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In 2006, the global CRM software market was worth just under $3.6 billion in license revenue alone and is forecast to reach $6.6 billon by yearend 2012, growing at a compound annual growth rate of 10.5%, a new Datamonitor report predicts.

CRM license revenue and maintenance revenue together are expected to surpass the $10 billion mark globally by yearend 2012, with maintenance revenue reaching approximately $3.6 billion.

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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.

(CRM software in this case refers to sales force automation, marketing automation, customer service automation, customer analytics and on-demand CRM software.)

Among the study’s findings and projections:

  • By yearend 2007, the global on-demand CRM market will be worth $1 billion, and such applications will drive CRM adoption, particularly within small-to-medium enterprises (SMEs).
  • The composition of the CRM market is also changing in terms of the typical size of enterprise deploying CRM, which was once a preserve of very large organizations:
    • In 2006, CRM application spending by enterprises with fewer than 1,000 employees accounted for one-third of all licenses sold.
    • By 2012, that sector is projected to account for over 42% of the market.
  • Because of their reliance on subscription revenues and service capabilities, the Telecommunications industry will remain the heaviest investor in CRM technologies along with Energy and Utilities and Financial Services.
  • Datamonitor also expects CRM investment by the Healthcare, Public Sector and Life Sciences to exceed the rate of growth in the Telecommunications sector, fueled 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.
  • Within the next 18 months, the on-demand 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-center 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,” said Vuk Trifkovic, Datamonitor technology analyst and author of the study.

About the study: The report, “Economic Outlook: Customer Relationship Management,” provides a detailed summary of the principal trends in the CRM market and offers an analysis of the main trends affecting the market and advises vendors on how to respond.

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