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CORPORATE EXECUTIVE BOARD® MAY 2007IT Practice KEY FINDINGS

Key Developments in the CRM Market

KEY QUESTIONS Who are the leading vendors in the

CRM market?

What are the key trends in the CRM market?

What are the typical CRM licensing costs?

TABLE OF CONTENTS Key Vendor Trends 2

Key Customer Trends 3

CRM Market Overview 4

CRM Licensing Costs 5

EXECUTIVE SUMMARY Industry research indicates that the leading enterprise CRM vendors in terms of market share include: SAP Oracle Microsoft Dynamics Amdocs

The leading mid-market CRM vendors include: Salesforce.com SalesLogix Bscaler Entellium SMBLive

Research indicates the following key trends in the CRM vendor market: The CRM vendor space is experiencing

consolidation, including Oracle’s acquisition of Peoplesoft and Siebel Systems, and RightNow Technologies acquisition of Salesnet, Inc.

CRM vendors are increasingly including enhanced functionalities such as Web-based architectures and wireless connectivity in their CRM offerings

Vendors increasingly focus development efforts towards the mid-market segment as industry experts indicate that this segment will account for a major share of the CRM market in terms of revenue over the next three years

CRM vendors are increasingly offering hosted and on-demand solutions for enterprises

The CRM customer space is witnessing the following key trends: Enterprises are decentralizing their CRM systems to

accommodate divergent regional and business unit needs

To manage demand and reduce IT costs, enterprises are increasingly adopting Software as a Service (SaaS) delivery model

To manage IT costs, enterprises are increasingly evaluating requirements-driven licensing options

RESEARCH METHODOLOGY

The information contained in this brief was researched using secondary source search engines such as Lexis/Nexis and Factiva, and company Web sites.

© 2007 Corporate Executive Board. All Rights Reserved Catalog No.: CIO183Q6BH

STATE OF THE CRM MARKET PAGE 2

KEY VENDOR TRENDS

Key Trends in the CRM Vendor Space

With the maturing of CRM markets, the emergence of the mid-market as a key revenue driver, and enterprise mandates to reduce IT costs, CRM vendors are experiencing the following key trends: 1. Consolidation and Shifting Market Focus: The CRM market is experiencing consolidation with Oracle’s acquisition of Peoplesoft in 2005 and Siebel in 2006. In addition, a leading mid-market CRM vendor, RightNow Technologies acquired hosted CRM solutions provider Salesnet, Inc. in 2006. As the CRM market matures, vendors are also looking to develop products which offer enhanced functionalities as compared to prior versions. For example, vendors are moving away from client/server architectures to Web-based architectures. Key CRM vendors including Oracle’s Siebel Systems, Peoplesoft, and SAP are offering portal-based CRM solutions. Another key area where CRM vendors are developing enhanced solutions is wireless CRM.1 2 2. Development of CRM Applications for the Mid-Market: Major CRM vendors are increasingly targeting development efforts toward the mid-market segment. Industry analysts indicate that the mid-market segment is one of the key revenue drivers for CRM vendors. According to market research firm Forrester, the mid-market segment will account for 38 percent of CRM revenues by 2010.3 3. Increased Demand for On-Demand CRM Solutions: CRM vendors are experiencing an increasing demand for on-demand CRM solutions. On-demand solutions refer to applications for which enterprises can use specific functionalities hosted by the vendor without paying license fees for the entire CRM application. According to a study conducted by U.S.-based research firm, Nucleus Research, 63 percent of enterprises with an employee base of more than 1,000 have adopted on-demand CRM technology.4

STATE OF THE CRM MARKET PAGE 3

KEY CUSTOMER TRENDS

Key Trends in the CRM Customer Space

Driven by the mandate to strike a balance between IT spending reduction and the ever-increasing demand for functionalities, the CRM customer space is experiencing the following key trends: 1. Decentralization of CRM Platforms: According to U.S.-based research firm Gartner, 30 percent of large-scale CRM deployments are single-instance. Although single-instance CRM deployments have lower total cost of ownership, global enterprises find it difficult to customize single-instance deployments according to regional functionality requirements. Industry experts indicate that enterprises are increasingly moving from single-instance CRM deployments to multiple-instance CRM deployments to meet increasing demand for functionalities. According to Gartner, more than 60 percent of CRM deployments will be multiple-instance deployments by 2012.5 2. Adoption of Software as a Service (SaaS) Model: With the evolution of service oriented architectures, enterprises are increasingly adopting software as a service (SaaS) model for CRM deployments. In response, vendors are offering CRM solutions in the SaaS delivery model. For example, in 2007, Microsoft is rolling out its CRM solution, Titan, in the SaaS delivery model housed in Microsoft’s live data centers. Salesforce.com’s hosted on-demand solution, ‘Platform Edition’ is also offered in the SaaS delivery model.6 3. Cost Reduction: In an effort to reduce IT costs, enterprises are increasingly negotiating requirements-driven licensing plans. For example, customers can choose between Salesforce.com’s Enterprise and Unlimited licensing schemes. The Enterprise license is priced at $50 per month and includes the ability to run up to 10 applications, 25 custom tabs and 200 custom objects. The Unlimited license is priced at $100 per user per month and includes unlimited applications and custom tabs, and 2,000 custom objects.7

STATE OF THE CRM MARKET PAGE 4

CRM MARKET OVERVIEW

SAP Commands the Leading Market Share in Europe in the CRM Space

According to research firm Gartner’s report, SAP commands 32 percent of the market share in Europe in 2005, in terms of revenues generated, followed by Oracle at 22 percent.8

Market Share in Europe of CRM Vendors in Terms of Revenues Generated

SAP

Oracle

Others

Source: Laurence Goasduff, “European CRM Software Revenue Increased 9.7 Percent in 2005,” Gartner Web site, 2006.

SAP and Oracle Command Equal Market Share in the U.S. According to a 2006 Gartner study, SAP and Oracle enjoy equal market share in the U.S. market.9

Market Share in the U.S. of CRM Vendors in Terms of Revenues Generated

SAP

Oracle

Others

32 %

22 % 46 %

Source: Coreen Bailor, “For CRM, ERP, and SCM, SAP Leads the Way,” CRM Magagine, 5 July 2006; and Renee Boucher Ferguson, “SAP, Oracle Square Off over Market Share,” eWeek, 18 July 2006.

28 %

28 %

44 %

Other leading vendors include Amdocs and Salesforce.com.

Other leading vendors include Amdocs, Microsoft Dynamics, and Salesforce.com.

STATE OF THE CRM MARKET PAGE 5

CRM LICENSING COSTS

Sample Licensing Costs of Leading Enterprise CRM Vendors

(Sample Licensing Costs In terms of $/user/year)

$16,000

$25,000

$13,500

$2,000

$3,995

$1,500

$3,750$2,250

$15,500

0

5,000

10,000

15,000

20,000

25,000

30,000

Limited Full Peoplesoft Limited Full On-Demand CRM MicrosoftDynamics

Amdocs

Source: Barbara Darrow, “Microsoft Makes a Leap To Per-User ERP Pricing,” Channel Web Network, 9 July 2006, and author unknown, “Schedule 70 Vendor Pricing,” Immix Group, 2007.

Siebel

Oracle SAP

Oracle E-Business Suite

$/U

ser/Y

ear

STATE OF THE CRM MARKET PAGE 6

CRM LICENSING COSTS (CONTINUED)

Licensing Costs of Leading Mid-Market CRM Vendors

(Licensing Costs In terms of $/user/year)

$240

$708 $720$780

$1,200

$1,800

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

SMBLive Entellium RightNow SalesLogix SalesForce Bscaler

Sources: Barney Beal, “CRM’s Top Software and Business Trends,” SearchCRM, 22 March 2005; and Liz Herbert, “The Forrester Wave,” Oracle Web site, 24 April 2007.

$/U

ser/Y

ear

STATE OF THE CRM MARKET PAGE 7

1 Julia Chang, “Trends Driving CRM Purchases,” ManageSmarter, 19 April 2007. 2 Barney Beal, “CRM’s Top Software and Business Trends,” SearchCRM, 22 March 2005. 3 ibid. 4 Erika Morphy, “More Large Firms Now Deploying On-Demand Apps,” CRMBuyer, 12 February 2007. 5 ibid. 6 ibid. 7 ibid. 8 Laurence Goasduff, “European CRM Software Revenue Increased 9.7 Percent in 2005,” Gartner Web site, 2006. 9 Coreen Bailor, “For CRM, ERP, and SCM, SAP Leads the Way,” CRM Magagine, 5 July 2006; and Renee Boucher Ferguson, “SAP, Oracle Square Off over Market Share,” eWeek, 18 July 2006. Professional Services Note: The Corporate Executive Board has worked to ensure the accuracy of the information it provides to its members. This project relies upon data obtained from many sources, however, and the Corporate Executive Board cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, the Corporate Executive Board is not engaged in rendering legal, accounting, or other professional services. Its projects should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither Corporate Executive Board nor its programs are responsible for any claims or losses that may arise from any errors or omissions in their reports, whether caused by Corporate Executive Board or its sources.

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