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October 31, 2007

Customer relationship management applications set to double in value

The market for customer relationship management applications continues to grow as more organizations recognize the importance of positive customer experiences. In 2006, this market was worth almost $3.6 billion globally, and it is forecast to reach $6.6 billion by 2012 due to greater customer relationship management deployment in new vertical segments. This arena will also become more competitive.

By CBR Staff Writer

Whether acquiring new, servicing current or keeping in touch with old customers, an organization needs to relate to its customer base. Customer relationship management (CRM) is a methodology facilitating such interaction and includes all processes, approaches and technologies that support its successful implementation. Implementing CRM should enable enterprises to capitalize 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 organizations are increasingly deploying CRM

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 the energy and utilities and financial services industries. However, CRM investment by the healthcare, public sector and life sciences is expected 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.

The composition of the CRM market is also changing in terms of the typical size of enterprises deploying CRM. While it was once a preserve of the very large organizations, according to Datamonitor estimates, in 2006, CRM application spending by enterprises with less than 1,000 employees accounted for one third of all licenses sold. By 2012, however, the sector will account for over 42% of the market. Although this implies that complex solutions for larger organizations will still account for the majority of CRM revenue, smaller CRM deployments will be increasingly important.

On-demand CRM is here to stay, but the landscape will be increasingly competitive

On-demand offerings relieve businesses of the maintenance and daily technical operations of software, offering companies the choice to let someone else host their applications for them. On-demand is 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 $1 billion, and such applications will drive CRM adoption, particularly within SMEs.

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The next 18 months will see established on-demand CRM specialists under pressure

Nevertheless, within the next 18 months, the market will become 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.

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