• April 2, 2008
  • By Marshall Lager, founder and managing principal, Third Idea Consulting; contributor, CRM magazine

There's No Stopping CRM

The CRM market as a whole grew 20 percent during 2007, the fourth consecutive year of double-digit growth, according to a report by research firm Gartner. "Market Trends: Customer Relationship Management Software, Worldwide, 2007-2012" indicates that total revenue for the year approached $8 billion. Nor is there any sign of CRM's growth abating. Sharon Mertz, research director of CRM for Gartner's software market research team, foresees a compound annual growth rate (CAGR) of 11.1 percent for the industry through 2012. The CAGR estimate, while lower than the previous year's (11.9 percent), is still strong, even as fears of an economic recession continue to loom. "When we've talked to vendors, we haven't seen a lot of nervousness, and in fact several have raised their financial guidance," she says. Mertz believes vendor confidence is genuine. "When you have this kind of sustained growth, naturally you look at what's driving it and wonder if it will continue," she says. "The vendors know what's in their pipelines, and they see that companies still have money to spend, and are still making investments." Maintenance is another revenue stream that isn't about to dry up, although some vendors who are switching from primarily on-premise to on-demand delivery may experience temporary declines; Mertz says revenues for those vendors "will be relatively flat as they change models." Some slowing is also to be expected among vendors that cater to the financial services market, due to the continued worry about general financial outlook. Another factor in CRM's continued growth is smart business development. "Vendor strategy lately has been about diversification," Mertz says. "Revenues are coming from outside the United States more and more; vendors are extending into partner channels; and many are also starting to reach downmarket, trying to reach the [small and midsize business] segment." Self-service and other means of handling customers via the Web will tend to grow in a weak economy, so Mertz says technologies that aid such efforts will continue to see strong demand. One mitigating factor, Mertz suggests, is the trend toward smaller CRM projects. And any truly adverse change in the economic situation will of course throw off any predictions, Gartner's included. "If it gets bad enough, people stick to blocking and tackling--just keeping their infrastructure running and making less investment in new technology," Mertz says. "But the executives who are running things now have been through other economic downturns. They know what they look like, and how to deal with them."

Related articles: Insight: CRM Market Set to Double Recent studies predict the global CRM market will double within six years, and suggest explosive growth in CRM adoption across every segment -- especially on-demand CRM. CRM Market Set to Double The global CRM market will double within six years, according to a new Datamonitor report. CRM Remains a Fertile Market New research points to explosive growth in CRM adoption across every segment -- especially on-demand CRM. CRM Numbers Grow, But Also Mislead The customer management applications market rose 8 percent in 2006, as it did in 2005; SAP and Oracle continue to lead, but their revenue figures don't tell the full tale. Oracle's Smaller Slice of CRM's Bigger Pie The worldwide CRM market grew 11.5 percent in 2006 to just under $6.5 billion in revenue; Oracle Corp. sees both its revenue and its market share slip. The CRM Market Is Still Strong [March 2007] The market continues to expand, albeit at a moderate pace, as vendors achieve strong growth in SaaS applications and vertically focused solutions. Midmarket CRM Grows SaaS and open-source CRM offerings are replacing contact managers and spreadsheets as the systems of record for medium businesses. Enterprise CRM Is Three Sheets to the Wind A new Forrester Wave on enterprise CRM finds Oracle and SAP to be riding at the crest, while a number of competitors stock the sea with solid options. CRM Is Back on the Glory Road The market experiences its second consecutive year of growth and enters its "second wave," according to one industry analyst. CRM Sticks to the Growth Track New license revenue continues to rise in the industry, with marketing applications predicted to be the top performers through 2009, despite mergers and economic pressure. Back to Double-Digit Growth There will likely come a time when not one, but all vendors in the large enterprise category offer a hosted solution. CRM New License Revenue Grows Again A shift from penny-pinching to business growth and the appeal of hosted solutions are contributing to a license-revenue upswing.
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