The CRM marketplace is odd. While it's dominated by some well-established heavyweights, it is also swarming with hundreds of upstart startups and more established, yet little-known, vendors.
What explains the unusual makeup of this market?
Five big boys account for a significant amount of the spending in the CRM market. According to Gartner, the 2014 market share for those vendors was as follows:
- Salesforce 18.4 percent
- SAP 12.1 percent
- Oracle (including Siebel) 9.1 percent
- Microsoft Dynamics 6.2 percent
- IBM 3.8 percent
Two things stand out here. First, the combined market share of these companies is just shy of 50 percent of the total market. And second, by the time we get down to IBM, we are talking a relatively insignificant sub-4 percent market share. That means the remaining 50.4 percent of the CRM market is accounted for by literally hundreds - and perhaps as many as a thousand - small CRM players offering something that the major players apparently aren't.
(In fact it's not quite that simple, because many larger companies use complex ERP systems like IFS which include CRM functionality, and these CRM systems are included in that 50.4 percent.)
One Size CRM Does Not Fit All
Nevertheless, this does beg some important questions. Why are there so many smaller CRM offerings, and what do they offer that the bigger players don't?
Rebecca Wettemann, an analyst at Nucleus Research, thinks that in many cases it comes down to greenbacks. "Price is certainly important, and some of the smaller players have a much more competitive price point than the larger companies," she said.
For the really budget conscious, free community versions of many open source CRM solutions are available, including:
Like many open source applications, all of these are also available on subscription, with the paid versions including additional benefits such as technical support and additional features.
Other low cost solutions include:
The bigger players tend to cater to companies of all sizes, including the largest enterprises at the top of the market. That means there's a niche for CRM solutions that specifically target smaller companies: the "S" end of the SMB market, so to speak.
One company that caters to this market that Wettemann highlights is Infusionsoft . Its CRM software offers all the core CRM functions as well as ecommerce functionality. It's a good niche to be in because there are millions of small businesses around the world, and the company says it has over 30,000 small business customers.
Other CRM companies catering to small businesses include:
CRM solutions for medium-sized businesses include:
Smaller CRM players are more responsive to customers' needs, Wettemann suggested. That means they may be more willing than larger companies to incorporate specific features, ways of working or industry requirements into their products.
(With open source CRM products, you can take the code and hire a programmer to add any missing functionality you need.)
This brings us to the key to understanding why there are so many companies offering CRM products. The market leaders like Microsoft Dynamics build strong products with a full range of horizontal capabilities that everyone needs: features like lead management, contact recording and so on.
For some industries it may then be possible to apply a customization template to make the product suit a particular vertical. If not, vendors depend on partners to develop the "last mile" of functionality needed by customers in different industry verticals.
But in many cases it is a better idea for companies to choose a ready-built CRM system specifically designed for their particular industry vertical. Such solutions are ready to be used out of the box and are available immediately. In addition, they can cost far less than a solution which involves customizing a mainstream product.
That presents a myriad of opportunities for CRM products tailored for specific market segments or niches, said Frank Scavo, president of management consulting firm Strativa. "If you think of all the specialty industries - electronic parts distributors, automobile dealers, and so on - you can see how you could end up with a lot of different CRM products," he said.
"Of course a charity could set up Salesforce and get together with some AppXChange partners to tailor it to their needs. But charities and non-profit organizations is all that Raiser's Edge does. So it already includes pledges, promises, volunteers and other special features that non-profits need when they solicit for funds," Scavo explained.
Another example is Veeva Systems, a CRM suite tailored for the needs of the pharmaceutical, biotech, animal health and consumer health markets. These markets have specific needs and compliance procedures, so it's perhaps not surprising that a pre-built package targeting companies in those industry verticals may be more appealing than the prospect of tailoring a more horizontal offering from scratch.
Yet another example of a niche CRM product is GreatVines, a solution designed for suppliers and distributors in the beverage industry. What's interesting about GreatVines is that it is actually built on Salesforce's platform, and it effectively competes with Salesforce's standard CRM offering. Built by people with experience in the drinks industry, GreatVines includes features such as account development, trade marketing, order entry, depletions and analytics unique for the beverage industry.
Given all this, it is easy to see why the CRM marketplace is as diverse as it is: Companies in different industries require different things from their CRM systems.
While many companies have needs that are general enough that they can be met by one of the market leading products out of the box or with some customization from a template or a customization partner, a large number of companies may be better off looking for a CRM solution that has been specifically designed to cater to their needs by a vendor who understands their industry.
Paul Rubens has been covering enterprise technology for over 20 years. In that time he has written for leading UK and international publications including The Economist, The Times, Financial Times, the BBC, Computing and ServerWatch.