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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.

CRM SaaS Market
  • IDC Projects One Third of all Software Delivered from the Cloud
    According to research and analyst firm IDC, the Software as a Service (SaaS) market achieved worldwide revenues of $13.1 billion in 2009. IDC predicts the SaaS market to reach $40.5 billion by 2014, representing a compound annual growth rate of 25.3%. By 2014, approximately 34% of all new business software purchases will be procured via SaaS and SaaS delivery will constitute about 14.5% of worldwide software spending across all primary markets. IDC also indicates that "business applications will account for just over half of the market revenue. The rest of the market growth will occur on cloud platforms as businesses begin to purchase cloud services instead of hosted services. In a related HR software blog post, the pace and adoption of CRM systems will be closely followed by HR applications.
  • ABI Forecasts Hosted Market
    Market research firm ABI Research forecasts the global market for hosted services will exceed $34 billion in 2012, of which the North American market will account for $11.6 billion.
  • Cloud Considered Viable by Most
    In July 2010, analyst firm Yankee Group revealed that more than half of U.S. enterprises now consider SaaS and cloud computing a viable technology, with favorable views on cloud jumping by more than 50 percent in the most recent year. The analyst firm research report stated that"cloud computing is on the cusp of broad enterprise adoption."
  • CRM Software as a Service Compared to all CRM Software
    Analyst firm Gartner predicted that by 2011, 25 percent of new business software will be delivered by SaaS.
CRM SaaS Market
  • CRM Spend Crawls, SaaS CRM Grows
    According to Gartner, the CRM application market grew 1% in 2009, however, SaaS made up 25% of all CRM spending.
  • On-Demand CRM Growth Projected at 17.4%
    According to the most recent Datamonitor research report released in 2009 and titled Selecting an On-Demand CRM Vendor, the 2008 on-demand CRM market is estimated at $1.7 billion in just subscription revenue and forecasted to achieve an impressive double digit compound annual growth rate of 17.4% from 2007 through 2013. The report also provided a decision matrix comparing market leading vendors Aplicor, Microsoft, NetSuite, Oracle, RightNow, and SAP.
  • SaaS Business Applications No Longer the Exception
    "By the end of 2009, 76% of U.S. organizations will use at least one SaaS delivered application for business" according to IDC Research.
  • 2009 SaaS Growth Forecast at 22%
    According to a May 7, 2009 Gartner report titled “Market Trends: Software as a Service, Worldwide, 2009-2013”, the software as a service (SaaS) market is projected to achieve $8 billion in 2009, almost a 22% increase from 2008 revenue of $6.6 billion. The market research firm projected the SaaS industry to achieve consistent growth through 2013 when worldwide SaaS revenue will reach $16 billion for enterprise applications.“Many factors are driving SaaS adoption, including the benefits of rapid deployment and rapid ROI, less up front capital investment, and a decreased reliance on limited implementation resources,” commented Ms. Mertz. “Greater market competition and increased focus by the megavendors is reinforcing the legitimacy of on-demand solutions. Many enterprises are further encouraged by the fact that with SaaS, responsibility for continuous operation, backups, updates and infrastructure maintenance shifts risk and resource requirements from internal IT to vendors or service providers.” The CRM software industry exhibits broad based market adoption, achieving penetration between 9% and 33% of total software market. Overall, SaaS represented more than 18% of the total CRM market in 2008.
CRM SaaS Market
  • SaaS Penetrates The Enterprise Market
    According to survey performed by Kelton Research and published in CIO magazine in June 2008, 73% of large companies say they have adopted or plan to adopt SaaS solutions in the next 18 months. The survey polled 100 IT and business executives from Fortune 500 companies. According to survey responses, the most common SaaS solutions were on-demand CRM software. The survey also noted that SaaS growth in the enterprise is being driven by faster implementations, easier maintenance and better pricing.
  • SaaS and SOA Drive Market Growth
    A 2008 research report issued by McKinsey & Co and the Sandhill Group found that software-as-a-service (SaaS) and service-oriented architectures (SOA) are the two most influential trends driving the business application software market. A survey among 850 enterprise sized companies found that 74 percent of respondents were “favorably disposed” towards acquiring SaaS solutions, with companies currently spending 19 percent of their application software budgets on hosted, subscription-based solutions. The research commentary also commented that “nearly every company – or division of a larger enterprise – is a customer or a prospect for SaaS platforms”. In an interesting merging of the industry's top two disruptive platforms, the study also predicted that while SaaS and SOA were currently on parallel development paths, “we expect them to converge in the future”, paving the way for a “tremendous battle between the largest software vendors and the newer SaaS providers”.
  • 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."
CRM SaaS Market
  • CRM Software Market Grows in 2007
    According to research results published in CRM magazine in September 2008, the Customer Relationship Management software market grew 12 percent to 14 percent in 2007 - marking the fourth consecutive year of industry growth. The research results from AMR Research estimated the 2007 CRM software market at $14 billion, approximately a 12 percent jump over the prior year and the most significant growth since the dot com collapse in 2000. According to CRM magazine Editorial Director David Myron, "While analysts may differ on the market's exact size and rate of growth, all agree that CRM software-as-a-service (SaaS) is the driving force.
  • The CRM Software 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 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.
  • 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.
2006 CRM Market Results

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 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.

CRM Direction

2005 CRM Market Size Results

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.

SAAS CRM Perpetual Licenses Grew
After periods of downturn, both on-premise licensed software and annual maintenance software agreements grew during the year.
SAAS CRM 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.
SAAS CRM 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.
SAAS CRM 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."

2004 CRM Market Size

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.


quote We think the change is more far-reaching and customer adoption is moving at a rapid pace that will catch many vendors, customers, and investors by surprise. quote
- Merrill Lynch
quote The On Demand software model will ultimately replace enterprise software in a significant portion of the market. It will be successful because it is simply a more efficient, rational way of delivering software. It's not just a somewhat better model, it's dramatically better. quote
- Halsey Minor, CNET founder

quote We reckon the market for hosted software will grow 25% a year to $10 billion by 2009. quote

- Pacific Crest Securities

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