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CRM's On-Demand Option to See Double-Digit Growth
October 27, 2008
By David Sims, TMCnet Contributing Editor
The on-demand customer relationship management (CRM) model should see “double-digit growth rates over the medium term,” according to independent market analyst firm Datamonitor.
The tech analyst firm’s new report, “On-demand CRM: From Top-lines to Bottom-lines,” reports that “many on-demand vendors are facing competitive pressures and struggling to find profitability in this high-growth market.”
Datamonitor recommends vendors look beyond revenue growth rates and “start doing more with less - by stabilizing operational expenses and increasing the use of their assets and data centers.” The report points out the potential for the growth of on-demand CRM products and the expanding footprint into the sweet spots of other CRM delivery models, “which will intensify competition.”
Surya Mukherjee, senior analyst with Datamonitor’s technology team and the report’s author, cautioned that investors and acquirers “will start getting disillusioned with growth if there is no payoff. The need of the hour for on-demand CRM vendors is to accelerate their path to profitability by driving operational efficiency.”
These findings continue trends Datamonitor found last December, when the firm asked 300 users of customer relationship management technology in pharmaceutical and biotechnology companies across North America and Western Europe to rate CRM vendors in five areas: product quality, customer support, service capabilities, vertical specialization, portfolio depth, and service levels.
Putting the survey responses with its own market research, TMC reported that Datamonitor pointed to an industry trend towards the on-demand delivery model. "Namely, end users of such products are more satisfied with customer support and services provided by SaaS (News - Alert) vendors rather than by traditional vendors."
The report stated that "on-demand CRM vendors are making a lasting impact on the pharmaceutical CRM market."
Datamonitor defines on-demand CRM as comprising of applications that typically reside with the vendors and allow multiple end-users to access the same instance of the application (multi-tenancy) remotely through the Web.
Users of on-demand CRM applications do not typically make upfront investments in software or hardware, as they simply access their CRM application via a Web-based interface and typically pay only per-user subscription fees monthly, semi-annually or annually.
The global on-demand CRM market, estimated by Datamonitor at about $1.7 billion in 2008 in subscription revenue alone, is expected to reach $3.8 billion by year end 2013, growing at a compound annual growth rate of 17.7 percent during this period.
However, “achieving profitability will be challenging, especially in the wake of increased competition from more entrenched delivery models,” says Mukherjee, adding that the on-demand model is “relatively new and depends heavily on S&M expenses to promote itself.”
Off-shoring of product development “could be a possible option to that end,” Mukherjee’s report says.

David Sims is a contributing editor for TMCnet. To read more of David's articles, please visit his columnist page. He also blogs for TMCnet here.

Edited by Stefania Viscusi

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