November 07, 2008, 8:20 AM — On-demand CRM model will enjoy double-digit growth rates in the next five years, but investors and users will start getting disappointed with this growth if there is no payoff, says Datamonitor.
The Datamonitor report, â€˜On-demand CRM: From Top-lines to Bottom-lines,â€™ estimates that the global on-demand CRM market will grow at a compound annual growth rate of 17.7 per cent during this period 2008-2013, reaching $3.8 billion by year five. The global on-demand CRM market is estimated at about $1.7 billion in 2008 in subscription revenue alone.
Datamonitor, a leading provider of online data, analytic and forecasting platforms for key vertical sectors, 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.
Surya Mukherjee, senior analyst, technology team, Datamonitor and the reportâ€™s author, pointed out that the double digit growth rates in the on-demand CRM market are grabbing headlines and attracting the attention of potential acquirers and investors alike.
â€œHowever,â€ he said, â€œinvestors 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.â€
Mukherjee added that because the on-demand model is relatively new, it depends heavily on sales and marketing (S & M) expenses to promote itself. â€œIf S&M;continues to be higher than the industry average, vendors will need to look at managing general and administrative costs better,â€ he pointed out.
â€œOff-shoring of product development could be a possible option to that end. Given that most on-demand vendors plan to expand data-centers in the near term, asset utilisation will also be a critical parameter to watch,â€ Mukherjee added.
As all strategies for on-demand models continue to revolve around the same principles â€” easy delivery over the web, minimal hassle due to zero footprint solutions, and a simplified subscription fees payment structure â€” innovating on these go-to-market strategies, will reap dividends, the report says.
A mixture of the positives from financial benefits, collaborative user interfaces, enhanced remote access, and reduced security concerns will make a persuasive case for the on-demand model, Datamonitor adds.
â€œThe on-demand CRM model has the potential to provide a sustainable alternative for customers dissatisfied with the on-premise model. Vendors should be active and need to in communicate a holistic message to end-users, comprising of the financial, social and security benefits of the model,â€ concluded Mukherjee.