CRM Market Suffers Some Growing Pains

Forrester Research reports that the CRM market will suffer a drop in 2002 revenue, but recover to grow steadily, though modestly, to reach $74 billion by 2007.

The bloom is off the customer relationship management (CRM) rose — at least a little bit — according to Forrester Research.

In CRM's Future: Humble Growth Through 2007, the Cambridge, Mass.-based research firm reports that while the CRM market will drop 5.4 percent in 2002 to $42.8 billion, revenues will bounce back with an albeit modest compound annual growth rate of 11.5 percent over the next five years, reaching in $73.8 billion by 2007.

Several factors that will reshape the CRM market, according to Forrester, including cross-channel integration, vendor verticalization, Web services and a shift in application pricing models.

Forrester breaks the CRM market into the following three categories:

Applications — software licenses, maintenance and services by application vendors (subcategories include marketing automation, CRM suites, analytics, customer channel management and field force automation).
Services — outsourced business process and professional services related to contacts and data (subcategories include contact center outsourcing, consulting and marketing services).
Infrastructure — integration and routing technology for contacts and data (subcategories include data integration and contact center infrastructure).

Professional service firms and outsourcers make up more than half of the total CRM market, according to Forrester. Growth at consulting firms will drive the CRM services segment to $41.9 billion in 2007.

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The applications category will recover from 2002's decline with annual growth rates of 6.8 percent in 2003, 14.0 in 2004, will taper to 12.5 percent by 2007.

Forrester says that due to the slowdown in Internet commerce software, customer-facing channel apps will experience the slowest annual growth rate in the CRM market: 7.3 percent over the next five years.

On the flipside, marketing automation applications will represent the fastest-growing CRM segment. Between 2002 and 2004, growth will hover around 14.5 percent, Forrester says, but the segment will expand at a 17 percent rate thereafter, reaching $928 million in 2007.

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