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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 Corp. sees both its revenue and its market share slip.
Posted Jul 10, 2007
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The CRM software market continued its growth streak in 2006, though at a slightly slower pace, according to recently unveiled research from Gartner. Total software revenue swelled year-over-year by 11.5 percent from $5.81 billion to $6.48 billion, a slight decrease from the 13.7 percent growth rate the sector enjoyed in 2005. The firm classifies software revenue as income accrued from new licenses; updates; subscriptions; and hosting, technical support and maintenance--and excludes professional services and hardware revenue. The document, "Market Share: CRM Software Market, Worldwide, 2006," points to several factors contributing to the market's growth, including continued buyer interest in leveraging applications intended to boost customer acquisition and retention efforts. "Businesses still have a lot of cash, and they're still really willing to invest in technologies that will help them grow their profitability, so that level of confidence really helped out the market," says Sharon Mertz, a research director at Gartner and author of the document. Additional market drivers, according to Mertz, are consolidation; increased interest in CRM technologies from SMBs; more on-demand deployments; double-digit growth in the Asia-Pacific region; and strong demand for vertical specialization, with considerable movement in industries such as communications, financial services, high tech and retail. These market dynamics are reflected in Gartner's assessment of CRM vendors' software revenue and market share figures. SAP again captured the heftiest chunk of the market, amassing $1.67 billion in revenue and a 25.7 percent market share, an increase over its 2005 revenue of $1.49 billion and 2005 market share of 25.6 percent. Meanwhile, Oracle Corp.'s combined revenue, including results from its PeopleSoft and Siebel Systems acquisitions, was strong enough to grab the second position, but the combined company slipped considerably further behind SAP. Oracle's $1.02 billion in revenue represented a significant decrease from its 2005 revenue of $1.33 billion, while its market share plummeted from 22.9 percent to 15.7 percent.
Ironically, as Oracle's market share declined, a rise in share was enjoyed by Salesforce.com, a company in which Oracle founder and chief executive Larry Ellison was an early investor. Salesforce's revenue rose from $280.7 million to $451.7 million and its market share increased from 4.8 percent to 7 percent. That put the company--the only named pure-play on-demand vendor on the list--in the third spot overall, outpacing Amdocs (which grew its revenue from $276.3 million to $365.9 million and its market share from 4.8 percent to 5.6 percent). Because revenues for Oracle, PeopleSoft and Siebel were bundled for this year's evaluation, business intelligence and analytics giant SAS Institute cracked into the top five with $220 million, up from $179.9 million in 2005. SAS's market share increased from 3.1 percent to 3.4 percent. Another large jump in market share could be found in Gartner's "Others" category, which comprises several smaller vendors. That group improved in revenue from $2.25 billion to $2.76 billion and in market share from 38.8 percent to 42.6 percent. While the market has continued to show signs of sturdy growth, the document also highlights market inhibitors, including:
  • pricing pressures and proof-of-concept requirements from more sophisticated buyers adding cost to the sales cycle and challenging vendor profitability
  • issues with adequate sales coverage slowing growth
  • general market churn and consolidation impacting buyer go-to-market strategies
Overall, Mertz expects the market will continue to expand, noting Gartner's forecast, "CRM Software, Worldwide, 2006-2011," which contends that the compound annual growth rate for that period will be 11.7 percent. "We're about to update it, and I believe it will stay within that ballpark, somewhere between 11.5 percent and 12 percent," she adds. Related articles: The CRM Market Is Still Strong [March 2007] The market continues to expand, albeit at a moderate pace, as vendors achieve strong growth in SaaS applications and vertically focused solutions. CRM Expansion Continues [June 2006] Worldwide, CRM software realized about 14 percent growth in 2005; drivers include consolidation, vertical-market solutions growth and midmarket growth. 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. Enterprise CRM Is Three Sheets to the Wind A new Forrester Wave on enterprise CRM finds Oracle and SAP to be riding at the crest, while a number of competitors stock the sea with solid options.
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