New research from Gartner predicts strong market growth continuing through 2012, despite the coming economic downturn.
Posted Apr 2, 2008
The CRM market as a whole grew 20 percent during 2007, the fourth consecutive year of double-digit growth, according to a report by research firm Gartner. "Market Trends: Customer Relationship Management Software, Worldwide, 2007-2012" indicates that total revenue for the year approached $8 billion.
Nor is there any sign of CRM's growth abating. Sharon Mertz, research director of CRM for Gartner's software market research team, foresees a compound annual growth rate (CAGR) of 11.1 percent for the industry through 2012. The CAGR estimate, while lower than the previous year's (11.9 percent), is still strong, even as fears of an economic recession continue to loom. "When we've talked to vendors, we haven't seen a lot of nervousness, and in fact several have raised their financial guidance," she says.
Mertz believes vendor confidence is genuine. "When you have this kind of sustained growth, naturally you look at what's driving it and wonder if it will continue," she says. "The vendors know what's in their pipelines, and they see that companies still have money to spend, and are still making investments." Maintenance is another revenue stream that isn't about to dry up, although some vendors who are switching from primarily on-premise to on-demand delivery may experience temporary declines; Mertz says revenues for those vendors "will be relatively flat as they change models." Some slowing is also to be expected among vendors that cater to the financial services market, due to the continued worry about general financial outlook.
Another factor in CRM's continued growth is smart business development. "Vendor strategy lately has been about diversification," Mertz says. "Revenues are coming from outside the United States more and more; vendors are extending into partner channels; and many are also starting to reach downmarket, trying to reach the [small and midsize business] segment." Self-service and other means of handling customers via the Web will tend to grow in a weak economy, so Mertz says technologies that aid such efforts will continue to see strong demand.
One mitigating factor, Mertz suggests, is the trend toward smaller CRM projects. And any truly adverse change in the economic situation will of course throw off any predictions, Gartner's included. "If it gets bad enough, people stick to blocking and tackling--just keeping their infrastructure running and making less investment in new technology," Mertz says. "But the executives who are running things now have been through other economic downturns. They know what they look like, and how to deal with them."
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