A new report reveals that the CRM software market in Europe will triple by 2005.
A new Datamonitor report says that the CRM (customer relationship management) software market in Europe is set to grow from $2.2 billion in 2000 to $7.6 billion by 2005. The report also says that application service providers (ASPs), which in 2000 generated a mere $3 million worth of revenues for CRM vendors, are set to become an extremely lucrative revenue stream over the next five years.
Currently the most significant channels for CRM vendors in Western Europe are pure indirect distribution ones, which account for 48% of revenues. But by 2005, the ASP channel is expected to generate up to $390 million worth of revenues for European CRM software vendors. Meanwhile CRM applications will account for 18% of ASPs’ revenues in 2005, compared to 14% in 2000
The rapidly growing small-to-medium sized enterprise (SME) sector will play a large part in driving the operational CRM market. Traditionally, the CRM market has been dominated by the enterprise sector. The cost of implementing a CRM strategy has been a significant barrier to entry for customers in the SME sector. The ASP channel will disable this barrier, offering key benefits to SMEs such as reduced cost, ease of integration, savings on IT labor, and access to new applications.
To exploit the SME market fully, CRM software vendors will need to build relationships with partners to gain market share and embrace the ASP channel. ASPs must take advantage of CRM applications to improve their product offering. CRM vendors will need to partner aggressively to take advantage of the current trend towards hybrid distribution channels, which will account for 51% of vendors’ revenues in 2005. The biggest players, such as Siebel and IBM, and Oracle and Cisco, are already making this move. Those who want to keep up with them will need to do the same.
