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Rental CRM is on the rise

Companies are increasingly looking to rent rather than buy software, changing the nature of the CRM marketplace in the process, according to research from Aberdeen Group.

The market for CRM software is expected to reach $17.7 billion by 2006, growing at a relatively sluggish annual rate of 6.7 per cent with license revenue will decline at an average annual rate of 4.8 per cent by 2006--while revenue from subscriptions will jump to $2.8 billion.

This is attributable to the interest in chasing small and midsize businesses. "Smaller and midmarket companies are more amenable to having something that they can pay for over time," Aberdeen analyst Hugh Bishop said. "It helps with cash flow to have a smaller payment on a quarterly or monthly basis. Purchasing of new CRM application software will rapidly transition to an application service provider, subscription-oriented model.?

Customer dissatisfaction has caused many to look for quantifiable return on invesent. A subscription model enables them to make a relatively small commient and to increase use as the applications prove their value. "The financial benefits and risk mitigation associated with this new model are driving user organisations to abandon the perpetual license model," said Bishop.

"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."

Two of the leading rental firms are tying up with hardware vendors to expand their marketshare. Next week, will unveil a deal with Dell Computer under which's hosted CRM service will be promoted on Dell's small-business solutions Web site. The associated CRM services will be hosted by on Dell's PowerEdge servers running Linux.

Rival NetLedger is teaming up with Hewlett-Packard to offer hosted business applications. Hosted back-office processing will run on HP ProLiant servers, and HP will handle leasing arrangements for interested customers, Nelson said.

NetLedger and HP plan to offer the solution direct and through solution providers, including current NetSuite and Oracle resellers while HP resellers also can enrol in NetLedger's solution provider program.

Source: Aberdeen Group back to main news

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