.com......676.5            8.4                451.7        6.9            49.8
Amdocs.................421.0            5.2                365.9        5.6            15.1
Microsoft...............332.1             4.1                176.1        2.7            88.6
Others................3,289.1           40.6             2,881.6      43.7            14.1
Total...................8,089.3         100.0             6,573.8     100.0           23.1

                                                  Source: Gartner; dollar figures in millions

Gartner has recommendations to go with its market assessments as well -- specifically that CRM vendors should focus on offering products, services, and contractual arrangements that enable users to create the optimal experience for their customers. "Top priorities include online communities, workforce optimization, analytics, multichannel campaign management, and marketing resource management," according to the report.

Social networking is an important area of expansion. "Looking forward, social networking, collaborative technologies, and social software are producing a major impact on the CRM market," Mertz writes in her CRM report. "Enterprises face increasing challenges to determine how best to harness these trends and technologies for growth, both internally and in their customer service strategies."


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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