Sales of hosted customer management applications grew 105% in 2004, with the market being led by RightNow Technologies and Salesforce.com, according to a report from AMR Research.
The report indicates that the hosted model has reached prime time as a delivery method for CRM (customer relationship management) applications. The hosted model differs from traditional licensed software because applications are served over the internet, rather than being installed on-site. In addition to impressive hosted growth, the overall CRM market saw double-digit growth for the first time in five years.
Two leaders in the hosted CRM market, RightNow Technologies and Salesforce.com, enjoyed 97% and 83% growth rates respectively. Salesforce.com climbed impressively from number 22 to number 12 in terms of total CRM revenue, although the market is still led by traditional installed-base application vendors.
In 2003 license-based revenue accounted for 95% of the market, while hosted revenue made up the other 5%. By contrast, in 2004, license-based revenue stood at only 91%, while hosted revenue made up the extra 9%.
According to Rob Bois, senior research analyst at AMR Research: "The hosted model has reinvigorated a market that failed to grow over the past several years. The hosted category has changed the whole perception of customer management with faster implementations, quicker time to value, and easy customisation."
Indeed, in the battle for the number 1 spot, SAP (buoyed by favourable currency exchange rates, AMR says) grew its customer management applications business by 30%, in the process unseating Siebel as the revenue market share leader. AMR expects SAP to continue to grow, especially in the manufacturing sector where the company holds an advantage. Siebel's CRM OnDemand represents one of the largest growth opportunities for the company as the product continues to gain momentum, the report concludes.
The report says that the overall CRM applications market grew by a healthy margin of 10% in 2004. And, across the top 40 customer management vendors evaluated, five grew at over 50% from 2003 to 2004 (those being Concerto, Digital River, Salesforce.com, RightNow Technologies, and Unica). Microsoft, another winner, topped 3,500 customers and recorded 32% growth.
AMR's 'Market Analytix Report Series' provides technology vendors with targeted marketing and competitive information on key application markets of ERP, SCM, CRM, procurement, PLM, and HCM. For a copy of the formal CRM report, contact AMR Research directly.