Back to Double-Digit Growth

The CRM applications market is finally shaking off some of the post-Y2K listlessness and showing signs of life. A recent AMR Research report maintains that for the first time since 1999 the CRM software market reached a double-digit growth rate, jumping 10 percent from 2003 to $10.9 billion in 2004. This is largely due to the efforts of those companies and individuals highlighted in our fourth annual CRM Leader Awards issue, which includes our Influential Leaders awards, CRM Market Leaders awards, and CRM Elite awards. The vendors, consultants, and customer companies mentioned in these pages represent the best of the CRM industry. We applaud them for their accomplishments over the past year, and hope that they continue to drive the industry's forward momentum for another year of double-digit growth. To do this, though, it is important to understand what's driving the market and what will sustain its growth--these insights, and more, can be gleaned from the pages of CRM magazine's 2005 CRM Leader Awards. Last year's market growth, according to the AMR report, is largely due to the 105 percent spike in hosted CRM investments. What's particularly interesting is the impact that pure-play hosting providers like NetSuite, RightNow Technologies, and Salesforce.com have had on the rest of the industry, from vendors to customers. It's only natural for SMBs to want enterprise-class applications, but installed applications have traditionally been too costly. However, as the hosted model removes the burden of initial up-front costs, as well as system maintenance and upgrades for customer companies, CRM hosting providers have charmed organizations within the voluminous SMB market. It's a small wonder, as SMBs relish solutions that are low cost and easy to implement. The hosted delivery model makes tons of sense for the SMBs, but Salesforce.com's leader Marc Benioff also makes a strong case now for hosted applications in departments of large businesses--and enterprise companies are listening to him. There will likely come a time when not one, but all vendors in the large enterprise category offer a hosted solution. Siebel is already up to version 8 of its on-demand product, and SAP is rumored to have a hosted solution in the works, as covered on destinationCRM.com ("SAP's New Hosted Model?" August 15, 2005). Clearly, hosting's popularity cannot be ignored. That's why this year we introduced a column in select CRM Market Leaders charts indicating whether a vendor offers a hosted solution or not. As the industry continues its resurgence, it is also essential to note each company's plans for growth. Consequently, we also introduced a new criterion in our propriety CRM Market Leader selection formula--reputation for company direction. To determine this, we polled analysts and asked them to consider such issues as new product releases and upgrades, organizational restructuring, and mergers and acquisitions over the past 12 months. We added this criterion for the simple reason that CRM buyers are justifiably concerned about these topics. One analyst says (on page 34) that some clients are so perplexed by one enterprise CRM suite vendor's direction that they don't know whether to stick with the vendor or switch. The lesson learned here? While hosting is largely responsible for bringing new customers into the CRM industry, it is company direction that will keep them.