CRM applications set to double in value

In a new report, independent market analyst Datamonitor predicts this will reach US$6.6bn by year end 2012, growing by a compound annual growth rate of 10.5%. The report, Economic Outlook: Customer Relationship Management, attributes growth to increasing deployment of CRM in new vertical segments as well as new flexibility in modes of deployment. Nevertheless, within the next 18 months Datamonitor expects on-demand CRM specialists to come under pressure as the CRM arena becomes substantially more competitive.

Whether acquiring new, servicing current or keeping in touch with old customers, an organisation needs to relate to its customer base. CRM is a methodology facilitating such interaction and includes all processes, approaches and technologies that support the CRM methodology. Implementing CRM should enable enterprises to capitalise on the client interactions through nurturing client relationships, supporting sales processes, exploring customer behavior and tailoring customer service according to the feedback received and cost constraints.

New industries and smaller organisations are deploying CRM with increasing frequency

Reliance on subscription revenues and service capabilities will mean that the Telecommunications industry will continue to be the heaviest investor in CRM technologies along with Energy and Utilities and Financial Services. However, Datamonitor expects CRM investment by the Healthcare, Public Sector and Life Sciences to exceed the rate of growth in the Telecommunications sector, fuelled by the adoption of a customer-oriented approach to public sector services and the relative success of applications supporting a relational, not transactional, approach to customers.

The composition of the CRM market is also changing in terms of the typical size of enterprise deploying CRM. Once a preserve of the very large organisations, Datamonitor estimates that in 2006 CRM application spending by enterprises with less than 1000 employees accounted for one third of all licences sold. By 2012, however, the sector will account for over 42% of the market. “Although this implies that complex solutions for larger organisations will still account for the majority of CRM revenue, smaller CRM deployments will be increasingly important," says Vuk Trifkovic, Datamonitor technology analyst and author of the study.

Increasingly competitive landscape

On-demand relieves businesses of the maintenance and daily technical operations of software, offering companies the choice to let someone else host their applications for them. Datamonitor considers on-demand as an important element of CRM strategy since subscription-based licensing and hosted architecture can address many inhibitors to CRM adoption.

Recent success of on-demand CRM providers, as well as the fact that most of the major vendors are having some on-demand strategy means that this innovative paradigm is clearly here to stay. Datamonitor estimates that by year end 2007, the global on-demand CRM market will be worth US$1bn, and such applications will drive CRM adoption, particularly within SMEs.

CRM specialists under pressure

Nevertheless, within the next 18 months the market will be substantially more competitive. Established on-demand CRM specialists will find themselves under increased pressure both from smaller hosted solution providers and established on-premise vendors offering on-demand versions. The implications are that subscription prices could decrease, particularly among the less differentiated entry-level solutions.

“Vendors offering on-demand CRM solutions will differentiate themselves by investing in advanced feature-sets, data-centre hosting efficiencies and by integration with their own on-premise versions of CRM so that their customers will be able to seamlessly migrate between the same vendor's hosted and more traditional editions,” says Trifkovic.

*Includes Sales Force Automation, Marketing Automation, Customer Service Automation, Customer Analytics and On-Demand CRM

**Datamonitor report 'Customer Relationship Management: global market Forecast model'