Hosted CRM Enjoying Greater Enterprise Adoption

May 31, 2005

Allen Bernard

The need for IT departments to complete projects with positive bottom line results quickly and cheaply is spurring the adoption of hosted customer relationship software.

This is good news for IT in general since over the past two-to-three years IT has been focused on cost-cutting and regulatory projects. Now, with a project 40% of companies using hosted CRM of some sort, IT is once again moving in the direction of revenue-generation projects.

"Larger enterprises have started to recognize that revenue generation is really a top priority again," said Rob Bois, senior research analyst at AMR Research and author of a yet-to-be-published spending study on CRM trends. "They pretty much exhausted all the cost-cutting and automation (projects) they could."

Software companies such as and more recently Siebel, with its On-Demand product, have popularized this model for customer management. According to an AMR survey of over 200 companies, the use of hosted CRM is rapidly growing, even among larger organizations.

AMR's findings challenge the assumption that SMBs are responsible for the vast majority of hosted application engagements: 28% of large companies (5000+ employees), 39% of mid-tier companies (1000 - 4,999 employees), and 41% of small-to-medium sized businesses have planned deployments over the next 12 months.

Recent deals from -- 5,000 seats with Merrill Lynch -- add credence to the findings, said Bois.

Hosted applications have emerged as a growing and extremely viable delivery method for CRM applications, even among larger organizations since "speed-to-solution is critical," said Bois. "And that's were the hosted applications have become an appealing option. You don't have to get in line in the IT queue to get these done."

According to the survey:

  • Forty-nine percent of all companies will use hosted sales or e-commerce applications within the next 12 months. This includes almost half (47%) of large companies.
  • The deployment of hosted sales force automation applications is more prevalent among larger organizations (31%) than SMB companies (22%).
  • "In the past, hosted CRM has been considered prevalent mostly in the SMB market." Bois said. "Our research shows that companies of all sizes are now using hosted applications as revenue generation becomes a top priority. This, coupled with shorter implementation times, makes the hosted model very attractive."

    Additionally, AMR expects robust growth in 2006 CRM budgets. Half of companies surveyed plan to increase their customer management software budgets in 2006 and total customer management budgets will increase eight percent on average from 2005 to 2006.


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