ASPs to Bring CRM to Small Businesses

Worldwide customer relationship management (CRM) spending will reach $76.3 billion in 2005, up from $23 billion in 2000, according to Gartner, Inc. But Datamonitor predicts small businesses will rely on ASPs to get a piece of the pie.

“Customer loyalty has always been valuable, but today it is vital for success,” said Rob DeSisto, Gartner vice president. “CRM is a business strategy and any notion of applying technology to customer relationships will fail unless business executives understand clearly the key decisions they must make.”

According to Datamonitor, the North American market for CRM software will grow from $3.9 billion in 2000 to $11.9 billion by 2005. Datamonitor predicts the CRM market will grow most rapidly in the government, entertainment and Internet retailing industries. This growth reflects the increasing significance of CRM solutions and e-business strategy among companies not traditionally associated with CRM. The rapidly growing small to mid-sized enterprise (SME) sector will also play a part in driving the operational CRM market as SMEs begin to adopt channel-based solutions.

Revenues accrued through the ASP channel, currently the least significant channel for vendors, will grow 128 percent in the next five years to be worth $431 million to CRM software vendors in 2005. Datamonitor’s findings indicated that the ASP channel, worth a mere $7 million to CRM software vendors in North America in 2000, will be driven by the SME market, which will use ASPs to adopt CRM solutions they previously could not afford.

“Traditionally, the CRM market has been dominated by the enterprise sector,” said Robin Goad, analyst with Datamonitor. “The cost of implementing a CRM strategy has been a significant barrier to entry for customers in the SME sector. The ASP channel will remove this barrier, offering key benefits to SMEs such as reduced cost, ease of integration, savings on IT labor, and access to new applications.”

Datamonitor recommends that vendor wanting to exploit the SME market must build relationships with partners to gain market share and embrace the ASP channel. ASPs must take advantage of CRM applications to improve their product offering. Datamonitor predicts the share of ASP revenues derived from CRM applications in North America will grow from 14 percent in 2000 to 21 percent in 2005.

“Currently, hybrid distribution channels are the most significant channels for CRM vendors in North America, accounting for 48 percent of vendors’ revenues,” Goad said. “We believe that CRM vendors must partner aggressively to take advantage of the current trend towards hybrid distribution channels, as we have seen with Siebel and IBM, and Oracle and Cisco.”

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