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2013 CRM Market Share Update: 40% Of CRM Systems Sold Are SaaS-Based

CRM-Market-Share-Analysis-Image-2012Last 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.

Figure-1-Market-Share-CRM

  • 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:

CRM-Software-Subsegments

  • 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.
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Why Cloud Computing is Accelerating in the Enterprise

Cloud computing gaining in the enterprise Translating time into dollars matters far more to many CEOs I’ve spoken with versus what platform their applications are running on.

What matters most is getting all they can out of every hour their business is operating.  They are all focused on getting beyond the constraints that held their growth back in the past – everyone wants a growth accelerator today.  For manufacturers especially, this includes applications with depth of functionality that can be quickly deployed regionally, and in more cases than ever, globally as well.  Line-of-business leaders want applications that make an immediate impact on their entire value chain.

Just having a cloud strategy is not enough for any enterprise software company anymore. Owning the pain prospects and customers go through daily to get work done is all that matters.  Every application and platform component needs to contribute to the goal of reducing customer’s challenges of doing business.  In studying companies who excel at this, I’ve often used stock market indices to see how they compare to market averages and their competitors.

Charting Progress Using the Cloud Computing Stock Index

Creating and using stock indices to track the performance of specific industry and market sectors is a great way to cut through hype.  I’ve been using these for over a decade to track industries and markets of interest, and have built the Cloud Computing Stock Index. You can download the latest summary here.  If there are companies you think need to be included please let me know.  I deliberately left out IBM, Google, Microsoft, Oracle and SAP as a prerequisite is that a firm derive at least 50% or greater revenue from cloud-based applications and services.

The graph below shows all-time performance of the Cloud Computing Index relative to Microsoft, Salesforce.com. NetSuite and Workday.

Figure 1 stock index

Key Take Aways

  • NetSuite posted a 62.6% increase in stock performance, followed by Workday (+20.57%), Salesforce (+4.23%) and the Cloud Computing Index (+4%) with Microsoft seeing a 8.18% decline in share price during the period.
  • NetSuite, Salesforce and Workday continue to gain new customers in the mid-tier and enterprise areas of the market based on depth of functionality, rapid application development (RAD), and increasing success creating alliances with system integration, selling and technology partners.
  • Workday’s expertise in Human Capital Management is accentuated by the depth of analytics and trend analysis and expertise in cloud-based integrations.  Their depth of functional expertise in these areas is leading to rapid growth.
  •  NetSuite is succeeding with its two-tier ERP selling strategy against long-standing ERP vendors including Oracle, SAP and others.

Bottom line:  Salesforce, NetSuite and Workday show how developing cloud-based applications designed for ease of use and speed of deployment are winning new customers in the enterprise – and driving up their stock price as a result.

Specifics on the Cloud Computing Stock Index

I used The Cloud Times 100 as the basis of the index, and included the 23 following companies, all of which are publically traded.  These include:

  • Akamai Technologies.
  • Amazon.com, Inc.
  • ARM Holdings plc
  • CA, Inc.
  • Cisco Systems, Inc.
  • Citrix Systems, Inc.
  • EMC Corporation
  • F5 Networks, Inc.
  • Fusion-IO, Inc.
  • Intuit
  • Juniper Networks, Inc.
  • Keynote Systems, Inc.
  • NetSuite Inc
  • Qualys Inc
  • Rackspace Hosting, Inc.
  • Red Hat, Inc.
  • Riverbed Technology…
  • Salesforce.com, inc.
  • Symantec Corporation
  • Trend Micro Incorporated
  • VMware, Inc.
  • Websense Inc.
  • Workday Inc

 Note: I do not hold equity positions or work for any of the companies mentioned in this blog post or included in the Cloud Computing Stock Index.  

Making Cloud Computing Pay

Relying on cloud computing strategies to free up dollars and time that can quickly be re-invested in product and service innovation emerged as the highest priority for respondents in a recent Rackspace survey.

While cost reductions were significant, the greatest contributions were seen in investments in innovation (48%), new product & service development (45%), and boosting sale efforts (38%).

Rackspace recently commissioned a study with market research firm Vanson Bourne, who surveyed 1,300 organizations in the UK and the U.S., including 1,000 Small & Medium Enterprises (SME) and 300 enterprises with 1,000 employees or more.  The methodology included coverage of Financial Services, Retail, IT/Technology, Manufacturing, Business and Professional Services, Media, Logistics, and Mobile Telecommunications sectors, with a further small representative group from other sectors.   Rackspace also partners often with the Manchester Business School to complete qualitative research, which they also did on this project.  You can find an executive summary of the study here, Cloud Computing Research.   In February, Joe McKendrick’s post titled Cloud Computing Boosts Next Generation of Startups, Survey Shows covered the findings from this survey from a start-up standpoint.

Key take-aways from the research include the following:

  • In March, Rackspace made a subset of the results available in Microsoft Excel format, titled the Vanson Bourne Cloud Barometer Data – IT Skills.   Thank you Rachel Romoff  and the Rackspace team for responding so quickly to my request for links to the data set and insights into how the study was completed.
  • 62% of respondents state that cloud computing is enabling their organizations to invest more money back into their businesses.  Cloud computing improved profits by an average increase of 22% according to the study.  Marketing benefits most 
    significantly from cloud computing investment, as is shown in the table below. I’ve asked for clarification from Vanson Bourne with regard to sales being rolled up into the marketing figure and will update this post when I get a response.
  • Average cost reduction is 23% due to cloud computing savings on infrastructure, based on the combined results of UK and US-based respondent analysis.
  • 62% of firms have invested funds saved due to cloud computing efficiencies back into their businesses, increasing total investment by an average of 23%.  The following table from the study shows the prioritization of investments being made based on funds saved from cloud computing:
  • 56% of organizations are using open source technology as part of their cloud strategies and 86% say that using open source cloud technology boosts their business’ ability to innovate.
  • 68% say their organizations are increasing their use of open source cloud computing technology due to the lower cost of ownership (58%) and the greater stability and robustness of it as a platform (45%).
  • Manufacturers are saving $774,000 (£506K) per using cloud providers according to the study.  Presented below is a table from the Vanson Bourne study comparing industries.

Bottom line:  Using the cost and time savings from cloud computing to free up up resources for product innovation is giving these companies a long-term competitive advantage in the market.

21 Most Admired Companies Making IT A Competitive Advantage

time-and-IT-competitive-advantage1-300x215All 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

Accenture
Amazon
Apple
Cleveland Clinic
General Electric
Goldman Sachs
Google
Hospital Corporation of America
IBM
Intermountain Healthcare
JP Morgan Chase
Kaiser Permanente
Mayo Clinic
Microsoft
Nestle
Proctor & Gamble
Progressive Insurance
Schlumberger
Target
Toyota
Wells Fargo

Key Take-Aways

  • 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.

What Impressed Business Leaders Most

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