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European CRM spending up by almost 10 per cent in 2005, with SAP and Oracle dominating

Analyst house says revenue and customer growth are the key drivers for increased spending but Europe is lagging behind the rest of the world

By Maggie Holland, 27 Jul 2006 at 14:39

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European spending on customer relationship management (CRM) reached $1.9 billion in 2005, an increase of 9.7 per cent compared with the previous year, according to research from Gartner.

But despite this increased spend, Europe is still lagging behind its worldwide counterparts who ramped up their CRM buying habits by 13.7 per cent.

Businesses are taking a more strategic approach to CRM and focusing on revenue generation and customer growth, according to analyst Gartner who conducted the research.

"The picture in Europe is very fragmented," said Chris Pang, senior research analyst at Gartner.

"Our research shows that growth in spend on CRM software correlates strongly with economic growth measures such as gross domestic product (GDP). GDP growth in countries such as Italy and Germany remains lower than the rest of the world, while market growth in countries such as the UK, Sweden, Norway and Denmark has been more consistent with that in North America,"

"This means we are seeing CRM growth rates ranging from a slight negative to more than 27 percent depending on the individual country. Businesses in Europe are focusing on new customer acquisition, expanding wallet share, process optimisation and business accountability."

SAP and Oracle jointly own more than half of the total CRM market, according to the research. Microsoft's recent foray into CRM allowed it to enjoy growth of 88.1 per cent, the fastest in Europe. Gartner also suggested that acquisition has played a large role in the resulting statistics.

Pang added: "Acquisitions of major players such as Peoplesoft early in 2005 and Siebel this year by Oracle have played a key role in pushing prices down. This encouraged more buyer activity with users 'stocking up' on CRM software.

"The net result is that we are seeing a return to more realistic and sustainable buying levels."

Gartner says that the high level of CRM vendor unions currently taking place will continue with one in three being involved in a merger or acquisition (M&A) each year until 2008. This surge in M&A activity will spark greater innovation in CRM application research and development from 2006 to 2010, according to the analyst.