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CRM market returns to health

With strong earnings from some of the major vendors and multiple reports citing the growth of the market, companies are once again spending on CRM.

The CRM market, once troubled by widespread failures and slow growth, is seeing a resurgence, according to multiple market studies and as evidenced by recent earnings reports.

Just yesterday, San Francisco-based Salesforce.com reported net income of $5 million for the quarter and total revenue of $71.9 million. The company added 41,000 new subscribers, bringing its total to roughly 308,000.

The hosted delivery model for CRM, applications accessed via the Web, has helped to drive much of the new growth in the market. Fellow hosted provider RightNow Technologies Inc. in Bozeman, Mont., also reported an earnings rise for the last quarter and released version 7.5 of its product.

According to Framingham, Mass.-based IDC, the CRM market as a whole returned to positive growth in 2004. The market for applications rose 8% to $8.8 billion last year and buyers plan to continue to focus on CRM initiatives this year.

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"The CRM applications market turned an important corner in 2004," said Mary Wardley, vice president of CRM applications research. "The growth of the relative newcomers, as well as new functionality and licensing models from established vendors, have rejuvenated the market and turned the spotlight on true customer need."

IDC identified San Mateo, Calif.-based Siebel Systems Inc. as the market leader with 10.7% of market share, while Oracle Corp., with its acquisition of PeopleSoft Inc., edged out Germany's SAP AG for second place.

The renewed interest in CRM has filtered down to small and midsized businesses (SMBs) as well. Another study, this one from Santa Cruz, Calif.-based Evans Data Corp., lists CRM as one of the top three projects for SMB developers this year, along with business-to-business e-commerce and workflow management. Roughly 41% of SMB developers are planning CRM projects in the next 12 months, according to the report.

Salesforce.com, which took off thanks to the SMB market and still garners a significant amount of its revenue from that segment, is steadily gaining traction with enterprise customers as well, a point CEO Marc Benioff was quick to make during yesterday's earnings call with financial analysts. Its largest customer, Automatic Data Processing Inc., is now up to 5,500 users. Salesforce.com has signed a 1,400-seat deal with Citizens Bank and a 5,000-seat deal with Aon Corp. Cisco Systems Inc., despite reports that it is struggling to integrate Salesforce.com with its existing applications, is expected to add another 1,000 seats this year, Benioff said.

Additionally, Salesforce.com is building additional data centers to provide "mirroring" capabilities, allowing corporate data to be copied to networks on each coast.

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