The customer relationship management (CRM) market is set to grow at a quiet pace to US$17.7 billion by 2006 (an average annual growth rate of only 6.7%), according to a report from market analysts, Aberdeen Group.
But despite the lower-than-expected rate of growth, the report, 'Worldwide CRM Spending: Forecast and Analysis 2002-2006', predicts a massive change in the way enterprises buy into CRM solutions: The majority of user organisations are expected to opt for subscription-based ASP (application service provider) plans rather than acquiring software licenses directly.
According to Aberdeen's senior vice president (and author of the report), Hugh Bishop, the financial benefits and risk mitigation associated with the newer ASP model are driving companies to abandon the standard licensing model.
There are benefits for the CRM suppliers as well, as subscription-based application hosting provides them with predictable, renewable revenue. "As a result, license revenues will decline at an average annual rate of 4.8%, while subscription revenues will skyrocket to US$2.8 billion," predicts Bishop.
SMEs to grow faster
CRM spending by small and medium-sized enterprises (SMEs) is expected to exceed that of larger businesses, partly because of the new pricing and software architecture models now available.
The report notes that the USA will continue to be the dominant market for CRM, while its share will drop slightly over time, due to increasing global adoption. This trend will be particularly marked in the Asia/Pacific Rim. While the USA accounted for US$7.14 billion (52.2%) of the overall market in 2002, its share by 2006 is expected to be US$9.18 billion (only 51.9%).
In the report
In addition to tracking the transition to the subscription model, Aberdeen's report provides market share data, as well as forecasts for seven separate CRM product segments including: sales automation; marketing automation; customer service automation; call/contact centre management; field service management; partner relationship management; and internal help desks. The report also contains a breakdown of the USA's CRM market by vertical market sector and user organisation size.
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