Datamonitor, a premium business information company specializing in industry analysis, today announced that the North American market for customer relationship management (CRM) software will grow from $3.9bn in 2000 to $11.9bn by 2005. In addition, revenues accrued through the application service provider (ASP) channel, currently the least significant channel for vendors, will grow 128 percent in the next five years to be worth $431 million to CRM software vendors in 2005.

According to Datamonitor's new report, CRM Distribution Strategies in North America to 2005, the CRM market will grow most rapidly in the government, entertainment and Internet retailing industries. This growth reflects the increasing significance of CRM solutions and eBusiness strategy among companies not traditionally associated with CRM.

Growth of CRM in the SME Sector

The rapidly growing small-to-mid sized enterprise (SME) sector will also play a part in driving the operational CRM market as SMEs begin to adopt channel-based solutions.

Findings indicated that the application service provider ASP channel, worth a mere $7m to CRM software vendors in North America in 2000, will see massive growth in the next four years, driven by the SME market. The ASP channel allows SMEs to adopt CRM solutions they previously could not afford.

"Traditionally, the CRM market has been dominated by the enterprise sector," said Robin Goad, analyst with Datamonitor. "The cost of implementing a CRM strategy has been a significant barrier to entry for customers in the SME sector. The ASP channel will remove this barrier, offering key benefits to SMEs such as reduced cost, ease of integration, savings on IT labor, and access to new applications," added Goad.

What Does this Mean for Companies in the CRM Space?

According to the report, in order to fully exploit the rapidly growing SME market, vendors must build relationships with partners to gain market share and embrace the ASP channel. ASPs must take advantage of CRM applications to improve their product offering. Datamonitor predicts that the share of ASP revenues derived from CRM applications in North America will grow from 14 percent in 2000 to 21 percent in 2005.

"Currently, hybrid distribution channels are the most significant channels for CRM vendors in North America, accounting for 48 percent of vendors' revenues," noted Goad. "We believe that CRM vendors must partner aggressively to take advantage of the current trend towards hybrid distribution channels, as we have seen with Siebel and IBM, and Oracle and Cisco," he added.

CRM Distribution Strategies in North America to 2005 is just one of six reports recently released by Datamonitor as part of a special CRM package. Also available are:

• Opportunities in North American Call Center Markets to 2005
• US Customer Relationship Outsourcing to 2005
• eMarketing Software Markets to 2005
• eSales Software Markets to 2005
• IP: The Future of ACD?

Datamonitor plc is a premium business information company specializing in industry analysis. Datamonitor help its clients, 5000 of the world's leading companies, to address complex strategic issues. Through its proprietary databases and wealth of expertise, Datamonitor provides clients with unbiased expert analysis and in-depth forecasts for six industry sectors: Automotive, Consumer Markets, Energy, Financial Services, Healthcare, Technology. Datamonitor maintains its headquarters in London, and has regional offices in New York, Frankfurt, and Hong Kong.