CRM growing, but cloud mashup could make it better

The latest figures from research firm, Gartner,  on the development of the CRM marketplace has prompted a response from Tom Brennan, VP of Marketing for Salesforce.com partner, FinancialForce.com, that highlights one of the important capabilities that the cloud brings to the business `party’, yet at the same time underpins one of the underlying failings of cloud services vendors.

Gartner’s research shows that 2013 saw a 13.7 percent growth in the CRM marketplace, with 41 percent of it being taken up by cloud-delivered services. The dominant single player is, as might be expected, Salesforce.com, yet over half of the market for CRM systems is taken up by that ubiquitous vendor, `Others’.

This is obviously still connected with the fact that it takes both time and external market or business pressures to push business users to make a change to their established ways of doing business. But after all this time that CRM has been the `poster child’ cloud service it does seem something of a surprise that cloud-delivered CRM does not take a bigger market share.

Brennan hits on one possible cause.

“The latest news from Gartner shows a welcome continuation in the trend for increased emphasis on customer service – as customer centricity becomes ever more important to businesses in maintaining a competitive edge.  

“Applying technology that will boost the front of office is only half the picture however, as without an enterprise resource planning (ERP) system that integrates with CRM, those at the front line of a business are held back from gaining full visibility of their customers’ journey.

“CEOs and CIOs should be wary of the consequences of spending too little attention on back office systems and failing to realise the role it plays in customer service. If the back office isn’t in order, problems will occur that leave customers disappointed, regardless of how good an organisation’s sales or marketing team is.”

And while Brennan’s position is geared to the fact that FinancialForce is an ERP services provider that supplies just such a collaborative back office capability to the CRM services of Salesforce, the underlying point is becoming of crucial importance: creating collaborative cloud services –mashing them together in new and creative ways that are unlikely to be engineered by any single applications software vendor – is the key advantage that the cloud provides.

Yet it seems to remain the elephant in the room that most cloud service providers and applications vendors seem determined to ignore in favour of selling their own specific capabilities.

According to Gartner, worldwide CRM market totalled $20.4 billion in 2013. 

"High levels of end-user investment in digital marketing and customer experience initiatives were the primary growth drivers of the market in 2013," said Joanne Correia, research vice president at Gartner. "CRM will be at the heart of digital initiatives in coming years. This is one technology area that will get funding because digital business is critical for companies to remain competitive." 

Strong demand for software as a service (SaaS), which represented more than 41 percent of CRM total software revenue in 2013, was driven from organisations of all sizes seeking easier-to-deploy alternatives to replace legacy systems, implement net-new applications or provide alternative complementary functionality. 

Salesforce.com continued to be the largest vendor overall in the CRM market with 16.1 percent of the market. SAP remained in the No. 2 position in the overall CRM space, but is still the leader in terms of revenue and market share for the sub-segments of customer service and e-commerce. 

From a regional perspective, Western Europe had strong growth of 15.2 percent in 2013, and North America continued to drive the bulk of the revenue share (52.9 percent) for the overall CRM market. These two regions represent almost 80 percent of all software spending on CRM technologies. In these markets infrastructure for cloud/SaaS deployments are more mature, and customer retention and acquisition continue to be main drivers of the focused build-out for the major vendors and on-premises software that is being upgraded.

The emerging Asia/Pacific and Greater China regions experienced less-aggressive growth, but they still reached double-digit growth rates. The regions are far from maturing, but are impacted by a slowing macroeconomy, and influenced by notable depreciation of some local currencies such as the Indian rupee and the Indonesian rupiah.

The communications, media and IT services vertical industries are the largest spenders on CRM because they focus on large groups using call centre technologies. They also invest more to improve analytics-related areas and improve/provide more consistent customer experiences. Manufacturing (including consumer packaged goods) is in second place, with these companies using CRM for product and channel management. Third-ranked is banking and securities, in which customer service and upselling to other financial products are core to growth.

Detailed analysis is in the report "Market Share Analysis: Customer Relationship Management Software, Worldwide, 2013." The report is available here.