CRM Market Grows for Fifth Straight Year

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The worldwide CRM market extended its growth streak to a fifth consecutive year, according to a report from Gartner, up 12.5 percent in 2008, from revenue of $8.13 billion in 2007 to $9.15 billion in 2008.

While the growth rate may seem less impressive than 2007’s 23.1 percent explosion, Sharon Mertz, Gartner research director and author of the report, explains that she was still “delighted, because the second half of 2008 was so tough for the vendors…. Despite that,many vendors did very well.”

(See bar chart below for the top five.)

“SAP didn’t do as well as I had anticipated,” Mertz says, noting a 0.8 percent slide in revenue compared to 2007. “The company is pretty focused on BusinessObjects this year, and the company’s CRM offering is more well-received than versions in the past. The user interface is far improved and people seem to like it much better, so we’ll have to wait and see if it helps SAP in the upcoming year.”

SAP’s stagnation was offset by explosive growth from Salesforce.com (up 42.7 percent over 2007) and Microsoft (up 75 percent), results that Mertz attributes to investments in technologies focused on customer retention, analytics, and on-demand solutions.

Top 5 CRM Vendors

Mertz finds that, like last year, the software-as-a-service (SaaS) side continues to push the overall CRM market forward, representing approximately 20 percent of total CRM software revenue in 2008, an increase from 15 percent in 2007. “SaaS is still really strong, and I don’t see that abating in the near future,” she says. “People expect a bit of dropout this year because of businesses consolidating and layoffs, leading to fewer users, but as a model it is exceptionally viable.”

Another area of interest, deemed “disruptive”with regard to last year’s report and still increasing in influence, is social networking. Mertz explains that, in 2007, more than a third of vendors told her social software/networking was top-of-mind for clients. In 2008, that grew to half. “It’s gaining more traction because more consumers are becoming involved in social networking and vendors really can’t ignore it,” she says. “They have to understand how these different platforms, communities, and forums will impact their clients’ strategies and how they can use that data most effectively in CRM.”

Mertz says it’s important to be realistic about the overall market.“People are buying things in smaller, more-focused chunks, so the smaller deal sizes can have an impact,” she says. “This year there is a different tone, because in the last four years the market had high growth.  We see positive signs, but clearly, growth is not going at the trajectory it had in the past.” 

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