SaaS Gives CRM a Big Boost

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It looks like 2008 could be a banner year for CRM, thanks in no small part to software-as-a-service.


A destinationCRM.com article cites research from Datamonitor, which expects the CRM market to nearly double from $3.6 billion to $6.6 billion over the next five years, and KensingtonHouse, which claims that 38 percent of companies are deploying, upgrading or actively considering a CRM purchase, a far bigger number than the 18 percent to 25 percent more typical for this so-called "market fertility" gauge.


Both Datamonitor and KensingtonHouse credit the growing acceptance of the SaaS delivery model as a key driver behind the increased interest in CRM. Fifty-five percent of the latter firm's SMB-heavy survey sample expressed a preference for SaaS, compared to 14 percent interested in on-premise software (and 31 percent undecided).


Datamonitor also mentions the growing use of CRM in vertical sectors such as health care and life sciences, which are being targeted by niche SaaS vendors, and by SMBs, which Datamonitor says accounted for a third of CRM licenses sold in 2007. Companies with fewer than 1,000 employees will make up 42 percent of the market by 2012, Datamonitor predicts.


As I've blogged before, SMBs have accounted for much of SaaS' popularity to date. SaaS vendors seem more willing than traditional software vendors to provide the simpler user interfaces that AMI-Partners says will become "a critical differentiator" for vendors trying to sell software to SMBs. SaaS also generally has fewer of what Datamonitor calls common "adoption inhibitors," including high cost and undue complexity.


Traditional on-premise software vendors, including Microsoft, are introducing SaaS offerings. As reported in a CRM Buyer article, Microsoft will expand its current limited release of CRM Live in 2008. The SaaS product is designed to address niggling user adoption issues, says Brad Wilson, the Microsoft exec heading up its Dynamics CRM division.

CRM went through a period where there were a lot of inflated expectations that were not met. The biggest problem for a lot of people was that the technology wasn't well suited for the people who were using it.