The 2004 CRM Apps Market: Double Digits
The CRM applications market experienced double-digit growth in 2004 for the first time since 1999, rising to $10.9 billion, a 10 percent increase over 2003's figure. The numbers were aided by a substantial 105 percent upswing in hosted CRM app sales, according to a report by AMR Research, "The Customer Management Applications Report, 2004-2009." AMR forecasts a five-year CAGR of 8 percent for CRM's total revenue growth, and details industry trends, forecasts, and the 2004 CRM revenue rankings of more than 40 vendors. The hosted CRM market's growth is an impressive uptake, says Rob Bois, senior research analyst at AMR Research. He also notes that it is due in part to the market's relative infancy--with a smaller base, a market can have a higher growth rate in comparison with a market with a larger one.
The ability to allow organizations to take a piecemeal approach to buying hosted applications also contributed to growth. "There was a bad taste in a lot of people's mouths with some failed deployments of CRM," Bois says. "They want to buy one or two modules and demonstrate an ROI before moving on. It's easier for them to get [hosted applications] approved through management or IT. [Hosted applications] give both small and midsize businesses an opportunity to get enterprise-class applications that maybe they wouldn't have been able to if they had to buy an installed application, and departments within larger businesses are able to do the same."
Two players well known for their hosted capabilities, RightNow Technologies and Salesforce.com, had strong revenue growth rates. RightNow enjoyed a 97 percent growth rate, but ranked 25th because of its substantially smaller 2004 revenue than some of the players within the total CRM applications market, with about $62 million. Salesforce.com, however, boosted its revenue ranking from 22 (with about $96 million) in 2003 to 12 (with about $176 million) in 2004, a 83 percent increase.
Despite growth in the hosted CRM space in 2004, the model accounted for only 9 percent of the entire CRM applications market, as traditional licensed applications that year still commanded most of the CRM market's revenue share, or 91 percent. SAP placed first in the 2004 revenue rank, with about $1.66 billion, up 30 percent from 2003. The company, which is expected to grow its CRM revenue by 4 percent from 2004 to 2005, swapped positions with Siebel Systems, which fell from 2003's top spot to 2004's second seed. Siebel's CRM revenue in 2004 slid 1 percent from 2003's approximately $1.35 billion to about $1.34 billion. Its forecasted growth is expected to be flat.
PeopleSoft took third place in CRM market revenue, but because it was acquired by Oracle, AMR took PeopleSoft's growth revenue forecast and attributed it to Oracle. Vertical specialists Amdocs and Dendrite International made their presence felt, securing respectively the fourth and fifth positions. Oracle placed sixth, while contact vendors Aspect Communications, which was acquired by Concerto Software (ranked 11th) earlier this year, was seventh, followed by Avaya, which was eighth. Microsoft landed in the ninth spot for CRM market revenue, and Cisco Systems' Internet Communications Software Group rounded out the top 10.
Contact center players placing in the top spots may surprise some, but Bois notes that when segmented by CRM license revenue and share, customer service and contact center infrastructure are the two largest applications, with $910 million and $768 million in 2004 revenue respectively. "Customer service and contact center infrastructure are still where a lot of the revenue that's driving customer management is coming from." These areas have the largest revenues, but segments including price management, channel management, and marketing automation are growing quite well, according to Bois.
For the growth in the overall CRM market applications market, however, Bois says the biggest driver is businesses' needs to increase revenue. "They spent the last few years in the economic downturn trying to cut costs. Businesses are really tasked with growing revenue now since they've already squeezed a lot of costs out of the processes."
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