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Moderate Growth in CRM Market Masks Big Move from In-house to ASP Use

BOSTON - The steady-as-she-goes growth of the worldwide customer-relationship management market is masking a sea change in how the technology is being paid for and deployed, according to a new report. "Purchasing of new CRM application software will rapidly transition to an application service provider (ASP), subscription-oriented model," says Hugh...

By Staff Writer | Updated on July 15, 2003

BOSTON – The steady-as-she-goes growth of the worldwide customer-relationship management market is masking a sea change in how the technology is being paid for and deployed, according to a new report. “Purchasing of new CRM application software will rapidly transition to an application service provider (ASP), subscription-oriented model,” says Hugh Bishop, senior vice president at the Aberdeen Group in Boston, a leading market analysis and positioning services firm. Bishop says CRM spending will grow at an annual rate of 6.7% through 2006, reaching $17.7 billion, and that spending by small and medium-sized businesses will exceed that of larger firms, because of the ability to tailor the solution. “The financial benefits and risk mitigation associated with this new model are driving user organizations to abandon the perpetual license model. CRM suppliers also see an advantage to this model, since it provides them with predictable, renewable revenues. As a result, license revenues will decline at an average annual rate of 4.8%, while subscription revenues will skyrocket to $2.8 billion,” Bishop says in the Aberdeen report. The U.S. will continue to dominate the CRM market, but international adoption, particularly in the Asia/Pacific Rim, will modify that. In 2002, the U.S. accounted for $7.14 billion (or 52.2%) of the overall market. By 2006 that share is expected to be 51.9%, Aberdeen says.

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