The customer relationship management market is expected to reach $17.7 billion by 2006, growing at an average annual rate of 6.7 percent, according to a report by Aberdeen Group, Boston, a market analysis and positioning services firm.
The study also found that a massive shift will occur in how user organizations acquire and pay for CRM solutions.
“Purchasing of new CRM application software will rapidly transition to an application service provider, subscription-oriented model,” said Hugh Bishop, senior vice president at Aberdeen and author of “Worldwide CRM Spending: Forecast and Analysis 2002-2006.”
“The financial benefits and risk mitigation associated with this new model are driving user organizations to abandon the perpetual license model,” he said. “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 percent while subscription revenues will skyrocket to $2.8 billion.”
Bishop also noted that CRM spending by small and midsized businesses is expected to exceed that of larger enterprises, partly because of the new pricing and software architecture models now available.
The report notes that the United States will stay the dominant market for CRM, though its share will dip over time because of rising global adoption. The United States accounted for $7.14 billion (52.2 percent) of the overall market in 2002. A 51.9 percent share is expected by 2006.