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Tier1 Research: Many Opportunities Still Exist for Established Players in the On-Demand CRM Market,

Posted by Don Panek - CRMDirectory Editor

Tier1 Research: Many Opportunities Still Exist for Established Players in the On-Demand CRM Market, but New Entrants Face Significant Challenges

New Report Analyzes Key Issues Surrounding the On-Demand CRM Market

MINNEAPOLIS--A new report by Tier1 Research (T1R) finds that the market for on-demand CRM software is booming and creating plenty of room for growth for the established players in this space. On the other hand, new entrants attempting to build a position in the on-demand software-as-a-service (SaaS) CRM business at this stage of the game face several barriers to entry, including classic startup risks, financial risk and competitive challenges from entrenched players. These findings are contained in a report released today by Minneapolis-based T1R, an independent research firm that analyzes the financial and industry implications of developments affecting public and private companies within the IT, communications and Internet sectors.

"Based on T1R's analysis, the estimated market size for the CRM software segment was $9.5bn in 2006, with 6.3% of the total market represented by SaaS deployments," said Michael Mankowski, senior analyst at T1R and lead author of the report. "Even with the buzz in the market around SaaS, on-premises deployments rule the roost, and the lower-than-expected penetration is great news for established players.

"SaaS has established itself as a viable business model with CRM on-demand, but larger companies cannot rest on their laurels. Larger on-demand CRM providers face a challenge of remaining nimble, and they need to build out additional functionality for continued success as they compete with smaller SaaS providers."

With more than 150 on-demand CRM providers across the globe, T1R analysts found that CRM is a starting point for many on-demand vendors, but some barriers to entry exist. These include:

The challenge of leveraging the ability to be flexible and deliver unique value through software features and functionality that is not always available when working with the larger CRM providers.
The challenge of getting to cash-flow positive, since the costs associated with building a multi-tenant environment are significant. It is not uncommon to have a long breakeven point in the early stages of the business, given the cost of goods sold and indirect customer acquisition costs.

This 20-page report, titled 'SaaS Report Series: Perspectives on CRM,' provides analysis on where the on-demand CRM market is going – including the opportunities that exist for established players and the risks and challenges facing startups. It also discusses insights garnered from T1R's proprietary ISV/SaaS database and examines the state of CRM on-demand and the needs of the small, medium and large customers.

Key Companies Covered

The report covers more than 15 key public and private companies in the SaaS sector, including the following: Adobe, CDC Corp, Entellium, Google, Intel, Microsoft, NetSuite, Oracle, RightNow Technologies, Salesforce.com, SAP AG, Savvis, SugarCRM, WebEx and Yahoo.

Report Orders

To learn more about this report, contact Lori Larson, Business Development Manager with Tier1 Research, at 239-561-9504 or at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

About Tier1 Research

Tier1 Research analyzes the financial and industry implications of developments affecting public and private companies within the IT, communications and Internet sectors. Tier1 blends traditional Wall Street investment research with industry analysis to deliver dynamic market and financial intelligence. Clients include institutional investors and technology vendors, along with end users and venture capitalists. These clients leverage Tier1 Research's analytical insight for idea generation, trend identification, due diligence and grounded opinions, as well as metrics and forecasts on companies and industries covered. Since its founding in August 2000, Tier1 Research's coverage has spanned the largest publicly held technology companies as well as smaller, pioneering public and privately held companies in order to provide comprehensive assessments of all companies impacting the technology marketplace in a meaningful way.

Tier1 Research, a division of The 451 Group, is headquartered in Minneapolis. For additional information on its research coverage and services, visit www.tier1research.com.