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SAP Keeps Lead in CRM as Market, Rivals Grow

Customer Relationship Management (CRM) software continued on its tear last year, driving billions in sales despite shifting economic conditions.

In a new report assessing the 2008 CRM market, industry researcher Gartner said worldwide revenue for CRM vendors grew 12.5 percent during the year, increasing to $9.15 billion.

Some companies fared better than others. The report found SAP remained in the lead, followed in order by Oracle, Salesforce, Microsoft and Amdocs.

"We are very pleased with the strong adoption of our CRM solution," a SAP representative said in an e-mail to InternetNews.com. "As Gartner's report indicates, we are the clear market leader, with a significantly larger market share than our closest competitors."

While coming in at No. 4, Microsoft posted an astonishing growth rate of 75 percent last year, according to Gartner (NYSE:IT), while Salesforce saw an impressive 45 percent increase. SAP actually lost revenue, by 0.1 percent, but retained its lead.

"SAP did not do as well as we expected," Garter Research Director Sharon Mertz told InternetNews.com. She said the strong dollar had harmed SAP's (NYSE: SAP) results, especially at the end of the year.

SAP's strength in the manufacturing vertical, which has been hit hard, didn't help either, according to Mertz. Still, there are bright spots.

"They have a lot of big contracts and a strong maintenance line," Mertz said.

That mix of income is increasingly important as firms like SAP seek to weather the current downturn. In its last quarterly report, SAP posted flat earnings -- because while software sales declined by a third, increased maintenance revenues made up for most of the shortfall. Still, the company has warned that its outlook for Q2 was not rosy.

In contrast, Microsoft and Salesforce are growing. Salesforce (NYSE: CRM) is only expecting to lose customers when companies merge, and Microsoft has worked well with verticals and "micro-verticals," according to Mertz. On Monday, Microsoft (NASDAQ: MSFT) also announced that its Dynamics CRM product had passed the million-user mark.

"Our fast path to more than 1 million users illustrates our strong market momentum, and shows how our CRM and xRM offerings are driving worldwide customer and partner success," Brad Wilson, general manager of Microsoft Dynamics CRM, said in a statement. Microsoft announces its earnings next week.

Part of Microsoft's success may be because its software is very intuitive, according to Mertz, and both Microsoft and Salesforce have done well by offering on-demand products.

"These days, customers want low, predictable costs and fast results. That's what Salesforce.com and cloud computing are all about," said Bruce Francis, vice president of strategy at Salesforce, in an e-mail to InternetNews.com.

Similarly, the cloud has also paid off for Oracle too, Mertz said.

"On-demand products such as Siebel and others have been strong for them," she said. And despite its historic foothold in the realm of deployed software, Oracle CEO Larry Ellison has made it clear that the company is firmly committed to its cloud offerings.

Health care and public sector verticals were relatively strong for software vendors, Mertz added.

Spokespeople from Oracle (NASDAQ: ORCL) did not return requests for comment by press time.

A time to buy

Despite the major vendors' success, this year's economic downturn could make it easier for enterprise IT to have the upper hand in dictating prices.

"Vendors are willing to negotiate," she said, adding that CRM customers also have emerged from a learning process with the tools to negotiate. "Buyers have been through several CRM implementations. They're smarter about what they need and about how to negotiate with vendors."

She added that buyers should closely examine the finances of any company whose product they purchase. "Take that extra step to make sure that your vendor is in a position to support you in the long term," she said.

"It goes without saying that most large providers will be there."

Update adds comments from SAP.