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Software as a service to fuel CRM boom

Analyst firm Gartner predicts growth in analytics and marketing automation underlined by growth of vendors including NetSuite and SugarCRM.

Software as a service (SaaS) based-delivery models are fuelling major growth in the customer relationship management (CRM) applications market.

As enterprises continue to invest in front-office applications, worldwide CRM software revenue is forecast to exceed $7.4 billion (3.7 billion) in 2007, up 14 per cent from $6.5 billion (3.2 billion) in 2006, according to analyst Gartner.

But SaaS-based, CRM adoption, driven by on-demand vendors like NetSuite, SugarCRM and Salesforce, and is growing at more than double the rate of the CRM market as whole.

In 2006, SaaS represented 12 per cent of total CRM software revenue and it is on track to reach nearly 14 per cent in 2007. By year-end 2007, the analyst predicts SaaS is forecast to represent more than $1 billion in CRM software revenue.

"The sustained performance of major on-demand solutions providers is driving the growth in the SaaS segment," said Sharon Mertz, Gartner research director.

Mertz also said this method of delivery was likely to become the dominant one in this market by 2011, as companies refresh existing business automation systems to make sure they fit with renewed strategies for business and revenue growth.

The worldwide CRM software market will experience healthy growth through 2007; however Gartner said growth will slow in the next 12 to 18 months because of the downstream impact of economic conditions, but also because the market size overall will increase.

But this trend will reverse by late 2008 and into 2009 as buying decisions become clearer and customers undertake platform migrations to service-oriented architectures, Mertz said.

"Increasing demand for analytics, marketing automation and a focus on SaaS solutions will also drive growth during this time," she said.

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