Last year, four out of every ten CRM systems sold were SaaS-based, and the trend is accelerating.
In the recent Gartner report Market Share Analysis: Customer Relationship Management Software, Worldwide, 2012 published April 18, 2013 the authors provide insights into why the worldwide CRM market experienced 12% growth in 2012, three times the average of all enterprise software categories. Gartner cites demand they are seeing from their enterprise clients for CRM systems that can help acquire customers, analyze and act on customer behaviors, and increase all-channel management performance. Big data inquiries are also increasing in CRM, driven by the interest enterprise clients have in getting more value from social network data and interactions.
Key take-aways from the report include the following:
- The CRM worldwide market grew from $16B to $18B attaining a 12.5% growth rate from 2011 to 2012.
- 80% of all CRM software in 2012 was sold in North America and Western Europe. North America CRM sales grew 16.6% from 2011 to 2012. The highest growth regions of CRM sales between 2011 to 2012 included Greater China (26.9%) and Latin America (24.3%).
- Salesforce.com is the world’s leading CRM software vendor with 14% market share in 2012 ($2.5B in sales), surpassing SAP (12.9%, $2.3B in sales), Oracle (11.1%, 2.01B in sales), Microsoft (6.3%, $1.1B in sales), IBM (3.6%, $649M in sales) and all others. The top ten vendors worldwide generated $10.9B in sales alone in 2012.
- Worldwide CRM software spending by subsegment shows Customer Service and Support leading all categories with 36.8% of all spending in 2012 ($6.6B), followed by CRM Sales (26.3%, $4.7B), Marketing (includes marketing automation) (20%, $3.6B) and e-commerce (16.9%, $3B). The following chart shows the distribution of revenue by category:
- 40% of all CRM software sold in 2012 worldwide was SaaS-based. Gartner states that they are seeing their enterprise clients seek out easier-to-deploy CRM systems compared to on-premise alternatives. The report states that many enterprises are now replacing their legacy systems with SaaS-based CRM systems as well. Enterprise clients also report that SaaS-based CRM systems are delivering net-new applications that deliver complementary functionality not possible with legacy and previous-generation CRM platforms.
- Ten fastest growing CRM vendors as measured in revenue Annual Growth Rate (AGR) in 2012 include Zoho (81.2%), Hybris (78.6%), Teradata (70.4%), Bazaarvoice (56.2%), Marketo (54.3%), Kana (44.2%), Demandware (43.9%), IBM (39.4%), Technology One (37.1%) and Neolane (36%).
- Communications, media and IT services were the biggest spenders on CRM in 2012 due to their call center requirements. Manufacturing including Consumer Packaged Goods (CPG) was second, and banking & securities were third.
All enterprises, regardless of what they produce or the services they deliver, are really information businesses.
The accuracy, speed and precision of IT systems means the difference between winning or losing customers, keeping supply chains profitable, and solidly translating new concepts into revenue-producing products and services. The world’s best-run services businesses have customer-driven IT as part of their DNA; it is very much who these companies are internally.
In the recently published Garter report CEO and Senior Executive Survey 2013: 21 Top Companies Admired for Competitive IT completed between October and December, 2012, which was part of the 2013 CEO and Senior Business Executive Survey, C-level respondents were asked to name the companies they most admired in terms of their ability to apply IT-related business capabilities for competitive advantage. Respondents were also asked to limit their responses only to their own and related industries.
391 respondents participated in the survey with 147 being CEOs, 149, CFOs; 49, COOs; and 46 being board members including Chairman of the board and president. Geographic distribution included 152 respondents from North America; 124 from Europe; 78 from Asia/Pacific; 20 from Brazil; 12 from South Africa; and 5 from the Middle East with minimum company size being $250M in annual sales or above.
The following is the list of the world’s most admired companies using IT for competitive advantage.
Most Admired Companies Making IT A Competitive Advantage
Hospital Corporation of America
JP Morgan Chase
Proctor & Gamble
- Customer-driven IT is the single most admired trait of all 21 companies in the list. Associated with this attribute is the proven ability of these enterprises to manage complex e-commerce systems & platforms, support multichannel management, in addition to continually show the ability to innovate quickly.
- Enterprises need to consider how the business successes their investments in IT are enabling can be used for branding and recruitment. Providing benchmark performance data and stories of how IT helped create entirely new markets and solve customer problems needs to be used for recruiting. Many of the 21 companies mentioned are doing this, using success stories as a catalyst for driving recruitment efforts for analytics, cloud computing and systems integration experts.
- Don’t underestimate the disruptive power of cloud computing and mobility to completely re-order enterprise systems quickly. Gartner mentions that there are enterprises whose IT organizations would have made the list had they not slowed down. While not directly stated, Gartner warns IT departments to not become complacent over time. From personal experience working in IT departments however, it is clear that complacency is a leading career hazard. It’s imperative for CIOs to keep challenging their organizations to stay intensely focused on new developments, seeking out how they can be used to strengthen business strategies.
- Four of the top five factors that most impressed respondents about the admired companies are customer-related. Customer-facing IT (15%); followed by an integrated/standardized/unified IT organization and process framework (13%); exceptional use of CRM (11%); customer-centered innovation (9%); and product design & offerings (9%) are the most mentioned attributes of the highest-performing companies. Multiple responses were allowed to this area of the survey. The following graphic provides an analysis of which factors most impressed the C-level executives who were respondents to the survey.
Enterprises are beginning to change their buying behaviors based on the deployment speed, economics and customization that cloud-based technologies provide. Gartner cautions however that enterprises are far from abandoning their on-premise models and applications entirely for the cloud.
Based on an analysis of the Gartner Hype Cycle for Cloud Computing, 2012, the best results are being attained by enterprises that focus on a very specific strategy and look to cloud-based technologies to accelerate their performance. Leading with a strategic framework of goals and objectives increases the probability of cloud-based platform success. Those enterprises that look to cloud platforms only for cost reduction miss out on their full potential.
The Hype Cycle for Cloud Computing, 2012 is shown below:
Cloudwashing and Inflated Enterprise Expectations
While the hype surrounding cloud computing may have peaked, cloudwashing continues to cause confusion and inflated expectations with enterprise buyers. This just slows down sales cycles, when more straightforward selling could lead to more pilots, sales and a potentially larger market. Cloud vendors who have the expertise gained from delivering cloud platforms on time, under budget, with customer references showing results are starting to overtake those that using cloudwashing as part of their selling strategies.
Additional take-aways from the Gartner Hype Cycle for Cloud Computing include the following:
- Cloud Email is expected to have a 10% adoption rate in enterprises by 2014, down from the 20% Gartner had forecasted in previous Hype Cycles. This represents modest growth as the adoption rate of this category had been between 5 and 6% in 2011.
- Big Data will deliver transformational benefits to enterprises within 2 to 5 years, and by 2015 will enable enterprises adopting this technology to outperform competitors by 20% in every available financial metric. Gartner defines Big Data as including large volumes processed in streams, in addition to batch. Integral to Big Data is an extensible services framework that can deploy processing to the data or bring data to the process workflow itself. Gartner also includes more than one asset type of data in their definition, including structured and unstructured content. The Priority Matrix for Cloud Computing, 2012 is shown below:
- Master Data Management (MDM) Solutions in the Cloud and Hybrid IT are included in this hype cycle for the first time in 2012. Gartner reports that MDM Solutions in the Cloud is getting additional interest from Enterprise buyers as part of a continual upward trend of interest in MDM overall. Dominant vendors in this emerging area include Cognizant, Data Scout, IBM, Informatica, Oracle and Orchestra Networks, are among those with MDM-in-the-cloud solutions.
- PaaS continues to be one of the most misunderstood aspects of cloud platforms. The widening gap between enterprise expectations and experiences is most prevalent in this market. Gartner claims this is attributable to the relatively narrow middleware functions delivered and the consolidation fo vendors and service providers in this market.
- By 2014 the Personal Cloud will have replaced the personal computer as the center of user’s digital lives.
- Private Cloud Computing is among the highest interest areas across all cloud computing according to Gartner, with 75% of respondents in Gartner polls saying they plan to pursue a strategy in this area by 2014. Pilot and production deployments are in process across many different enterprises today, with one of the major goals being the evaluation of virtualization-driven value and benefits.
- SaaS is rapidly gaining adoption in enterprises, leading Gartner to forecast more than 50% of enterprises will have some form of SaaS-based application strategy by 2015. Factors driving this adoption are the high priority enterprises are putting on customer relationships, gaining greater insights through analytics, overcoming IT- and capital budget-based limitations, and aligning IT more efficiently to strategic goals.
- More than 50% of all virtualization workloads are based on the x86 architecture. This is expected to increase to 75% by 2015. Gartner reports this is a disruptive innovation which is changing the relationship between IT and enterprise where service levels and usage can be tracked.
Bottom line: Gartner’s latest Hype Cycle for Cloud Computing shows that when cloud-based platforms are aligned with well-defined strategic initiatives and line-of-business objectives, they deliver valuable contributions to an enterprise. It also shows how Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) are the catalysts of long-term market growth. The following slide from the presentation High-Tech Tuesday Webinar: Gartner Worldwide IT Spending Forecast, 2Q12 Update: Cloud Is the Silver Lining (free for download) also makes this point.
It’s time to strip away the hype surrounding analytics, big data and cloud computing by asking how these technologies contribute to excellent customer experiences and greater customer engagement. Those are the real catalysts of market growth and the greatest disruptive forces at work in enterprise software today.
Filtering forecasts of future technology adoption with a customer experience and engagement mindset is essential for separating hype from reality. Two excellent blog posts were published today that provide useful insights for doing this. Ray Wang’s Monday’s Musings: 10 Mega Business Trends To Watch For In 2012 provides pragmatic, insightful analysis of the progression going on from transactional to personal fulfillment systems. Many of the CIOs I’ve met with in the last two months are saying exactly what Ray has written regarding this transition. Paul Greenberg’s CRM 2012 Forecast – The Era of Customer Engagement – Part I delivers more insight than any of the financial or industry analyst reports I’ve read in the last twelve months on CRM and its intersection to social networks. He has defined customer engagement so thoroughly I am sure this post will be a classic, referenced for years to come. Both posts provide an excellent framework to evaluate the upcoming wave of new forecasts due out from research firms at the start of 2012.
Having recently read Forrester’s US Tech Market Outlook For 2012 and applying the concepts Ray Wang and Paul Greenberg discuss, here are several take-aways from that report:
- Total U.S. ICT market in 2011 was $962B with the majority being generated from software sales ($208B) followed by Telecom Services ($199B) and IT Consulting and Systems Integration Services ($188B). The following graphic illustrates the purchase of ICT product and services in the U.S. during 2011. As enterprise software companies are striving to deliver what Ray Wang is calling Experiential Systems, the majority of their core Intellectual Property (IP) was obtained from building Transactional Systems. Despite this conflict, software development methodologies including Agile give the industry a fighting chance at growth in 2012.
- Software continues to dominate both in total revenue ($208B) and growth rate, with 8.2% growth projected for 2012. In addition to analytics and Business Intelligence (BI), Forrester is predicting an increase in ERP, Middleware and SaaS-based application growth.
- Forrester is most optimistic in their forecasts for analytics, BI, Cloud Computing and Smart Computing. Cloud Computing forecasts at Forrester are indexed to sales levels of NetSuite, RightNow Technologies (Oracle), Salesforce.com, and Ultimate Software. Forrester is claiming these four vendors will generate a 23% increase in revenues in calendar Q1, 2012 over Q1, 2011, increasing and staying constant at 24% year-over-year growth from Q2 to Q4, 2012 relative to Q2 to Q4, 2011. Salesforce.com could accomplish this level of growth through acquisitions alone. They’re showing they can integrate newly acquired companies faster than Oracle, who they are challenging for global CRM market leadership in the 2012 – 2013 timeframe. When customer experience and engagement is taken into account, the forecast seems high. Salesforce knows how to translate trial users into customers. The question is can they do this fast enough in 2012 throughout the enterprise and mid-tier accounts to keep up their sales growth on track while reducing churn and increasing profitability.
- Smart Computing is defined by Forrester as platform technologies including specialized analytics, BI, service-oriented architecture (SOA) infrastructure, virtualization software, rules engines, and awareness-based technologies. Forrester is very optimistic about this area with a growth rate second only to cloud computing. Its index of the market is based on Informatica, Pegasystems, and Tibco Software. Forrester is predicting in calendar Q1, 2012 there will be 16% growth over Q1, 2011, followed by consistent 13% growth year-over-year for Q2 to Q4, 2012 relative to 2011. The following graphic compares growth of both Cloud Computing and Smart Computing.
- The inflexion point of Smart Computing will happen when analytics, BI and awareness-based technologies including RFID can be used to make customer experiences consistently positive and drive cultural change throughout a business to center on customers’ expectations. Paul Greenberg refers to this area of customer engagement in his blog post. I agree with him and see the real value of analytics not for reporting, but for being a barometer of just how customer-centric and focused on delivering exceptional customer experiences a company is becoming.
- In 2012, financial services, professional services, and manufacturing will be the three industries that dominate software purchases. Financial services (19%), professional services (15%) and manufacturing (14%) will be the largest buyers of enterprise software. Forrester believes that ERP replacements, supply chain management (SCM) and product lifecycle management (PLM) will all be proprieties in the coming twelve months.
Bottom line: Critiquing high growth technologies based on their contribution to customer experience, engagement and the creation of Customer Lifetime Value (CLV) is what matter most. Hopefully the new wave of forecasts for 2012 and beyond will take the customer – not just technology and statistical extrapolations – into account.