New license revenue for worldwide CRM software totaled US$2.8 billion in 2002, a 24.7 percent slide from a 2001 revenue of US$3.7 billion, according to technology research firm Gartner. The market had already declined 6.4 percent in 2001.
"Smaller deals, tactical projects, longer sales cycles, and heavy competition have caused CRM vendors to struggle," Tom Topolinski, an analyst at Gartner, said in a statement.
To make matters worse, the multibillion-dollar industry is mired in an upheaval as a result of Oracle's hostile bid to acquire PeopleSoft. CRM software customers are tentative about upgrades or new system purchases as they wait for the hostilities to settle and see if the proposed merger of PeopleSoft and J.D. Edwards pans out.
Rivals are already hoping to poach customers from one another during this turbulent time. For instance, SAP last week launched a worldwide ad campaign to siphon customers unnerved by Oracle's bid for PeopleSoft.
Siebel Systems continued to hold the No. 1 position based on worldwide new license revenue for CRM software, with a 24.9 percent market share. But the company, buffeted by financial concerns, saw its market share slip more than 3 percentage points in 2002, according to Gartner. SAP and PeopleSoft were the only top-tier vendors to experience a gain in market share in 2002.
CRM software is designed to track sales leads, accounts and orders and help service representatives handle customer complaints.
Having spent years in CRM sales as an independent SI, I do not agree with the report for the following reasons:
a) the report measure sales in USD licenses and
ignored the fact that actual average sale price
of a CRM license have fallen drastically.
b) On the same basis, the report did not mention the hosted CRM (ie subscription only users) with an estimate of 180,000 users in the last 2.5 years.
c) The implementation time for CRM application have been shortened drastically to make a better value proposition to the customer. As an example,
a back office CRM used to be a 4-6 months implementation. New generation back Office CRM (such as FrontRange Heat) allows a rapid
deployment that could be down to 2-3 weeks. It helps the customer saving but the average implementation revenue is far less than what it used to be.
For these factors, I believe if the report goes by number of seats, implemenattion and types of CRM deployment, you will find the market increased slightly but definitely did not decline.