After a slump, the CRM software market stabilized in 2003 and began to turn around in 2004.

"By some estimates, the potential market is still quite substantial," says Steve Butler, Senior Analyst at eMarketer and author of the CRM Software: Spending and Trends report. "That’s illustrated by Siebel Systems’ bold prediction that worldwide spending on customer-facing technology solutions over the next 10 years will be nearly five times larger than the total for the preceding quarter century."

But growth never comes easily, Mr. Butler says: "Siebel itself, which pioneered the CRM space, has seen software sales tumble this year."

IDC currently estimates that worldwide sales of CRM applications will increase by a compound annual growth rate of 8.9% between 2004 and 2008, to reach $11.4 billion. The research firm predicts that analytic CRM applications will continue to lead the market, after topping $908.7 million in global sales and posting 12.7% growth in 2003.

In North America — which by some estimates accounts for nearly half of global CRM software sales — CRM license revenues are forecast to grow by 4.2% in 2005, to reach $2.8 billion by the end of this year, according to Datamonitor.

A third comparative estimate from Forrester Research predicts that worldwide spending on CRM projects will reach $13 billion in 2005, of which $3.2 billion will be spent on new software licenses. The remaining $9.8 billion will go toward integration, administration and maintenance costs.

According to its breakdown of worldwide CRM software sales for 2004, AMR Research estimates that customer service applications accounted for 21% of spending last year. Call center infrastructure made up 19%, followed by SFA at 16% and marketing automation & analytics software at 12%.

Looking ahead to 2005, AMR Research notes that hosted CRM solutions gained acceptance during 2004, and will continue to gather momentum this year. In support of its outlook for further spending growth, AMR points to early project activity in areas such as specialty chemicals, high tech, consumer products, retail, and discrete manufacturing (the production of items that can be individually marked or counted, as opposed to products sold by weight or volume, such as gasoline.)

The CRM services market is also expected to grow. IDC predicts that during the next two years, CRM services spending will increase at a "modest to moderate" pace through mid-2007, after which it should accelerate to "moderate to strong" growth through 2009.

"Most analysts agree that the factors driving increased CRM services spending are the improving economy and business profitability," says Mr. Butler, "as well as a need for more complex systems that require more consulting assistance, particularly with change management issues."

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