On-demand CRM faces uphill struggle

On-demand CRM vendors will need to capitalise on a high-growth period

On-demand customer relationship management firms face an uphill struggle to achieve profitability despite predictions of double-digit growth rates for the model, according to research released today by Datamonitor.

The new report, On-demand CRM: From Top-lines to Bottom-lines, estimates that the market is worth about $1.7bn in 2008 in subscription revenue, reaching an expected $3.8bn by 2013 and growing at a compound annual growth rate of 17.7 per cent during this period.

However, Datamonitor said that vendors will not only need to capitalise on this high-growth period to expand their customer base, but must achieve operational efficiencies if they are to be successful in the space.

"The pure play vendors have all grown at around 65 to 70 per cent but the revenue is not trickling down to the bottom line because the assets they need to acquire, including datacentres, are huge," explained report author Surya Mukherjee. "They need to utilise these assets better to deliver maximum efficiency."

Mukherjee also advised customers looking to invest in on-demand CRM products to ensure that they are able to scale, offer good integration with existing on-premise architecture, and can be customised according to specific needs.

Earlier this week, on-demand business software vendor NetSuite made an audacious bid to swipe some of its rival Salesforce.com's customers by offering its NetSuite CRM+ product at half the price of the latter's SFA tool.