The Future State of the CRM Market

What Will Inhibit CRM Growth

A disturbing trend that the AMR analysts note is that "CRM failure rates remain high," they write. "Although vendors are improving user interfaces and technologies to combat this problem, it only puts a bandage on the situation."

To fix the problem, customer management vendors "need to find ways to build more carrots into their tools to create sustainably high adoption rates," states the report. "If success rates don't improve and total cost of ownership doesn't come down, buyers will find CRM investments harder to justify, especially if budgets begin to shrink." (For an alternative take on CRM, see "Open Source CRM Delivers More Control, Less Cost.")

Financial services companies are known for their significant use of and reliance on customer management applications. But financial services companies are in a world of hurt right now. If this trend continues, CRM vendors "heavily reliant on this sector" could be in a world of hurt themselves, note the analysts. These vendors "will need to diversify or may not have the ability to sustain growth rates near those of 2007."

The Vendors to Watch

It's not a huge surprise that during the next four years SaaS "will continue to dramatically outpace the perpetual license software market by double digit margins," the analysts predict. AMR Research survey data shows "a universal preference" for the subscription software model in customer management, regardless of company size. (For more on SaaS, see "Five Best Practices for Implementing SaaS CRM.")

Next, the analysts contend that Microsoft and Salesforce.com will continue to push into larger enterprises and "see success competing directly with SAP and Oracle."

Larger enterprises, the analysts state, "will stop talking about building a better customer experience and start doing it." Enterprises will begin to add the role of chief customer officer (CCO), even in non-service industries. In turn, the report predicts that vendors such as RightNow Technologies that "specialize in cross-channel customer experience will capitalize on this trend and see accelerated growth despite economic conditions."

Along those lines, vendors moving from a traditional perpetual license model to a SaaS model will take longer than expected to do so. "We will start to see these vendors restructuring sales, development, and even support into separate lines of business to go to market separately," write the analysts. "Some undercapitalized vendors will not make it out of the other end of the tunnel."

And lastly, Google and Zoho will become important vendors in the customer management market within two years, notes the report. "While Google has already partnered with Salesforce.com, expect to see something that looks a lot like CRM coming out of Google labs," the analysts write. "Zoho will become the next Act by seeding free individual CRM seats that eventually turn into paid departmental deployments."