A wave of reports from major analyst firms in the past month shows that the market for CRM software is alive and well and that Germany's SAP AG has taken over the lead in CRM revenue from longtime leader Siebel.
Yet for buyers of CRM software and services, whether SAP, Oracle or San Francisco-based Salesforce.com is No. 1 makes little difference.
"Frankly, I don't get calls from end customers asking who are the top five," said Rob Bois, senior research analyst with Boston-based AMR Research Inc. and author of The Customer Management Market Sizing Report, 2006-2011. "It's a much more complicated conversation. These are market sizes, revenue numbers, not success."
AMR is not the only analyst firm to size up the CRM market this summer. Framingham, Mass.-based IDC and Stamford, Conn.-based Gartner Inc. have come up with reports as well. So, who cares how the top five vendors in the market ultimately shake out? Well, Oracle for one.
"I look at Siebel with 4.6 million seats deployed and 5.6 million with Oracle and Siebel CRM combined," said Mike Betzer, vice president of Oracle's CRM product strategy. "When you have companies as big and complex as Oracle and SAP, just taking global software numbers and saying SAP seems to be ahead doesn't make sense. It's because it's part of a bundle."@39655
Siebel still holds the edge in deployments and live users, Bois agrees.
"The reality is Siebel is still by far the most widely deployed CRM application out there," Bois said. "SAP has the most revenue because they bundle it with ERP and other deals. At some point, they'll flood their customer base with so much CRM shelfware that they'll run out. But there's such a captive audience, I don't think they'll fall out of the top spot any time soon."
What the reports do indicate is that the market for CRM software and services is healthy. AMR predicts that the market for customer management software and services will grow to $19.2 billion through 2011, a 9% compound annual growth rate. Gartner, which also puts SAP ahead of Oracle, says CRM software spending grew to $5.81 billion last year, an 11.5% increase, and predicts that software spending will grow between 11% and 12% for the next five years.
Driving much of the new spending is Software as a Service (SaaS), or on-demand applications. Salesforce.com, a pioneer of the delivery model, had the third-largest share of the market, according to AMR, and if it continues its current growth pace, it will surpass Oracle in a couple of years.
"They won't be able to continue on that torrid pace," Bois said.
The market has also seen vendors pay particular attention to the usability of their applications, specifically the user interface. Customer Data Integration (CDI), which helps give companies one view of the customer over multiple systems of record, is rising in importance as well. Oracle and Siebel had begun developing their own CDI products before the acquisition, while SAP has focused on Master Data Management. Companies are also purchasing from standalone CDI vendors.
"The first notion for most of these companies is that capability should come from one backbone vendor," Bois said. "If they don't have that notion of a backbone or one ERP system, that's where standalone CDI vendors really have a play."
The CRM market is now top-heavy with CRM suite vendors, according to the report. SAP, Oracle, Salesforce.com and Microsoft lead the pack. Microsoft came in at No. 8 in total revenue but offers a full suite of sales, marketing and service, while Aspect and Avaya, respectively fourth and seventh in revenue, focus on customer service. The vendors with fifth and sixth most revenues, Amdocs and Dendrite, focus on telecom and pharmaceuticals, respectively. According to Bois, though, innovation is likely to come from smaller vendors.
A flood of venture capital into the software market and innovations like Salesforce.com's AppExchange, which allows startups to build add-on on-demand applications to its CRM suite, are making it easier for new ideas to emerge. Microsoft has said it will also be providing an on-demand marketplace of applications using its vast partner network.
"It's so easy now for somebody with a good idea to turn that into a software application with just a little funding," Bois said.