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How big is the CRM software-as-a-service industry? How fast will it grow? When will it cap?
These are a few of the questions that potential or actual CRM SaaS users would like to understand before committing SaaS into their strategic information systems planning and making financial investments. While the analysis and speculation to these questions vary according to the different sources, users can take heart that the majority of the answers show significant consistency.
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- The CRM Market Share Leaders
According to a report published in CRM Magazine (September 2007), analyst firm Gartner calculated that CRM software revenue (including revenues from new licenses, updates, subscriptions, hosting, technical support and maintenance) grew 11.5 percent, from $5.81 billion in 2005 to $6.8 billion in 2006. Contributing factors to this growth included double digit Asia Pacific growth and increased adoption of on-demand solutions. The reported touted SAP as the market share leader with $1.67 billion of software revenue and a 25.7% market share, Oracle taking the number two spot with $1.02 billion of software income and 15.7% market share and Salesforce.com landing the distant number three spot with $451.6 million for 2006.
In a separate report published in CFO Magazine, Gartner analyst Robert Desisto predicted that by 2011 fully a quarter of new business software will be delivered as a service.
- On-Demand Gaining Traction
According to IDC report, "U.S. Software On-Demand Delivery Model 2005-2009 Forecast" customers are becoming increasing comfortable with the on-demand delivery model. The report indicates that "the cost-savings benefits surrounding software delivered on-demand have resonated with the marketplace and customers are now looking at on-demand delivery of software to help increase employee productivity and efficiency within customer organizations."
- CSO Insight Survey Forecasts CRM Implementation Evolution
CSO Insights surveyed over 1,000 global companies that have implemented CRM to understand what's next for these organizations. The report, "2007 Sales Performance Optimization Survey", found the top three next initiatives to be CRM sales process integration (e.g. providing integrated sales process coaching to sales people), implementation of sales management analytics and implementation of lead generation solutions. See source for complete article.
- The Future For Hosted CRM Market Share
In a CIO magazine 2006 article, AMR Research was quoted to predict that by 2009, hosted CRM applications will account for only 12 percent of the total U.S. CRM market.
According to AMR Research, the entire enterprise applications market will increase from $47.8 billion in 2004 to $64.8 billion by 2009.
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The most recent publicly available industry size and speculation from analyst firm Garner suggested that the SAAS industry growth will increase from the $6.3 billion incurred in 2006 to $19.3 billion in 2011. This analyst firm went on to say that 25 percent of all new business software will be deployed as a service by 2011. A primary reason cited for for SaaS growth was the dysfunction of the client/server era which is now driving alternative approaches to IT development, delivery and management. See source for complete article.
AMR Research reported that 2006 CRM spending grew to $12.6 billion with SAP advancing from 16% market market share in 2005 to 18% in 2006, Oracle advancing from 4% market share in 2005 to 11% in 2006 and Salesforce.com taking the number three spot and advancing from 3% market share in 2005 to 4% in 2006. AMR expects the CRM market to expand to $19.2 billion within four years.
In 2006, hosted applications accounted for about 3 percent of all software applications revenue. Analyst firm IDC projects revenue from on-demand applications to increase almost 60 percent in 2007, and grow at a compound annual rate of 32 percent over the next five years, reaching just over $2B in 2010.
In a June 2007 Redmond Channel Partner magazine, analyst firm Forrester Research was quoted to have estimated 2006 worldwide CRM revenues for solution providers to be $8.4 billion and projected growth to nearly $11 billion by 2010.
As reported in CRM magazine in January 2006, Worldwide CRM software license revenues will experience a 3 percent CAGR from 2004 to 2009. Marketing automation is expected to be the fastest growing segment of CRM, achieving an 11.2 percent CAGR through 2009.
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According to IDC, on-demand software sales accounted for only 6% of the $9 billion CRM market in 2005.
IDC forecasts that worldwide SaaS spending will reach $10.7 billion by 2009, a CAGR of 21%.
AMR Research estimates CRM on-demand was a $600M business in 2005 and will surpass the $1 billion mark in three years.
As reported by Customer Interactions Solutions magazine, 2005 global CRM software revenue totaled $7 billion, a 13.7 percent increase from 2004. Several underlying factors and trends were also identified.
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Perpetual Licenses Grew
After periods of downturn, both on-premise licensed software and annual maintenance software agreements grew during the year. |
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Hosted Software Grew More
While still a small fraction of the overall global CRM software market, on-demand CRM solutions demonstrated significantly higher growth than on-premise software systems. |
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SAP #1 CRM Market Share Leader
SAP has been cited by multiple analyst firms as the number one CRM software vendor for the year. SAP achieved approximately 25.9 percent market share in 2005. |
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Change in Measurement
CRM market share has traditionally been measured in terms of new license revenue. However, due to the rise of both software as a service and open source CRM solutions, some leading analyst firms are changing market share measurement to annual total software revenue. This more encompassing sum total includes revenue from new licenses, product updates, software subscriptions, technical support and software maintenance. Total software revenue does not include professional services or hardware related revenues. |
An AMR report indicated that 47% of large enterprises, or companies with more than $1 billion in annual revenues, were going to look at the hosted model as part of their "going forward CRM strategy."
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According to analyst firm IDC worldwide spending on SaaS reached $4.2 billion in 2004, a 39% increase over 2003. That growth is expected to continue over the next five years and reach $10.7 billion in 2009 - representing an eye-popping 21 percent CAGR (compound annual growth rate).
IDC SaaS research analyst Erin Traudt indicates that buyers from small and medium sized businesses and divisions of larger companies are leading the charge as the most frequent SaaS adopters.
More specifically, hosted CRM sales grew 105% in 2004 to $403M, up from $196M a year earlier, according to AMR Research.
According to CRM analyst Liz Herbert of Forrester Research, "In a year in which on-premise CRM sales remained flat, hosted sales applications compounded their already high growth. On demand computing is taking off in companies ranging from smaller businesses moving off ACT! or Excel to divisions of enterprises that are dissatisfied with their inflexible, corporate IT-controlled on-premise system. What's the appeal? Lower entry costs and the ability to roll out incrementally rather than in a big bang approach, both of which translate into lower risk."
While Forrester estimates the size of the U.S. software market in 2005 is $137 billion, analyst firm Garner predicts that renting will be the software model of choice by 2008, with more than 50 percent of all software purchases being made on a subscription rather than license basis. "The reality is, it's becoming a standard way of how people are doing business," says Gartner Vice President Joanne Correia.
In a 2005 AMI-Partners market research report titled "Software-as-Services: Moving On Demand To In Demand With SMBs", author Laurie McCabe predicts worldwide spending by SMB companies (those with 200 or fewer employees) for SAS applications will increase more than 40 percent between 2004 and 2009 to reach $2.4 billion.
The global CRM applications market was about $11B in 2004 and is expected to grow to $16B by 2009 according to AMR.
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