CRM Set for Recovery

Hit $6.75 billion in 2001, due to reach $10.4 billion by 2006, ARC predicts

Dedham, MA  July 8, 2002  The global customer relationship management (CRM) solution market is set to bounce back from its current slump and will reach $10.4 billion by 2006, according to a new study by the ARC Advisory Group.

The CRM market has suffered from a sharp downturn with the extended depressed economic markets and terrorist attacks of September 11, and last year's sales fell to $6.75 billion after slowed growth in 2000.

"The strong CRM market growth in the late 90s was fueled by the overwhelming success the ERP [enterprise resource planning] market experienced with Y2K," said ARC CRM analyst Steve Clouther, author of the technology consultancy's CRM Software & Services

Worldwide Outlook market study. "The companies with a customer-centric strategy recognized the financial benefits of having a comprehensive CRM solution that integrated with the back-office operations."

But a slowing world economy and fears of costly and time-consuming technology implementations caused the CRM market to slow in 2000 and then actually decline in 2001.

The impact from the downturn of the global economies was felt around the world by all the CRM suppliers, and the events of September 11, 2001 represented the coup de grace for many, as they wrote off millions of dollars  sometimes even billions  in restructuring costs associated with closing facilities and terminating employees.

Nevertheless, ARC sees the CRM market growing over the next five years at a cumulative average growth rate of 9.1 percent, reaching $10.4 billion by 2006.

Clouther saw a few key elements contributing to this growth. "The concept of modular applications, integration to other applications, demonstrable ROI [return on investment], vertical industry solutions, the extended enterprise and e-collaboration, coupled with fast-track implementations, will be key elements in the recovery," the analyst said.