IDC Predicts $11.4 Billion in CRM Application Sales in 2008

So much for the claims that the CRM industry's era of growth is over: A new report by industry research firm IDC says the worldwide market for CRM applications will reach $11.4 billion in 2008. That figure up from $7.4 billion in 2003, which is a rise of more than 50 percent over the next five years. This expected growth should help compensate for a slight drop in revenues in 2003. IDC's study, "Worldwide CRM Applications 2004-2008 Forecast and 2003 Vendor Shares," says that new market conditions, including an increased reliance on ROI justifications, have "fundamentally changed" purchasing patterns industry-wide. Nevertheless, the firm concludes that there was positive growth in several CRM categories like analytics, and the recent rough patch may well be over. "While a return to double-digit growth rates remains in the future, the full-scale landslide seems to have ended," says report coauthor Mary Wardley, IDC's vice president of enterprise applications and CRM software. Among the critical factors that IDC expects to contribute to the industry's overall rebound are "alternative delivery methods"--a reference to hosted, or on-demand, delivery of CRM functionality. Wardley says that "vendors must have an answer to compete with these typically lower-cost challengers [and]...must continue to emphasize total cost of ownership as well as ROI." According to Wardley, "The 2003 market year for the CRM applications market was one in which vendors worked feverishly to regain solid ground." End users, she says, "are buying on a smaller, more-considered scale, [and] large deals are not as plentiful." The study also indicates that Siebel Systems, while holding on to the top spot among CRM vendors, saw its 2003 worldwide application revenue drop 27.3 percent from 2002, to $881.5 million. Over the same period SAP's revenue jumped 14.0 percent, to $497.5 million, according to IDC. Overall, the CRM applications market "experienced a nearly flat year in 2003, with a slightly negative growth rate of 1.4 percent." Although Siebel suffered a considerable drop in sales, Wardley says, there were some attributes in the company's favor this year, namely its analytics presence and the addition of a hosted application. Siebel's analytics modules "play an unusual role as both a door-opener and [an] add-on to existing accounts." Wardley credits Siebel for having "done a particularly admirable job selling these products stand-alone, and not just as part of a CRM offering." In its efforts to secure a tight grip on the number-two spot, SAP has a distinct advantage over its CRM-only rival, Wardley says. "SAP, by contrast, has had the good fortune of a green-field installed base of its own ERP customers to target," she says. The company's "consistent sales" over the past two years can be ascribed in large part to its ability to deliver "a complete solution...that has met its installed base's requirements." Rounding out the top five vendors, IDC says that Oracle, PeopleSoft, and Amdocs "are all tightly clustered." Oracle managed to hold third place, with $328.9 million in revenue, good enough for a 4.4 percent share of the worldwide market. Related articles: A CRM Growth Spurt in 2006? A new study from IDC predicts CRM market to hit $101 billion by 2007.

CRM Market Expansion Overall revenue is growing, even though license revenue fell 2 percent in 2003.