CRM software revenues in Europe rose 9.7 per cent to hit $1.9 billion in 2005, according to Gartner.
But Europe was lagging behind the rest of the world with global growth figures of 13.7 per cent, itself down on a 2004 figure of 15.1 per cent. "The picture in Europe is very fragmented," said Chris Pang, senior research analyst for 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."
SAP was the No. 1 CRM vendor in Europe based on total software revenue, with a 32.4 per cent market share in 2005, up from 31.4 per cent in 2004. Siebel was the second largest vendor, but was acquired by Oracle early in 2006. Oracle’s own CRM sales pipeline suffered while customers awaited affirmation of future product directions following its acquisition of Siebel.
SAP and Oracle jointly held more than 50 per cent of the total CRM software market, but there have been significant gains for SalesForce.com - growing 86.4 percent in 2005 - and Microsoft, which reported the fastest growth in Europe at 88.1 per cent. "Both Salesforce.com and Microsoft have the resources and desire to gain scale and narrow the gap with SAP and Oracle going forward," predicted Pang.
The highest growth in CRM software could be seen in applications for marketing automation, which increased by 18.6 per cent. This was followed by sales automation at 12.1 per cent and customer service and support applications at 3.6 per cent.
Merger and acquisition activity also played a part. "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," said Pang. "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."
Because of the size of Oracle’s acquisition of Siebel, Gartner predicts there will be a short term braking effect on CRM market growth. But the research firm predicts continued high levels of acquisitions in the CRM software market through 2008, where one in three CRM software vendors will be involved in a merger or acquisition (M&A) each year.
"This ferment of M&A activity will spark a burst of innovation in CRM application research and development from 2006 to 2010," said Pang. "Particularly in Europe, the market is still wide open for smaller, best of breed vendors."