According to the study, the industry continues to sputter in generating license revenue.
Posted Jul 14, 2004
The CRM market finally rebounded in 2003, with revenue growing by 4 percent over 2002, according to the omnibus CRM report recently issued by AMR Research. The report projects even greater expansion this year--to the tune of 6 percent revenue growth--and a five-year compound annual growth rate of 8 percent through 2008. Overall, the report says CRM revenue will grow from $9.9 billion in 2003 to $14.4 billion in 2008.
The study, "The Customer Management Applications Report, 2003-2008," indicates that the bulk of 2003's growth came from "pockets of success," including marketing analytics modules and quality monitoring applications. Revenue generated by implementation, services, and training also grew 8 percent in 2003.
Where the industry continues to sputter, according to AMR's findings, is in generating license revenue. Revenue in that category fell by 2 percent in 2003, an underpinning of AMR's prediction that the shift of revenue from licensing toward services is a growing trend. (Still, the 2 percent drop was an improvement over the previous year, when license revenue fell 12 percent.) In fact, maintenance revenue grew by 8 percent in 2003, and the report contains survey results showing that companies expect to spend 55 percent of their CRM budgets on maintenance in 2004.
Other findings, however, reflect less success on the part of end users. Only one third of the companies in AMR's survey of CRM users cited in the study reported a tangible ROI from their customer management implementations. More than a quarter of those surveyed said they'd prematurely ended a CRM deployment due to failure.
That track record may explain why AMR predicts the bulk of the growth over the next year will come from outside the full-suite CRM market. Laura Preslan, research director at AMR Research and the primary author of the report, believes that future CRM growth will come from specialized modules like analytics, price optimization, and hosted applications, but she notes that full-suite CRM isn't gone just yet. "Full suite sales will continue, but there will be many fewer that are purchased up front," she says, predicting that "more land-and-expand deals where companies purchase one or two modules, and then gradually purchase and roll-out additional modules over time."
Jeff Pulver, vice president of worldwide marketing for Siebel Systems, says that Siebel's analytics module is "one of the fastest growing areas of our product line." Nevertheless, Pulver says, Siebel is "still seeing new customers buying the full suite of products."
Preslan says it's also worth noting that "companies are showing their preference for easy-to-use, easy-to-implement tools, as evidenced by the growth rates of Microsoft's CRM product and Salesforce.com"--which showed 94 percent and 39 percent revenue growth, respectively. "Buyers are choosing ease of use over functionality bells and whistles."
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