• August 2, 2005
  • By Marshall Lager, founder and managing principal, Third Idea Consulting; contributor, CRM magazine

The CRM Industry Is Here to Play

The CRM applications market turned increased user organization into positive growth during 2004, according to a newly released report from IDC. Total market revenues reached $8.8 billion, a gain of 8 percent over 2003, and customers' intentions to implement CRM and focus on CRM initiatives remain high in 2005. IDC's report, "Worldwide CRM Applications 2004 Vendor Shares: Let the Games Begin," examined 153 providers of commercially available applications delivered through sale, rental, lease, or as a service, including marketing automation, sales automation, customer service, and contact center applications. Siebel Systems maintained its position as market leader, garnering 10.7 percent of the market in 2004, with Oracle's 6.8 percent share giving it the second spot, supplanting SAP.

"CRM is benefiting from general market recovery, pent-up demand, and a resurgence of IT budgets in 2004," says Mary Wardley, vice president of CRM apps research at IDC and coauthor of the report. "The growth of the relative newcomers, as well as new functionality and licensing models from established vendors, have rejuvenated the market and turned the spotlight on true customer need." This growth is not confined to North America and Western Europe, but those regions are the largest markets for CRM, representing 60.3 percent and 28.8 percent of worldwide revenue, respectively.

"We had a couple of really down years in the CRM industry, then 2003 was hovering just slightly below break-even," Wardley says, blaming the tough times on a number of related factors surrounding IT expenditures at the turn of the 21st century. "Enthusiasm for CRM was a little overexuberant due to Y2K issues. IT departments were realizing they had a budget and needed to spend it on updating the organization, and CRM came online at just the right time to get on the schedule. But organizations didn't realize the extent of business process change that was required to properly implement CRM products and initiatives. They left well enough alone, since businesses won't flag something as a problem as long as they can get it done, no matter how inefficiently."

The results of the IDC study indicate that vendors are adapting to customer needs and business benefits, rather than raw, untamed functionality. As a result, implementations will likely focus more upon BPM flows than specific functions, according to the report. However, functions like embedded analytics are at the top of the must-have list.

"We're not seeing the traditional market cycle, where there ends up being two or three major vendors with a commoditized product," Wardley says, pointing to the growth of software-as-a-service from Salesforce.com and other on-demand vendors such as RightNow Technologies, as well as more customization options and vertical applications. "Buying CRM is different from buying accounting applications--every business has different processes. Salesforce.com came along and made the on-demand space work, but Siebel and the other leaders adapted. Siebel will be doing a lot more bridging of its enterprise offering with the on-demand component."

Related articles:
SFA and Marketing Automation Show Even Growth
SMBs Are Shopping For ERP and CRM Solutions
Business Process Management Is the Next Phase in the CRM Evolution

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