CRM Expansion Continues
CRM total software revenue worldwide is continuing its upsurge. The market totaled $5.7 billion in 2005, a 13.7 percent year-over-year increase, thanks in large part to license and maintenance revenue, according to Gartner's "Market Share: CRM Software Worldwide, 2005."
Other main drivers, according to Sharon Mertz, research director at Gartner, and author of the report, include:
forward momentum in 2005 and a strong Q4 finish, with many vendors showing strong double-digit growth
consolidation, which produced opportunities for both best-of-breed and suite vendors due to buyer uncertainty (many vendors like SAP and Rimini Street have attempted to benefit from the Siebel-Oracle acquisition with safe-passage programs)
continued adoption of on-demand offerings
high growth in vertical market solutions
increased opportunities in emerging markets
midmarket growth
"There's overall strong demand for CRM in the market," Mertz says. During the economic slump experienced over the last few years, businesses were more concerned with cost-cutting initiatives, but as business confidence returned, more companies are focusing on front end are looking to drive revenue, according to Mertz.
Gartner has traditionally measured market share in terms of new license revenue, but the emergence and increasing popularity of open-source software and buyer-consumption models, such as hosted and subscription offerings, have altered Gartner's method of measuring market share. Now, total software revenue is the guide. This takes into account revenue generated from new license, updates, subscriptions and hosting, technical support, and maintenance (it excludes, however, professional services and hardware revenue).
SAP has retained its top spot, outpacing all contenders with $1.47 billion, which represents a 19.6 percent growth increase from 2004's $1.23 billion. The company also captured 25.9 percent of the market, up from 24.6 percent from 2004. SAP's ongoing emphasis on its NetWeaver platform; strong growth in its vertical solutions; penetration into emerging markets like China and Russia; and channel partnerships are some of the elements that helped SAP stay atop of the leaderboard, according to Mertz. SAP, like other traditional enterprise vendors, has been moving downward to capture the interest of midmarket companies, and its 2006 entrance into the on-demand space may boost its presence in smaller markets.
Siebel Systems secured the second seed, pulling in $966.1 million, up from its 2004 revenue of $908.3 million, but its market share experienced a slight skid from 18.1 percent in 2004 to 17 percent in 2005. Now a part of Oracle's ever-expanding conglomerate, Siebel is evaluated separately, as the Siebel-Oracle megadeal didn't close until January 2006.
Oracle (including PeopleSoft) is a distant third, and the only vendor within the top five to see both 2005 CRM software revenue and market share decline. Oracle accrued $367.5 million in 2005 CRM software revenue, an 11.7 percent drop from 2004's $416.2 million, and its market share slid from 8.3 percent to 6.4 percent. Still, Siebel and Oracle's combined 2005 total revenue equates to about $1.33 billion, which slightly trails SAP's total. After Oracle announced its intent to acquire Siebel and make it the core of its CRM offering, people were less likely to buy Oracle CRM solutions, according to Mertz.
On-demand player Salesforce.com realized $280.7 million in 2005 CRM total software revenue (up an impressive 77.7 percent from 2004's $158 million, which was enough to grab the fourth slot, while market share grew from 3.2 percent to 4.9 percent. It is important to note, however, that companies with smaller revenues compared to vendors with larger earnings can experience higher growth rates.
Rounding out the top five is Amdocs--a telecommunications specialist that's strengthening its functionality in other verticals like financial services--with $276.4 million in 2005, up 22.3 percent from 2004's $225.9 million. Its market share percentage grew slightly from 4.5 percent to 4.9 percent. "Others" accounts for $2.33 billion in CRM software revenue in 2005, a 12.6 percent boost from $2.07 billion in 2004.
As indicated by market movement, the trend of industry consolidation will surely continue. Within the past four weeks alone Infor announced plans to acquire SSA Global Technologies and M2M Holdings announced it will acquire Onyx Software. "That trend has continued through 2006 and will continue," Mertz says. "There's still a lot of volatility in the market."
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