Companies are increasingly looking
to rent rather than buy software, changing the nature of the
CRM marketplace in the process, according to research from
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, Salesforce.com
will unveil a deal with Dell Computer under which Salesforce.com's
hosted CRM service will be promoted on Dell's small-business
solutions Web site. The associated CRM services will be
hosted by Salesforce.com on Dell's PowerEdge servers running
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.