The market for CRM applications soared 84 percent in 2000 to $6.2 billion, according to International Data Corp. (IDC) and it’s not done yet. By 2005, CRM apps will generate more than $14 billion in revenues.
“The rise of new market players and products indicates the many fronts on which end users are fighting the CRM battle,” said Mary Wardley, program director of IDC’s CRM Applications and eCommerce Applications Software programs. “Despite the current economic downturn, end-user organizations continue to rate CRM as critical to their organizations ongoing business strategy. End-user response to the market condition is to plan an ongoing implementation strategy over an extended period of time rather than purchase the total solution up front. This will fuel CRM applications growth over a longer period of time.”
IDC’s research, “Worldwide CRM Applications Market Forecast and Analysis Summary, 2001-2005,” divides CRM into three segments: sales automation applications, marketing automation applications and customer service and contact center applications. All three segments saw robust growth in 2000, with no one market showing revenue growth below 70 percent. Sales automation was once again the largest of the CRM applications market, garnering more than 42 percent — or $2.6 billion — of the worldwide CRM application revenues in 2000. Marketing automation applications experienced the greatest growth but remains the smallest of the three markets in terms of revenue.
According to IDC, Siebel maintained its stranglehold on the CRM market, outperforming all other competitors by a huge margin. Siebel’s market share increased from its standing in 1999 to 23 percent in 2000. The next nearest competitor grabbed a 5.5 percent market share.
Not surprisingly, North America was the leading global market for CRM applications, with nearly $8.6 billion in revenue in 2005. However, Western Europe will boast growth bragging rights, increasing its revenues at a 22 percent clip from 2000 to 2005. By comparison, North American CRM revenues will increase at a lower compound annual growth rate.
“CRM revenues in Western Europe have accelerated due to an increased understanding of CRM issues and the internationalization of product offerings,” Wardley said.
The European market, however, appears to be divided on how it feels or what it knows about CRM applications. An IDC survey of 405 European organizations found that end users in Europe are split on CRM. More than 50 percent rate CRM as critical for their business, while nearly one-third are not interested at all.
“Much of this apathy relates to a simple lack of understanding of the benefits of CRM, not to mention basic functionality,” said Bill Clough, senior research analyst with IDC’s European ERM and CRM Applications research program. “Now that companies are going to be a bit more careful with their IT budgets, and less driven by the ‘first mover’ or ‘early adopter’ messages, it will take even more effort on the part of software vendors to educate the market about the real needs that are met with CRM solutions.”
The value and benefits of CRM seem ambiguous to many of the European respondents. Although most identified with the benefit of improving customer service processes, many completely missed the possibility of key advantages such as customer acquisition and retention. “In tightening economic markets, when businesses begin to focus less on the latest technologies and more on what solves real problems and cost issues, these two benefits are not receiving the attention they deserve,” Clough said.
IDC’s survey shows the response to CRM technology varies by country and industry. Only 36 percent of French respondents claimed to be using CRM software, while in the United Kingdom and Italy, 53 percent said they were using the technology. The European average was 46 percent. The first industries to deploy CRM technologies in Europe were finance, services and telecoms. These industries rate the importance of CRM significantly higher than the average. The two categories of respondents exhibiting the most apathy or uncertainty toward CRM were utilities and healthcare, with 39 percent and 45 percent of respondents, respectively, stating “don’t know” or “no need.”
In the Asia-Pacific market, Frost & Sullivan estimates that CRM applications generated revenues of $236 million in 2000 with an expected surge to $5 billion by 2007. Despite the immense promise of this market, Frost & Sullivan points to the cost of implementation, which could dissuade adoption in some sectors.
To overcome this hurdle, CRM vendors will need to educate future consumers as to the long-term cost benefits. Offering Web-based solutions could be another means of attracting cost-conscious clients. eCRMs can be hosted by ASPs, thereby reducing start-up and maintenance expenses. To bolster interest in CRM software, Frost & Sullivan also recommends that vendors consider new geographic markets, identify new potential user groups and tailor their applications for specific vertical industries.
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