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CRM Market Continues to Soar for a Fourth Straight Year
Gartner sees 23 percent growth in 2007, and also finds social networking becoming a disruptive force in the CRM industry.
Posted Jul 10, 2008
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No matter what currency you've got in your wallet, CRM has seen continued strong growth for the fourth consecutive year, according to new research from analyst firm Gartner, with a 23.1 percent boost (in American dollars) in 2007.

According to Sharon Mertz, research director of CRM for Gartner’s software market research team and author of "Dataquest Insight: CRM Software Market Share Analysis, Worldwide, 2007," companies finally understand that this software is no longer merely a nice complement but rather a necessary staple. "The space is chugging right along," she says. "[Every company has] to invest in CRM whether to retain customers, grow its base, understand [them] better, or gain an end-to-end view. People are still willing to make those investments." While the 23.1 percent statistic is in American dollars, Mertz stresses the 12.8 percent growth in Euros and 24.6 percent growth in Yen symbolize the market’s global strength. 

A large component of the CRM industry's continued upward climb has been software-as-a-service (SaaS), according to the study. SaaS represented more than 15 percent of total CRM software market revenue in 2007 -- a figure that Mertz admits even she was surprised by, but one that she expects will continue to grow. "SaaS showed up as a stronger driver than I had originally projected," she says. As the gloomy economic horizon forces some companies to reduce their capital budgets, SaaS can fill a CRM need without tapping into that part of the ledger. While pure-play SaaS vendors (such as Salesforce.com) make up the majority of the total market share, other traditional vendors offering both on-demand and on-premise solutions (such as Oracle) are also enjoying success, according to the study. 

The advent of SaaS may not necessarily be new, Mertz says, but the rise of social networking is quite fresh and top-of-mind. She goes on to note that vendors have only recently begun stressing to clients the importance of social networking. "This is definitely becoming a more prominent force in the market," Mertz says. "Vendors will have to implement a strategy [they] can use to advise clients not only from a technological perspective but also from a ‘how do you use this…and apply it’ perspective. It’s one thing to put up a forum [or] chat room, or build a community around your customers -- but it’s another to know how to manage that and make the most out of it."

Being able to deliver on customer feedback, and providing not just service but a superior experience, is also on many companies’ agendas. Study statistics illustrate the market for customer service and support offerings reflects this growing need, as the segment grew 22.7 percent in 2007 and maintained its position of 39 percent of overall CRM market share. "This segment is still very healthy," Mertz states. "[The customer service and support space] has a very large base already, so you wouldn’t expect as much growth as we’ve seen there."  

While customer service’s continued growth was somewhat unexpected, the explosive growth in Microsoft’s overall CRM market share in 2007 was not, according to Mertz. SAP and Oracle still top the CRM market share list, but the Redmond, Wash.-based software giant grew by 88.6 percent in 2007, rounding out the Top 5. (Salesforce.com and Amdocs placed third and fourth, respectively.) Mertz explains the latest release of Microsoft Dynamics CRM -- which had been code-named Titan -- and its integration with the widely used Microsoft Office productivity applications, will only help the company grow stronger moving forward. "[Microsoft’s CRM offering] has grown really well over the past couple of years," Mertz says. "Coming in with different models and price points makes it attractive to people who haven’t used it before. We’ll continue to see strong growth from [the company] and [it will] get a bigger piece of the market as time goes on."

Mertz still sees steady growth in the CRM market’s future, despite the recent gains. "I always question, ‘Is there a saturation point?' " Mertz admits. "Will people slow down from here, sit back, and take advantage of what they’ve recently purchased?" Not anytime soon, she says, thanks to a change in mindset on the part of many companies -- The renewed belief that CRM is a critical business technology will help spur additional purchases. "The opportunity for the market is still really good," she concludes.

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