The Future of CRM

Barney Beal, News Director
26 Mar 2009

According to Gartner, the future of CRM should be similar to its past. That is not to say that there will be no changes in the CRM market. The core challenge of managing customer relationships remains as difficult as ever.

'How to enrich the customer experience -- organizations were struggling with this 10 years ago and are still struggling today,' said Isher Kaila, research director with Gartner. 'The second big area is business process management. Ten years ago, companies were trying managing business processes but also organizational collaboration. There's a real lack of end-to-end process, and a lack of alignment within the organization as to what customers need, the KPIs, and a broader level of interplay between business and IT.'

The importance of CRM hasn't changed either. According to Gartner's annual survey of more than 1,500 CIOs, CRM and enterprise applications remain their second priority for 2009.

What has changed is that businesses are getting better at implementing CRM programs. In 2000, the majority of organizations viewed CRM as unlikely to deliver business benefits, but in 2009 the majority expects them to succeed.

CRM application pricing and delivery has also changed significantly. According to Gartner, organizations were commonly paying $3,000 per licensed user at CRM's height in 2000, and that has fallen to between $1,000 and $1,500 this year. While the per-user pricing model still prevails, service-oriented architectures (SOAs) and Software as a Service (SaaS) are fuelling process-based pricing.

In addition, SaaS has changed the CRM landscape significantly. Nearly 50% of all field sales applications will be delivered via SaaS by 2012, according to Gartner, and 40% of all CRM applications will be SaaS-based by 2020. The competition will bring per-user pricing down from $800 per year to near $500 by 2020, the firm predicts.

Companies may be worried about different aspects of CRM programs than they were a decade ago, but fear and anxiety persist.

The CRM software market has also seen its share of change, and while it reached a high in 2000, growing at a rate of 90% before bottoming out in 2003, it has shown steady growth over the last five years, growing between 11% and 23% per year, and it is set for 10% growth from 2007 to 2012, according to Gartner. The company estimates the total revenue in 2008 for CRM software, including license, maintenance and subscription revenue, reached nearly $9 billion worldwide.

In turn, the vendor landscape is shrinking. The five largest CRM vendors represented an estimated 60% of the market in 2008, and three or four large vendors will claim 50% market share by 2020, Gartner predicts.

That's because the large vendors are evolving into platforms for software and service partners.

Innovation in the CRM market will come from these smaller startups, which will be acquired and merged into the larger ecosystem.

'There's more pressure on vendors to specialize in the niche,' Kaila said. 'Enterprises are very process focused. Companies want software that really integrates well into end-to-end processes for CRM. We'll see larger vendors dominate the space because they have visibility into the larger CRM process. Then it's just survival of the fittest.'

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