Gartner predicts CRM software revenue will grow 14 percent this year to exceed $7.4 billion, as SaaS, sales, and foreign markets continue to drive the market.
Posted Sep 6, 2007
As enterprises continue to invest in front-office applications, worldwide CRM software revenue is forecast to exceed $7.4 billion in 2007, according to a new report from Gartner--up 14 percent from $6.5 billion in 2006. The research firm also expects the market to experience continued strong growth through the rest of the decade, due in large part to software-as-a-service (SaaS) and expansion to new overseas markets.
The annual "CRM Software Forecast" report suggests that, despite CRM's evolutionary development beyond sales force automation (SFA), sales continues to be its predominant subsegment, driven primarily by the continued growth of SaaS. In 2006, SaaS represented 12 percent of total CRM software revenue, and is on track to reach nearly 14 percent this year. By year-end, SaaS may represent more than $1 billion in CRM software revenue, growing at more than double the rate of total CRM software market. "The sustained performance of major on-demand-solutions providers is driving the growth in the SaaS segment," says Sharon Mertz, research director at Gartner. "As businesses refresh existing SFA systems to align with their renewed drive for business and revenue growth, we expect this to push sales software to [continue to be] the largest subsegment [through] 2011."
In addition to sales, technology related to customer service and the contact center was another subsegment that experienced stronger-than-expected growth, driven primarily by workforce optimization and multichannel functionality as businesses targeted improvements among their customer-service representatives and tried to appease customers across all channels. The contact center segment "usually grows a little slower than the others, though that's partially because the market for contact centers is such a large and diversified one," Mertz says. "This year, that wasn't the case."
Analytics continues to garner attention as well, with both niche players (such as SAS and SPSS) and suite providers (such as Oracle and SAP) embedding dashboards and user-friendly interfaces to bring analytics to the masses. "It's a maturity curve," Mertz says, referring to the evolution of these applications from a "back-office tool for the guys in the white lab coats" to a front-line application that business users are leveraging on a daily basis. "They're becoming mainstream and organizations are now using them to do analysis to drive their business in real time, and on a daily basis. Analytics and BI apps are immensely popular right now, and [are] allowing companies to really drive value from all that data their CRM systems have been collecting over the years."
Growth is also being driven globally by software companies that are beginning to make worldwide investments, particularly in regions such as India and the rest of Asia. Mertz points to such recent examples as SAP's expansion in India and Salesforce.com's April debut of its China Edition. "Those vendors that are large enough are expanding to provide specific markets with localized solutions," she says. "Many of these developing areas are experiencing a dramatic increase in middle-class organizations that require CRM solutions. Vendors are taking advantage of that."
Despite the market's expected strength through the end of this year, its growth will be hindered somewhat over the next 12 to 18 months because of the downstream impact of economic conditions, Mertz says. Nevertheless, Gartner still expects the market to expand significantly over the coming years, surpassing $11.4 billion in total software revenue by 2011. "Businesses still have money to invest, and customers still have money to spend, so while analysts expect an eventual downturn for the economy, its actual impact on the [CRM] market will be minor," Mertz says.
After an expected hiccup in early 2008, Mertz predicts that forward momentum will return to the market by late 2008 and into 2009, as buying decisions become clearer and customers undertake platform migrations to SOA. "Increasing demand for analytics, marketing automation, and a focus on SaaS solutions will also drive growth during this time," she says. "Buyer application selection will continue to focus on areas showing rapid ROI in all CRM subsegments."
Overall, Mertz says the ongoing emergence of SOA, open source, Web 2.0-related technologies, and SaaS will result in continued market momentum for the CRM industry. "It's a very exciting time in CRM right now," she says "And that's being reflected by the growth it's experiencing."
The CRM Market Is Still Strong [March 2007]
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CRM Expansion Continues [June 2006]
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CRM New License Revenue Grows Again [Sept. 2005]
A shift from penny-pinching to business growth and the appeal of hosted solutions are contributing to a license-revenue upswing.
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; while SAP continues to dominate, Oracle sees both its revenue and its market share slip.
SaaS Will Outpace the Rest of the Market
A recent forecast predicts software-as-a-service will be the dominant source of the market's revenue growth.
SaaS Rises in the East
The Asian market for on-demand software nearly doubled last year as awareness and adoption rates boomed; new report says satisfaction is high for CRM and other applications.
SAP Escalates in India
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A new report from AMR on customer management indicates double-digit market growth is here to stay, though the economy remains a concern.