Sales of hosted customer relationship management (CRM) applications more than doubled last year, according to a report by AMR Research, suggesting that the hosted model has reached "prime time" as a delivery method for CRM applications. 

The hosted model differs from traditional licensed software in that applications are served over the web rather than installed on-site.

In addition to impressive hosted growth, the overall CRM market saw double-digit growth for the first time in five years, the research found.

Two of the main players in the hosted CRM market, RightNow Technologies and Salesforce.com, enjoyed 97 per cent and 83 per cent growth rates respectively.

According to the study, Salesforce.com rocketed from number 22 to 12 in terms of total CRM revenue. However, AMR noted that the market is still led by traditional installed-base application vendors.

"The hosted model has reinvigorated a market that failed to grow over the past several years," said Rob Bois, senior research analyst at AMR Research.

"The hosted category has changed the whole perception of customer management with faster implementations, quicker time-to-value and easy customisation."

In what AMR describes as "the heated battle for the number one spot" SAP, buoyed by favourable currency exchange rates, grew its customer management applications business by an impressive 30 per cent and unseated Siebel as the revenue market share leader.

The analyst firm expects SAP to continue to grow, especially in the manufacturing sector where the company holds an advantage. Siebel's CRM OnDemand represents one of the largest growth opportunities for the company as the product continues to gain momentum.

The overall CRM applications market grew by a healthy 10 per cent in 2004. Across the top 40 CRM vendors evaluated in the report, five grew at over 50 per cent from 2003-2004 (Concerto, Digital River, Salesforce.com, RightNow Technologies and Unica).

Microsoft, another winner, topped 3,500 customers and recorded 32 per cent growth.