On-Demand CRM market to reach $3.8 billion by 2013

http://www.executivebrief.com |  Enterprise Software, CRM, Datamonitor

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, ‘On-demand CRM: From Top-lines to Bottom-lines,’ 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 report’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.

“However,” he said, “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.”

Mukherjee added that because the on-demand model is relatively new, it depends heavily on sales and marketing (S & M) expenses to promote itself. “If S&M;continues to be higher than the industry average, vendors will need to look at managing general and administrative costs better,” he pointed out.

“Off-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,” Mukherjee added.

As all strategies for on-demand models continue to revolve around the same principles — easy delivery over the web, minimal hassle due to zero footprint solutions, and a simplified subscription fees payment structure — 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.

“The 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,” concluded Mukherjee.

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