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Future Looks Brighter for CRM Service Providers: Report

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November 04, 2011

Future Looks Brighter for CRM Service Providers: Report

By Narayan Bhat, TMCnet Contributor

After five years of volatility, the CRM service industry is set to see a steady growth over the next few years. In 2012, CRM industry’s revenue will increase by four percent, says market research firm IBISWorld.

“As corporate profit increases and private investment in computers and software rises, revenue is forecast to increase at an average annual rate of 4 percent to $8.3 billion,” said the research firm in its latest report.

The growth will primarily prompted by small businesses that are likely to seek better ways to manage their client relations making use of decreasing price for CRM services. In addition, cloud technologies and social networking sites are helping to spur demand for CRM systems, and several industry players are already integrating social networks with their programs, so customers can monitor company comments on networks such as Twitter (News - Alert).

The research firm expects that the CRM service industry will remain strong in 2011, despite the volatility that it experienced during the past five years.

According to its assessment, low corporate profit and limited capital investments caused the industry to experience unstable revenue streams during the recession. However, when the economy began to bounce back in 2010, sales grew and the industry became steadier.

“From 2006 to 2011, revenue is expected to increase at an average annual rate of 1.5 percent. In 2011, revenue will rise 6.4 percent to $6.8 billion as companies invest more in their capital equipment to improve their client relations,” the report stated.

But the service providers are now required to prepare themselves to the ever changing preferences of their customers.

Today companies prefer that their CRM services be accessible via the internet instead of being installed and housed on their servers. As a result, the industry is providing more on-demand CRM services where all information is accessible over the web.

“Firms will continue to improve their services to meet the needs of the customers and invest in cloud space to make it easier to add more clients,” says IBISWorld analyst, Janet Shim.

SAP (News - Alert) AG, Salesforce, Oracle Corporation and Microsoft Corporation are some of the largest CRM service providers. As demand rises, these larger firms will look to gain more market share and are expected to acquire smaller firms with advanced technology, says the research firm.

Already in 2011, Oracle (News - Alert) acquired RightNow Technologies (News - Alert) to gain larger access to cloud CRM technologies. From 2011 to 2016, the number of industry companies is projected to decrease at an average annual rate of 1.3 percent to 172 firms.

Narayan Bhat is a contributing editor for TMCnet. To read more of Narayan’s articles, please visit his columnist page.

Edited by Jennifer Russell

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