After a few years of decidedly lackluster CRM sales, the market for CRM systems has leapt out of the doldrums. In fact, companies are eagerly implementing systems right and left, according to Gartner, a Stamford Connecticut-based research firm, whose latest CRM study reveals that worldwide customer relationship management (CRM) total software (license and maintenance) revenue totaled a hefty $5.7 billion in 2005. That’s a 13.7 percent increase from 2004, a growth rate far greater than the rest of the high-tech sector and most segments of the software industry.

Gartner believes that the sharp growth in sales results from a strong commercial economy that has increased overall business confidence. This, in turn, has caused firms to invest in solutions, like CRM, that have the potential to drive revenue and expand business opportunities. In addition, buyers of CRM systems are now more familiar with what CRM can do (and can’t do), resulting in more confidence in the CRM segment.

Gartner observes that there have been strong sales of CRM products and services across the market, with continued rapid adoption of on-demand solutions as well as increased penetration of emerging markets. Highlights of the Gartner study include:

• SAP was the No. 1 CRM vendor based on total software revenue, with a 25.9 percent market share in 2005.
• Increased mid-market opportunity drove growth across the CRM market for both the large suite vendors and on-demand providers, such as Salesforce.com.
• Siebel’s strong fourth quarter results drove growth, but at the expense of Oracle and PeopleSoft’s CRM solutions.
• Industry specialists such as Amdocs also benefited from high demand for vertical market solutions.
• Merger and acquisition activity continued relentlessly in 2005, as large vendors acquired smaller firms and as market leaders acquired each other.
• Market consolidation in 2005 remained a driver for best-of-breed and suite providers by offering a compelling value proposition and capitalizing on temporary buyer uncertainty.
• Buyers were solidly focused on new customer acquisition, expanding wallet share, process optimization, and business accountability.

As in previous years, Gartner published, as part of its study, a list of the top five CRM vendors. The 2005 list is somewhat different from previous years, due to a change in the way that Gartner calculates market share. Gartner traditionally measured market share in terms of new license revenue. However, due to the emergence and increasing popularity of open-source software and buyer consumption models such as hosted and subscription offerings, Gartner now measures market share in terms of total software revenue.

This new measurement of revenue includes new licenses, updates, subscriptions and hosting, and technical support and maintenance, but not professional services and hardware revenue. The top five worldwide CRM vendors are shown in the following table:

Worldwide CRM Total Software Revenue Estimates for 2005 ($ Millions)

Company	2005 Revenue	2005 Share (%)	2004 Revenue	2004 Share (%)	2004- 2005 Growth (%)
SAP	1,474.7	25.9	1,232.8	24.6	19.6
Siebel	966.1	17.0	908.3	18.1	6.4
Oracle (w/PeopleSoft)	367.5	6.4	416.2	8.3	-11.7
SalesForce.com	280.7	4.9	158.0	3.2	77.7
Amdocs	276.4	4.9	225.9	4.5	22.3
Others	2,332.6	40.9	2,071.7	41.3	12.6
Total	5,698.0	100.0	5,012.8	100.0	13.7

Note that even if Siebel revenue were folded into the Oracle/PeopleSoft revenue (to reflect the recent merger between the two firms), SAP would still remain the market share leader, but only by around 3 percentage points. This comes as somewhat of a surprise, considering that most of the industry believed, based upon 2004 figures, that the merger between Oracle and Siebel would create the world’s largest CRM firm.