Germany's SAP AG has overtaken Siebel Systems Inc. as the revenue leader in the CRM market, according to Boston-based AMR Research Inc.
Based on both CRM revenue and application license, SAP overtook its San Mateo, Calif., rival.
"Siebel struggled to grow its CRM revenue," explained Rob Bois, senior research analyst. "They are at a transitional period. They've had changes at the top and they're adjusting to the notion that software buyers are buying differently."
Gone are the days of "big bang," enterprise-wide CRM purchases. Companies are now buying more pragmatically and modularly. With its services-oriented architecture (SOA) approach to its next release and its Siebel OnDemand hosted offering, Siebel is addressing this shift, Bois said. In fact, OnDemand represents one of the largest growth opportunities for Siebel, and the product is gaining momentum.
"SAP, on the other hand, has executed well, particularly in core manufacturing," Bois said. "One interesting thing we found is half of the time core SAP shops don't even evaluate other CRM vendors."
While SAP has closed the functional gap with Siebel, it has also benefited from favorable currency exchange rates and CRM spending by manufacturing companies, one of SAP's core strengths. Conversely, the services industries, one of Siebel's traditional strengths, has been spending less on CRM, Bois said.
AMR forecasts 4% growth for SAP in 2004-2005 and 0% growth for Siebel.
Siebel, however, maintains that license revenue is not an accurate representation of market leadership, countering that many of SAP's CRM licenses are sitting unused. Siebel outnumbers SAP by far when it comes to live users, according to Siebel.
"That's valid," Bois said. "A lot of SAP's implementations, even though they sold them, are still in the pilot phase. This report is on market share of revenue. It's not a direct translation to live users."
In fact, AMR estimates that only 300 companies are live on mySAP CRM 4.0. SAP, however claims that, though the numbers fluctuate, there are roughly 3,200 customers on mySAP CRM worldwide, some on 4.0 and some on earlier versions, and about one-third of those, over 1,000, are live.
Still, the report differs from another recent market share determination by Framingham, Mass.'s IDC that Siebel maintains its market lead . IDC's report factors in CRM spending above and beyond license revenue.
Overall, the CRM license market grew 10% in 2004, led by hosted CRM applications, which accounted for 9% of revenue, as compared to 5% in 2003, according to AMR. RightNow Technologies Inc. and Salesforce.com, hosted heavyweights, grew 97% and 83%, respectively. SAP appears ready to grab a chunk of the growing market itself, hinting at a hosted release later this year.
The top 10 CRM vendors by revenue after SAP and Siebel for 2004 were PeopleSoft Inc., Amdocs Inc., Dendrite International Inc., Oracle Corp., Aspect Communications Corp., Avaya Inc., Microsoft, and Cisco Systems Inc.
While market leadership can offer some sense of a company's direction and make for lively debates on corporate press releases, the report does not prove which application is better for a company's needs.
"We do caution that this is just about revenue," Bois said. "It is something buyers need to look at in terms of evaluating the viability of company, but we're talking about a very large market. Buyers don't need to be too concerned with who's No. 1 and who's No. 2."