According to the research firm Gartner, in the past year alone, more then $3.5 billion (USD) was spent on new customer relationship management (CRM) software licenses, but the top four CRM vendors (SAP, Siebel, PeopleSoft, and Oracle) accounted for only 38 percent of this total CRM revenue.
Part two of the Comparing On Demand Customer Relationship Management Service Alternatives series.
So, despite Oracle's CRM buying spree (including its acquisition of PeopleSoft and its planned acquisition of Siebel), when all is said and done, the combined CRM market share controlled by Oracle in 2004 will be a mere 21 percent, while SAP controls approximately 17 percent of the market.
In other words, 62 percent of the total CRM market is being served, not by the on-premise, full-suite CRM "big three" (soon to be the "big two") vendors, but by smaller vendors, including those that support the software as a service (SaaS) model, and vendors that specialize in best-of-breed offerings for specific CRM functions and industries.
| The demand for CRM SaaS offerings has been booming according to IDC. This trend should continue for the foreseeable future. |
Although at present, on-demand CRM applications make up a small segment of the overall CRM market, throughout 2004 and 2005 the demand for CRM SaaS offerings has been booming. IDC, a global market intelligence firm, has projected that the SaaS market will to grow to $10.7 billion (USD) by 2009, and will likely continue to grow in the foreseeable future.
In fact, salesforce.com, the industry's leading on-demand CRM service, grew its new subscription sales by 84 percent in 2004 and they anticipate approximately $300 million (USD) in revenue for 2005.
To put this growth in perspective, most of saleforce.com's revenue comes from subscriptions, not from professional services or maintenance fees. Accordingly, when its projected 2005 revenue of $300 million (USD) is compared to SAP's 2004 license revenue of $525 million (USD) (as estimated by AMR Research) there's little doubt that salesforce.com is rapidly gaining market share.
| The software on-demand delivery model is helping to reinvigorate the software industry and turns an attentive ear to customer needs and wants. |
Industry experts see software on-demand and SaaS having a pronounced market presence in the future. According to Erin Traudt, IDC's SaaS research analyst, "The software on-demand delivery model is helping to reinvigorate the software industry and turns an attentive ear to customer needs and wants � Ultimately, customers want their business problems solved and the on-demand model provides another option to help accomplish that important and necessary feat."
| "The SaaS category has changed the whole perception of customer management with faster implementations, quicker time to value, and easy customization." Rob Bois |
Likewise, Rob Bois, a senior research analyst with AMR Research notes that "the software as a service category has changed the whole perception of customer management with faster implementations, quicker time to value, and easy customization."
What's more, it appears that rising stars like salesforce.com and NetSuite, which support the CRM SaaS model, have a unique window of opportunity while SAP, Oracle, and Microsoft get their product strategies together.
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