CRM report_1997-2002 - CONTENTS Customer Relationship...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: CONTENTS Customer Relationship Management Software Report, 1997–2002 EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 THE 1997 CUSTOMER RELATIONSHIP MANAGEMENT MARKET . .5 The 1997 Customer Relationship Management Market Leaders . . . . . . . .9 CRM Revenue Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 CRM TECHNOLOGY ENVIRONMENT . . . . . . . . . . . . . . . . . . . . .17 CRM CUSTOMERS AND MARKET CHANNELS . . . . . . . . . . . . . .19 CRM MARKET FORECAST, 1997–2002 . . . . . . . . . . . . . . . . . . .27 APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 Appendix A: Related Research . . . . . . . . . . . . . Appendix B: Research Methodology . . . . . . . . Appendix C: Vendor Information Request, 1997 Reader’s Acronym List . . . . . . . . . . . . . . . . . . . Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 . . . . . . . . . . .32 . . . . . . . . . . .42 . . . . . . . . . . .44 1 LIST OF TABLES Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table 1: 2: 3: 4: 5: 6: 7: 8: 9: 10: 11: 12: 13: 14: 15: 16: 17: Customer Relationship Management Vendors Ranked by 1997 Aggregate Revenue . .6 Top 10 CRM Vendor 1997 License Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 CRM Vendors Ranked by 1997 License Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .11 CRM Aggregate Revenue and Market Share by Revenue Type . . . . . . . . . . . . . . . . .13 CRM License Revenue and Market Share by Application Type . . . . . . . . . . . . . . . . .14 Top Six TAS Vendors by 1997 License Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Top Five Customer Service and Field Service Vendors by 1997 License Revenue . . . .16 CRM License Revenue by Client/Server vs. Host-Based Applications, 1996–1997 . . .17 CRM License Revenue by Operating System, 1996–1997 . . . . . . . . . . . . . . . . . . . . .18 CRM License Revenue by Customer Company Size, 1996–1997 . . . . . . . . . . . . . . . .21 CRM License Revenue by Customer Geography, 1996–1997 . . . . . . . . . . . . . . . . . .22 CRM License Revenue by Vertical Industry, 1996–1997 . . . . . . . . . . . . . . . . . . . . . .23 CRM License Revenue by Sales Channel, 1996–1997 . . . . . . . . . . . . . . . . . . . . . . . .25 CRM License Revenue Share by Application Type, 1997–2002 . . . . . . . . . . . . . . . . .28 CRM License Revenue Growth by Application Type, 1997–2002 . . . . . . . . . . . . . . . .28 Aggregate CRM Revenue by Type, 1997–2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 Aggregate CRM Revenue Share by Type, 1997–2002 . . . . . . . . . . . . . . . . . . . . . . .30 LIST OF FIGURES Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure 1: 2: 3: 4: 5: 6: 7: 8: 9: 10: 11: 12: CRM Aggregate Revenue, 1995–1997—est. 1998 . . . . . . . . . . . . . . . . . . . . . . . . . .5 Top 10 CRM Vendor 1997 License Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 CRM Aggregate Revenue Share by Revenue Type . . . . . . . . . . . . . . . . . . . . . . . . . .13 CRM Market Share by Application Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Top Six TAS Vendors by 1997 License Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Top Five Customer Service and Field Service Vendors by 1997 License Revenue . . . . .16 CRM License Revenue by Customer Company Size, 1996–1997 . . . . . . . . . . . . . . . .21 CRM License Revenue Share by Customer Geography, 1997 . . . . . . . . . . . . . . . . . .22 CRM License Revenue Share by Vertical Industry, 1997 . . . . . . . . . . . . . . . . . . . . . .23 CRM License Revenue Share by Sales Channel, 1997 . . . . . . . . . . . . . . . . . . . . . . . .25 CRM License Revenue by Application Type, 1997–2002 . . . . . . . . . . . . . . . . . . . . . .27 Aggregate CRM Revenue by Revenue Type, 1997–2002 . . . . . . . . . . . . . . . . . . . . .30 © Copyright 1998 by AMR Research, Inc. No portion of this report may be reproduced in whole or in part without the prior written permission of AMR Research. Any written materials are protected by United States copyright laws and international treaty provisions. AMR Research offers no specific guarantee regarding the accuracy or completeness of the information presented, but the professional staff of AMR Research makes every reasonable effort to present the most reliable information available to it and to meet or exceed the statistical standards as to sample size and accuracy which are considered good practice in professional industrial market research. AMR Research is not a registered investment advisor, and it is not the intent of this document to recommend specific companies for investment, acquisition, or other financial considerations. 2 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. EXECUTIVE S U M M A RY Customer Relationship Management Software Report, 1997–2002 The 1997 Customer Relationship Management (CRM) market reached approximately $1.2B, an increase of 55% over 1996. In 1998, AMR Research expects the market to grow by 58% to more than $1.9B. For the 1995 to 1998 period, the CRM market will sustain 56% average annual growth. From 1997 to 2002, the total revenue in the CRM market will grow from $1.2B to $7.5B, sustaining a 58% compound annual growth rate (CAGR) over the five-year span. The technology-assisted selling (TAS) segment will lead the CRM market with 64% CAGR and should reach $5.1B in application software license revenue by 2002. The customer support segment consists of customer service and field service. Customer service will grow at a 50% CAGR over the five years and should reach $1.9B in application software license revenue. Field service will grow at a slower pace with a 41% CAGR and should reach $480M in application software license revenue by 2002. From 1997 to 2002, the total revenue in the CRM market will grow from $1.2 to $7.5B, sustaining a 58% compound annual growth rate over the five-year span. 2000 1500 1000 500 0 1996 1997 1998 Figure 1: CRM Aggregate Revenue 1995–1997—est. 1998 Source: AMR Research, 1998 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 3 Mergers and acquisitions, driven by business development strategies to broaden product offerings, changed the complexion of the CRM market in 1997. Mergers and acquisitions, driven by business development strategies to broaden product offerings, changed the complexion of the CRM market in 1997. As a result, more CRM vendors are working to deepen functionality in both technology-assisted selling and customer support areas. Mergers and acquisitions took place within as well as across the two application components of CRM: • TAS—includes contact managers, Sales Force Automation (SFA) systems, telemarketing, sales configuration systems, and sales support applications • Customer Support: – Customer service—inbound call center applications – Field service—solutions for dispatching field service personnel, managing spare parts inventories, and supporting repair depot operations The Report also includes the following market highlights: • The combined revenue of the top five CRM vendors grew 88% from 1996 to 1997. Siebel Systems was one of the major contributors to this high growth, with a 1996–1997 growth rate of 203%. • The largest enterprises continue to drive the bulk of market growth. Companies with annual revenue of more than $1B accounted for more than half of the market growth; companies with revenue greater than $250M accounted for more than 75% of the total market. • With the exception of Baan subsidiary Aurum Software, none of the ERP vendors that have begun to sell CRM software are accounted for in the overall market size. • The top six TAS vendors accounted for 59% of the TAS market in 1997. • The customer support market segment continues to be more fragmented, with the top five vendors accounting for only 52% of the total market. • Although the highest growth rates were in Latin America and Asia/Pacific, North America continued to lead all geographic segments with 77% of the total market. • Direct sales remains the most effective means of selling complex and expensive CRM systems, capturing 82% of overall revenue in 1997. 4 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. THE CRM MARKET The 1997 Customer Relationship Management Market The 1997 CRM market reached approximately $1.2B and saw an increase of 55% over 1996. In 1998, the market should grow by 58% to more than $1.9B (see Figure 1). For the 1995–1998 period, the CRM market will sustain 58% average annual growth. AMR Research believes that the growing acceptance of CRM concepts is not only fueling this healthy growth rate, it is also driving growth in other application software markets—especially the Enterprise Resource Planning (ERP) market. Therefore, actual CRM application software revenue is likely higher than the $1.2B contributed by the companies covered in this Report. AMR Research expects this growth to continue as other software providers incorporate support for customer relationship management processes in order to share in this market’s 58% growth rate. Most of these other software providers, especially the large enterprise application vendors, do not report revenue by function, so a quantification of this additional portion of the CRM market remains elusive. AMR Research believes that the growing acceptance of CRM concepts is not only fueling the healthy growth rate, it is also driving growth in other application software markets—especially the ERP market. 2000 1500 1000 500 0 1996 1997 1998 Figure 1: CRM Aggregate Revenue, 1995–1997—est. 1998 Source: AMR Research, 1998 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 5 Table 1: CRM Vendors Ranked by 1997 Aggregate Revenue 1 997 Revenue Rank Software Vendor Revenue, 1996 ($M) Revenue Forecast, 1998 ($M) Revenue, 1997 ($M) Market Market Share, 1996 Share, 1997 Market Share Forecast, 1998 Growth Rate 1996Ð'97 Growth Rate Forecast 1997Ð'98 1 Siebel Systems, Inc. 39 119 412 5% 10% 22% 203% 247% 2 The Vantive Corporation 64 117 156 8% 10% 8% 83% 33% 3 Clarify, Inc. 56 88 146 7% 8% 8% 57% 65% 4 Scopus Technology, Inc. Trilogy Development 5 Group 50 87 - 7% 7% - 74% - 50 75 113 7% 6% 6% 50% 50% 6 Aurum Software, Inc. 45 71 178 6% 6% 10% 58% 150% 7 Symantec Corp.* 38 46 30 5% 4% 2% 23% -35% 8 Astea International, Inc. 40 39 30 5% 3% 2% -3% -23% 9 CWC, Inc. 38 27 40 5% 2% 2% -29% 48% 10 Onyx Software Corp. 10 18 29 1% 2% 2% 84% 60% 11 Metrix, Inc. 14 18 26 2% 1% 1% 27% 49% 12 RTS Software, Inc. 12 17 34 2% 1% 2% 42% 100% 13 Goldmine Software Corp. Firstwave 14 Technologies, Inc. 12 16 32 2% 1% 2% 33% 100% 23 16 16 3% 1% 1% -32% 1% 15 Pivotal Software, Inc. 4 15 34 1% 1% 2% 275% 127% 10 14 21 1% 1% 1% 42% 49% 8 13 22 1% 1% 1% 73% 69% 18 Saratoga Systems, Inc. 10 12 16 1% 1% 1% 26% 30% 19 Update Marketing, Inc. IETÑIntelligent 20 Technology 9 12 17 1% 1% 1% 33% 40% 4 10 18 1% 1% 1% 150% 80% 21 Calico Technology, Inc. 5 9 22 1% 1% 1% 105% 138% 22 MEI BT Squared 23 Technologies 5 6 10 1% 1% 1% 40% 60% 5 5 18 1% <1% 1% 0% 260% 24 SalesLogix Corp. - 5 20 - <1% 1% - 300% 16 Applix, Inc.* 17 Concentra, Inc.* 25 Foresight Software, Inc. 4 4 5 1% <1% <1% 0% 25% 26 Cincom Systems, Inc.* 2 4 7 <1% <1% <1% 100% 75% 27 BayStone Software 1 3 7 <1% <1% <1% 306% 125% 28 Moss Micro, Inc. 1 3 5 <1% <1% <1% 200% 60% 29 Selectica - 3 5 - <1% <1% - 67% 30 The Premisys Corp. Configuration Systems & 31 Consulting Borealis 32 Technology Corp. 1 2 3 <1% <1% <1% 193% 50% 1 1 3 <1% <1% <1% 100% 86% 0 1 2 <1% <1% <1% 623% 60% 33 PowerCerv Corp.* - 1 1 - <1% <1% - 5% 34 Enact, Inc. - 1 2 - <1% <1% - 135% Subtotal 558 879 1,477 74% 75% 80% 57% 68% Other 198 292 373 26% 25% 20% 48% 28% Total 756 1,171 1,850 100% 100% 100% 55% 58% * Customer Relationship Management Revenue Only Source: AMR Research, 1998 6 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. The largest enterprises continue to drive the bulk of market growth. Companies with annual revenue of more than $1B accounted for more than 43% of the market, while companies with revenue greater than $250M accounted for more than 75% of the total market. Although these large enterprise buyers helped create the first two $100M vendors in 1997, the CRM market is not dominated by a small group of vendors (as is the ERP market). In the CRM market, the top 10 vendors (by revenue) account for only 58% of the total market. The ERP top 10 accounts for 75% of the market. CRM Market Begins To Consolidate During 1997 and early 1998, as vendors worked to deepen functionality in both TAS and customer support areas, numerous mergers and acquisitions significantly changed the complexion of the CRM market: • Siebel Systems’ (San Mateo, CA) acquisition of Scopus Technology, Inc. (Emeryville, CA) enhanced and extended functionality to customer support and field service operations. • Aurum Software (Santa Clara, CA) acquired Beologic (Copenhagen, Denmark), a Danish sales configuration vendor. During 1997 and early 1998, as vendors worked to deepen functionality in both TAS and customer support areas, numerous mergers and acquisitions significantly changed the complexion of the CRM market. • SalesLogix (Phoenix, AZ) acquired Opis Corp. (Des Moines, IA), a mid-market customer support vendor. • The Vantive Corporation (Santa Clara, CA) acquired Innovative Computer Concepts (Manchester, NH) for its spare parts distribution capability as Vantive works to develop a field service application. Most of these mergers and acquisitions were driven by business development strategies to broaden CRM product offerings. The net effect of this activity is further consolidation of TAS and customer support applications into a wider-reaching CRM suite. Although the vast majority of vendors in the CRM space are developing suites that cover both TAS and customer support functionality, 9 of the top 10 vendors in 1997 generated more than 3/4 of their revenue from one of the following product segments: • TAS—includes contact managers, SFA systems, telemarketing, sales configuration systems, and sales support applications • Customer support: – Customer service—inbound call center applications – Field service—solutions for dispatching field service personnel, managing spare parts inventories, and supporting depot repair operations Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 7 By the beginning of 1998, 6 of the top 10 vendors in the CRM space provided applications that cover both TAS and customer support By the beginning of 1998, 6 of the top 10 vendors in the CRM space provided applications that cover both TAS and customer support requirements. In 1998, AMR Research expects further consolidation of the CRM market, as demonstrated by Siebel’s acquisition of Scopus and by Clarify, Inc.’s (San Jose, CA) continued investment in its TAS offerings to develop an integrated CRM suite. requirements. As CRM is one the hottest areas in enterprise applications, the pace of mergers and acquisitions will continue to accelerate. Generally, mergers and acquisitions are likely to occur for one of three reasons: • Building a CRM suite—for example, Siebel Systems’ acquisition of Scopus to offer best-of-breed functionality for both TAS and customer support • Broader product footprint—for example, Aurum’s acquisition of Beologic to include sales configuration capabilities integrated tightly with an SFA solution • Organizational critical mass—for example, the merger of sales configurator vendor Calico Technology (San Jose, CA) and marketing encyclopedia vendor FirstFloor Software, Inc. (Mountain View, CA) AMR Research expects larger CRM vendors such as Siebel to use their high stock market capitalizations to continue to expand their product footprints. Additionally, large private companies like Trilogy Development Group (Austin, TX) will likely acquire vendors to expand their product scope. Furthermore, ERP vendors are likely to continue buying their way into CRM, as the temptation to dip into this market’s 58% growth rate will be great. Finally, the emergence of larger CRM, companies is likely to push smaller vendors together to gain critical mass. Many small vendors are product-rich and people-poor. The fastest way to grow may be to merge with a competitor, as hiring in a full-employment market is very difficult. ERP Vendors Begin to Enter the CRM Market During 1997 and early 1998, several leading ERP vendors entered the CRM market space, both through internal development efforts and acquisitions: • In May 1997, Baan International N.V. (Ede, Netherlands) acquired Aurum software. ERP vendors are likely to continue buying their way into CRM, as the temptation to dip into this market’s 58% growth rate will be great. 8 • In March 1998, SAP AG (Walldorf, Germany) acquired Kiefer & Veittinger GmbH (K&V), an SFA vendor headquartered in Mannheim, Germany. • In early 1998, Oracle Corporation (Redwood Shores, CA) rolled out an internally developed SFA offering. Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. With the exception of Baan subsidiary Aurum Software, none of the ERP vendors that have begun to sell CRM software are accounted for in the overall market size. However, market-leading ERP vendors are expanding their CRM offerings and are expected to offer complete suites by 2000. With their automatic integration with back office, ERP vendors should win business in their installed base. To compete, CRM vendors must develop cost-effective interfaces or partnerships with companies that can develop such interfaces. Additionally, the entry of ERP vendors will extend CRM’s reach into manufacturing verticals that have been relatively untapped by most CRM vendors. THE 1997 CUSTOMER RELATIONSHIP MANAGEMENT MARKET LEADERS 93% Average 1996–1997 Growth Rate for Top Five CRM Vendors The combined revenue of the top five CRM vendors grew 88% from 1996 to 1997, with an average growth rate of 93%. Two of the top five vendors generated more than 80% of revenue from TAS application sales in 1997, and three of the top five generated more than 60% of application revenue from customer support applications. With a growth rate of 203%, Siebel was the major contributor to the high growth rate in the top five (see Table 2). A number of observations can be drawn from the performance of the top CRM vendors: The entry of ERP vendors will extend CRM’s reach into manufacturing verticals that have been relatively untapped by most CRM vendors. • Siebel and Vantive each captured 10% of the overall market in 1997, with Siebel increasing its overall market share from 5% and Vantive increasing its market share from 8% in 1996. The other 8 of the top 10 vendors account for only an additional 38% of the total CRM market. This means that the top 10 could look much different at the end of 1998 than it did at the close of 1997. • With the exception of Aurum, none of the ERP vendors that have begun to sell CRM software account for more than 1% of the overall market. In 1998, ERP vendors will begin to launch CRM products and make a greater contribution to this market. Baan, ranked number six in total company revenue and number seven in application license revenue, is a good indication of the significant impact ERP vendors are likely to have in CRM over the next three years. • The market’s growth is not limited to the largest vendors. A number of smaller vendors turned in impressive growth numbers: – BayStone Software (Saratoga, CA) at 306% – Pivotal Software (North Vancouver, BC) at 275% – Moss Micro (Irvine, CA) at 200% – The Premisys Corp. (Chicago, IL) at 193% – IET—Intelligent Technology (Burlington, MA) at 150% Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 9 Table 2: Top 10 CRM Vendor 1997 License Revenue Company Siebel Systems Total License Revenue, 1997 ($M) TechnologyTechnologyAssisted Selling Assisted Total Market Market Revenue Share, 1997 ($M) Share Customer Service Revenue ($M) Customer Service Market Share Field Field Service and Service and Logistics Logistics Revenue Market ($M) Share 101 13% 81 18% 20 8% 0 0% The Vantive Company 76 10% 23 5% 38 15% 15 18% Clarify, Inc. 59 8% 6 1% 41 16% 12 14% Scopus Technology 58 8% 23 5% 35 14% 0 0% Trilogy 49 6% 49 11% 0 0% 0 0% Aurum Software 46 6% 41 9% 5 2% 0 0% Symantec 46 6% 46 10% 0 0% 0 0% Astea International 16 2% 4 1% 0 0% 12 14% Goldmine Software 14 2% 14 3% 0 0% 0 0% Pivotal 12 2% 11 2% 1 0% 0 0% Subtotal 477 63% 298 67% 140 56% 39 46% Other 285 37% 150 33% 109 44% 46 54% Total 762 100% 448 100% 249 100% 85 100% Figure 2: Top 10 CRM Vendor 1997 License Revenue Source: AMR Research, 1998 10 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. Table 3: CRM Vendors Ranked by 1997 License Revenue Rank by 1997 License Revenue Software Vendor Application License Revenue, 1996 ($M) Application License Revenue, 1997 ($M) Market Market Growth Rate, Share, 1996 Share, 1997 1996Ð'97 1 Siebel Systems, Inc. 36 101 8% 13% 182% 2 The Vantive Corporation 42 76 9% 10% 84% 3 Clarify, Inc. Scopus 4 Technology, Inc. 39 59 8% 8% 51% 37 58 8% 8% 57% 5 Trilogy Development Group 33 49 7% 6% 50% 6 Symantec Corp.* 38 46 8% 6% 23% 7 Aurum Software, Inc. Astea 8 International, Inc. Goldmine 9 Software Corp. 29 45 6% 6% 55% 16 16 3% 2% -3% 10 14 2% 2% 33% 10 Metrix, Inc. 8 12 2% 2% 51% 11 Pivotal Software, Inc. 3 12 1% 2% 275% 12 Onyx Software Corp. 6 11 1% 1% 84% 13 Applix, Inc.* 4 10 1% 1% 165% 14 Saratoga Systems, Inc. 7 9 2% 1% 26% 15 RTS Software, Inc. 6 9 1% 1% 42% 16 Update Marketing, Inc. Calico 17 Technology, Inc. 6 8 1% 1% 33% 3 6 1% 1% 100% 10 5 2% 1% -47% 19 Concentra, Inc.* 3 5 1% 1% 73% 20 IETÑIntelligent Technology 2 5 <1% 1% 150% 21 SalesLogix Corp. - 4 - <1% - 22 BT Squared Technologies 1 3 <1% <1% 150% 23 Moss Micro, Inc. Foresight 24 Software, Inc. 1 2 <1% <1% 200% 2 2 <1% <1% 0% 25 Cincom Systems, Inc.* 1 2 <1% <1% 100% 26 BayStone Software 0 2 <1% <1% 306% 27 Selectica Borealis 28 Technology Corp. - 2 - <1% - 0 1 <1% <1% 244% 29 The Premisys Corp. 0 1 <1% <1% 193% 30 MEI Configuration Systems & 31 Consulting 0 1 <1% <1% 1150% 18 Firstwave Technologies, Inc. 0 1 <1% <1% 127% 32 Enact, Inc. - 0 - <1% - 33 PowerCerv Corp.* - 0 - <1% - 34 CWC, Inc. - - - - - Subtotal 343 576 73% 76% 68% Other 125 186 27% 24% 48% Total 468 762 100% 100% 63% * Customer Relationship Management Revenue Only Source: AMR Research, 1998 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 11 In the hot, relatively young CRM market, license sales far exceed maintenance and services revenue as vendors drive to capture market share. Application license revenue is often the best indicator of a vendor’s market momentum. Application license revenue often distinguishes the high-growth vendors—those with significant new license sales—from mature software companies with total revenue boosted by maintenance and services sold to their installed bases. Application license revenue is the basis for the remaining tables and figures in this Report, except where otherwise noted. Table 3 and Figure 2 present a ranking of CRM vendors according to application software licenses sold in 1997. On the whole, CRM is an application-driven market. The most significant difference between the tables is CWC’s (Mankato, MN) drop to number 34 in application license revenue (see Table 2), which reflects the company’s previous services-centric revenue stream. Additionally, several field service and sales configuration vendors also drop in the rankings owing to the high proportion of maintenance and customer service work required by those types of applications. For example, Astea International (Horsham, PA) drops from number 12 in total revenue to number 15 in application revenue. CRM REVENUE SEGMENTS License Revenue Takes 65% Market Share In the hot, relatively young CRM market, license sales far exceed maintenance and services revenue as vendors drive to capture market share. In 1996, 62% of revenue was derived from license sales. During 1997, that number increased by 3% to 65% for a total of $762M. By comparison, license revenue has a 48% share in the supply chain management (SCM) market and 47% in the ERP market. CRM maintenance revenue remained a constant 12% in 1997. Services revenue declined by 3% in 1997, ending at 19% as vendors focused on selling, relying on systems integrators and VARS to provide services (see Table 4). 12 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. Table 4: CRM Aggregate Revenue and Market Share by Revenue Type Revenue Type Revenue, 1996 ($M) Market Share, 1996 Revenue, 1997 ($M) Market Share, 1997 Application Software Licenses 468 762 62% 65% Application Software Maintenance Implementation/Service/Training/ Consulting/Custom Development 116 177 15% 15% 168 227 22% 19% OEM Royalties 2 0 0% 0% Hardware 0 0 0% 0% Other 1 5 0% 0% Total 756 1171 100% 100% Figure 3: CRM Aggregate Revenue Share by Revenue Type Source: AMR Research, 1998 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 13 TAS Is the Leading CRM Application Segment Though installed systems may be In terms of market share, the two CRM application segments remained essentially unchanged from 1996 to 1997. TAS was by far the largest CRM market segment, capturing 59% of 1997 revenue. Customer service followed with a 30% share in 1997. Field service is a smaller segment, with 12% of 1997 revenue. The field service application market is smaller than TAS or customer service for two reasons: aging, companies have been unwilling to replace existing, closely tailored field service applications. • Only a fraction of the enterprise population produces goods that require on-site services. • Though installed systems may be aging, companies have been unwilling to replace existing, closely tailored field service applications (see Table 5). Table 5: CRM License Revenue and Market Share by Application Type Revenue, 1996 ($M) Application Revenue, 1997 ($M) Market Market Growth Rate, Share, 1996 Share, 1997 1996Ð'97 Technology-Assisted Selling 272 448 58% 59% 65% Customer Service 135 225 29% 30% 66% 62 89 13% 12% 44% 468 762 100% 100% 63% Field Service & Logistics Total Figure 4: CRM Market Share by Application Type Source: AMR Research, 1998 14 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. Top 6 1997 TAS Players Capture 59% of the TAS Market In 1997, the majority of CRM vendors generated the bulk of their application revenue from one of two distinct market segments—TAS or customer support. As illustrated in Table 6, the top six TAS vendors, Siebel, Trilogy, Symantec Corp. (Cupertino, CA), Aurum, Vantive, and Scopus, accounted for 59% of the total TAS market. Siebel captured 18% of the TAS market in 1997 while Trilogy, the number two vendor, captured 11%. The top four TAS vendors generated at least 80% of their overall application revenue from TAS applications, with two of the top six generating all of their application revenue from TAS. From the top six TAS vendors, only Scopus and Vantive generated less than half of their overall license revenue from TAS applications. In 1997, the majority of CRM vendors generated the bulk of their application revenue from one of two distinct market segments—TAS or customer support. Table 6: Top Six TAS Vendors by 1997 License Revenue Rank Company Revenue, 1997 ($M) Market Share, 1997 1 Siebel Systems 81 18% 2 Trilogy 49 11% 3 Symantec 46 10% 4 Aurum Software 41 9% 5 The Vantive Company 23 5% 6 Scopus Technology 23 5% Subtotal 263 59% Other 185 41% Total 448 100% Figure 5: Top Six TAS Vendors by 1997 License Revenue Source: AMR Research, 1998 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 15 Top 5 1997 Customer Support Players Account for 52% Market Share The customer support market segments are fragmented and include numerous vendors. All five of the top customer support vendors also offer TAS products. The customer support market segments are fragmented and include numerous vendors. All five of the top customer support vendors also offer TAS products. The top five vendors hold 54% of the customer service market and 46% of the field service market. Clarify and Vantive share top billing for overall customer support, but Clarify has a slightly higher customer service market share while Vantive has slightly more of the field service market. Neither third-ranked Scopus nor fourthranked Siebel offered field service applications in 1997. Now merged, their combined 1997 revenue would move the new company to the top of the list based on customer service revenue alone. After these leaders, there is a dramatic fall-off in market share for other vendors (see Table 7). Table 7: Top Five Customer Service and Field Service Vendors by 1997 License Revenue Rank Company Customer Support License Revenue ($M) Customer Support Market Share, 1997 Field Service and Field Customer Logistics Service and Service License Logisitics Market Revenue Market Share, 1997 ($M) Share, 1997 Customer Service License Revenue ($M) 1 Clarify, Inc. 53 16% 41 16% 12 14% 2 The Vantive Company 53 16% 38 15% 15 18% 3 Scopus Technology 35 10% 35 14% 0 0% 4 Siebel Systems 20 6% 20 8% 0 0% 5 Astea International 12 4% 0 0% 12 14% Subtotal 173 52% 134 54% 39 46% Other 161 48% 115 46% 46 54% Total 334 100% 249 100% 85 100% Figure 6: Top Five Customer Service and Field Service Vendors by 1997 License Revenue Source: AMR Research, 1998 16 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. TECHNOLOGY ENVIRONMENT CRM Technology Environment Field Operations Drive the Technology Direction The inclusion of field sales and service employees in the customer information stream is a primary concern of organizations following a CRM strategy. Remote users need updated information prior to making site visits. They must be able to provide timely feedback upon call completion. Using laptop or hand-held computers and connecting via modem, wireless services, or the Web, these employees must synchronize with central systems. Thus, a client/server architecture is best for CRM applications. In 1996, 8% of new CRM licenses sold were host-based; by 1997, the number had fallen to only 2% (see Table 8). The inclusion of field sales and service employees in the customer information stream is a primary concern of organizations following a CRM strategy. Table 8: License Revenue by Client/Server vs. Host-Based Applications, 1996–1997 Architecture Client/Server Host-Based Total Revenue, 1996 ($M) Revenue, 1997 ($M) Market Market Growth Rate, Share, 1996 Share, 1997 1996Ð'97 432 750 92% 98% 74% 37 11 8% 2% -69% 468 762 100% 100% 63% Source: AMR Research, 1998 UNIX and NT are the dominant platforms of choice for CRM applications. The predominant platforms for packaged CRM applications in multiuser environments were UNIX and NT (see Table 9). In 1997, NT passed UNIX as the most commonly used platform, achieving a 43% share (up from 37% in 1996). UNIX dropped from 41% to 38%. AMR Research expects NT will begin to dominate the market in 1998. The fast-growing top four vendors with CRM suites—Siebel, Vantive, Clarify, and Aurum—all offer NT-based applications. Market leader Siebel’s CRM products are exclusively NT-based, and the field service applications acquired from Scopus are expected to be NT-based. Aurum products are solely NT-based. Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 17 AMR Research expects a sharp fall-off in market share for singleuser applications partly because multi-user platforms are necessary for sharing information. The single-user products, such as contact management software, utilize Windows 95 and single-user NT as platforms. In 1997, these platforms captured 19% of the market, down from 22% the year before. AMR Research expects a sharp fall-off in market share for single-user applications for two reasons: • Multi-user platforms are necessary for sharing information. • Microsoft (Redmond, WA)’s Outlook, which includes contact management features, is causing sales of single-user contact management to decline. Table 9: License Revenue by Operating System, 1996–1997 Operating System Revenue, 1996 ($M) Revenue, 1997 ($M) Market Market Share, 1996 Share, 1997 Growth Rate, 1996Ð'97 IBM MF 1 1 0% 0% 26% OS/400 0 0 0% 0% - DEC Open VMS 0 0 0% 0% - UNIX 192 286 41% 38% 49% Multi-User Windows NT Windows 95 & Single-User NT 172 327 37% 43% 90% 102 146 22% 19% 43% MS/DOS/Windows 3.x 2 2 0% 0% -23% Other Operating System 0 0 0% 0% - 468 762 100% 100% 63% Total Source: AMR Research, 1998 18 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. CRM CUSTOMERS CRM Customers and Market Channels North American Fortune 500 Drives Growth and Sets Pace for the Rest of the World Customer demand highlights the long-term CRM market growth opportunities. While there are signs that mid-market CRM sales are accelerating, the largest companies fueled the growth of the overall market (see Table 10 for details). Although the highest growth rates were in Asia/Pacific and the Rest of the World, North America continued to lead all geographic segments with 77% of the total market in 1997 (see Table 11 for details). Although the highest growth rates were in Asia/Pacific and the Rest of the World, North America continued to lead all geographic segments with 77% of the total market in 1997. Electronics was the leading vertical, capturing 32% of the overall CRM market in 1997. Electronics has been particularly successful for CRM vendors because of the critical customer support requirements necessary to compete in the Electronics industry. Additionally, CRM is particularly strong in non-manufacturing verticals, accounting for 26% of the overall market in 1997, including the following industries: • Telecommunications • Insurance • Software • Financial Services Industries The common thread across these verticals is the demand for a high level of interaction and support of customers. Industrial Products captured 6% of the CRM market, largely a result of sales of TAS products such as product configurators to support complex sales processes (see Table 12 for details). A number of observations can be drawn from the character of demand in the 1997 CRM market: • North American corporations with revenue greater than $1B dominate the CRM market. Although growth rates outside North America are good, revenue is still miniscule when compared to other enterprise application markets such as ERP. This indicates that there is plenty of Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 19 AMR Research expects that mid-market sales will continue to accelerate as smaller companies adopt CRM business practices. market left to be tapped. The 64% growth rate in CRM geographical leader North America also indicates that the largest pool of buyers shows no signs of curtailing spending for these applications. • The CRM market appears to have suffered little from the financial crisis in Asia. Despite the year-end downturn, calendar year revenue in Asia/Pacific turned in the second highest growth rate (69%). At the same time, Asia/Pacific revenue remains at only 6% of the overall CRM market. AMR Research expects continued strong growth in Asia/Pacific. • The CRM market is made up of expensive applications with costly implementations aimed at companies that can afford to pay big money for systems and packaged applications such as contact managers, which require little in the way of implementation services. The high end of the market (companies with over $250M in sales) dominates with 75% of 1997 license revenue. The mid-market is much smaller, with only 25% of 1997 license revenue attributed to companies with under $250M in sales. Taking this further, many of the license sales recognized as companies with under $250M in sales were actually divisions of Fortune 500 firms. However, the highest growth rate for license sales occurred in companies with revenue of $250M to $999M, with a 113% growth rate in 1996–1997. AMR Research expects that mid-market sales will continue to accelerate as smaller companies adopt CRM business practices. • While a true mid-market for CRM today is small, AMR Research believes that this is potentially a multibillion-dollar market opportunity. This opportunity consists of true midsize enterprises as well as larger companies scared off by the prohibitive price tag of high-end CRM applications. Several vendors, including Aurum and Siebel, are exploring ways to tap the mid-market. Current mid-market vendors such as Onyx Software Corporation (Bellevue, WA), Pivotal, SalesLogix, and Moss Micro will need to defend their market niche. AMR Research expects that the recent entry of ERP vendors into the CRM market will expand the potential market into more traditional manufacturing verticals. 20 Electronics—the leading vertical segment—and other non-manufacturing verticals have to date been the most frequent buyers of CRM, largely because of the unique challenges of selling and servicing products and services in these areas. However, AMR Research expects that the recent entry of ERP vendors into the CRM market will expand the potential market into more traditional manufacturing verticals. Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. Table 10: License Revenue by Customer Company Size, 1996–1997 Customer Revenue Revenue, 1996 ($M) Revenue, 1997 ($M) Market Market Growth Rate, Share, 1996 Share, 1997 1996Ð'97 Less than $50M 49 91 10% 12% 87% $50MÐ$249M 47 99 10% 13% 113% $250MÐ$999M 157 244 34% 32% 55% $1B or More 216 328 46% 43% 52% Total 468 762 100% 100% 63% Figure 7: License Revenue by Customer Company Size, 1996–1997 Source: AMR Research, 1998 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 21 Table 11: License Revenue by Customer Geography, 1996–1997 Revenue, 1996 ($M) Region North America Revenue, 1997 ($M) Market Market Growth Rate, Share, 1996 Share, 1997 1996Ð'97 357 585 76% 77% 64% Europe 83 128 18% 17% 55% Asia/Pacific 26 43 5% 6% 69% Latin/South America 2 2 0% 0% 56% Rest of World 2 4 0% 1% 89% 468 762 100% 100% 63% Total Figure 8: License Revenue Share by Customer Geography, 1997 Source: AMR Research, 1998 22 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. Table 12: License Revenue by Vertical Industry, 1996–1997 Revenue, 1996 ($M) Vertical Market Revenue, 1997 ($M) Market Market Growth Rate, Share, 1996 Share, 1997 1996Ð'97 Automotive Assembly 11 16 2% 2% 46% Other Assembly 25 34 5% 4% 36% 7 13 1% 2% 95% 147 254 32% 33% 72% 4 6 1% 1% 60% 30 48 6% 6% 61% Mills 6 7 1% 1% 30% Apparel 2 4 1% 0% 49% Food & Beverage/CPG 12 22 2% 3% 88% Medical Devices 13 17 3% 2% 36% Pharmaceuticals/Biotech 10 18 2% 2% 72% Chemicals 10 17 2% 2% 66% 0 0 0% 0% Ð 20 33 4% 4% 60% Transportation 6 11 1% 1% 89% Public Sector 5 0 1% 0% -100% 38 80 8% 11% 114% Non-Manufacturing Industries 123 185 26% 24% 50% Total 468 764 100% 100% 63% Aerospace & Defense Electronics Semiconductor Industrial Products Oil & Gas Utilities Other Manufacturing Figure 9: License Revenue Share by Vertical Industry, 1997 Source: AMR Research, 1998 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 23 CRM MARKET CHANNELS CRM products range from simple contact managers designed for individual use to enterprise suites that manage marketing, sales, and customer support operations. CRM products range from simple contact managers designed for individual use to enterprise suites that manage marketing, sales, and customer support operations. The product scope and the product complexity define sales channels. In 1997, 82% of CRM license revenue was realized through direct sales (see Table 13). Vendors with applications complex and/or broad in scope used direct sales as their primary channel. For example, market leaders (including Siebel, Clarify, and Trilogy) relied exclusively on their direct sales forces. Vantive’s direct sales force produced 84% of sales while systems integrators and distributors generated 8% each. Aurum’s direct sales force produced 73% of its license revenue, with the remaining 27% coming from distributors. The sales cycle for broad, complex products is often long and involved, and includes factors that many vendors believe require the attention of a direct sales rep. Direct sales remains the most effective means of selling complex and expensive CRM systems: • Large-scale SFA and CRM deals average over $1M, and some exceed $5M. • SFA and CRM suites affect the operations of several departments, so selling CRM systems requires cross-functional agreements. • A CRM sales process may require multiple visits to several different customer sites. • Complex demonstrations may be required. For example, field service demonstrations to a global business may take weeks or months. Inexpensive products that target individual users or small groups are generally sold through distributors or retailers. For example, vendors offering workgroup-level TAS—as does Goldmine Software Corporation (Pacific Palisades, CA)—sell through distributors. Symantec’s contact management application ACT! is sold by retailers. Market leaders will increasingly turn to VARs and systems integrators to help gain market share in the mid-tier while the direct sales force continues to make high-end sales. 24 In the future, AMR Research expects to see a shift in channels, with VARs and systems integrators capturing more sales in the CRM market. Market leaders, which at this point have focused primarily on sales to large customers, are moving into the mid-tier. Since margins there are thinner, offsetting higher-margin revenue characteristic of VAR and systems integration deals is important. Market leaders will increasingly turn to VARs and systems integrators to help gain market share in the mid-tier while the direct sales force continues to make high-end sales. Distributors and retailers will continue as preferred channels for lowcost products. Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. Table 13: CRM License Revenue by Sales Channel, 1996–1997 Sales Channel Revenue, 1996 ($M) Direct Sales Revenue, 1997 ($M) Market Market Growth Rate, Share, 1996 Share, 1997 1996Ð'97 377 627 80% 82% 66% 5 8 1% 1% 78% Distributors 59 84 13% 11% 43% VARs 19 29 4% 4% 57% Other Indirect Sources 10 13 2% 2% 39% 468 762 100% 100% 63% Systems Integrators Total Figure 10: CRM License Revenue by Sales Channel, 1997 Source: AMR Research, 1998 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 25 26 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. MARKET FORECAST Customer Relationship Management Market Forecast, 1997–2002 CRM License Revenue Will Grow to $7.5B by 2002 From 1997 to 2002, license revenue in the CRM market will grow from $762M to $7.5B, sustaining a 58% CAGR over the five-year span (see Table 14). The TAS segment will lead the CRM market with 64% CAGR and should reach $5.1B by 2002 (see Table 15). Customer service will grow at a 50% CAGR over the five years, reaching $1.9B. Year 2000 considerations are expected to accelerate growth in 1998 and 1999. Field service will grow at a slower pace, with a 41% CAGR and revenue increasing from $85M to $480M. Note that field service revenue growth is forecasted to peak in 2000, when the need to respond to competitive pressures, coupled with a growing reference base among the vendors, will spur customers to replace legacy systems. From 1997 to 2002, license revenue in the CRM market will grow from $1.1 to $7.5B, sustaining a 58% CAGR over the five-year span. Figure 11: CRM License Revenue by Application Type Source: AMR Research, 1998 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 27 Table 14: CRM License Revenue Share by Application Type, 1997–2002 Application Type 1997 ($M) 1998 ($M) 1999 ($M) 2000 ($M) 2001 ($M) 2002 ($M) TAS 428 703 1154 1897 3113 5100 Customer Service 249 380 577 862 1285 1914 85 120 170 244 346 480 762 1203 1900 3002 4744 7495 Field Service Total Table 15: CRM License Revenue Growth by Application Type, 1997–2002 Application Type 1998 1999 2000 2001 2002 TAS 64% 64% 64% 64% 64% Customer Service 53% 52% 49% 49% 49% Field Service 41% 42% 44% 42% 39% Total 58% 58% 58% 58% 58% Source: AMR Research, 1998 CRM Aggregate Market Will Reach $12B by 2002 Increased market awareness of CRM’s ability to enhance revenue will fuel efforts to improve AMR Research projects aggregate revenue (licenses, maintenance, and services) will increase from $1.2B in 1997 to $11.5B in 2002, as shown in Table 14. A 58% CAGR is forecasted over the five-year period. customer contact channels. Maintenance will increase its share of overall CRM revenue as the installed base continues to grow. Maintenance renewal rates should remain high for several reasons: • Most customers are new. • Many customers base purchases on the future vision of the vendors, expecting enhancements. • Product technology advances make upgrades easier to implement. AMR Research observes the following trends critical to CRM growth from 1997 to 2002: • Increased market awareness of CRM’s ability to enhance revenue will fuel efforts to improve customer contact channels. The customer service call center is the primary channel for personal contact between a company and its customers. Therefore, the demand to implement 28 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. and upgrade call centers to make them productive in relationshipbuilding as well as in traditional measurements will spur a 51% CAGR in the customer service market segment. • Many companies will choose to buy applications rather than invest the resources needed to upgrade legacy systems to new technologies. • Acquisitions will quicken as point-solution providers join forces to prevent larger vendors with more comprehensive product footprints from making them obsolete. For example, AMR Research expects further consolidation in the TAS space, as CRM vendors work to expand their TAS functionality beyond SFA to include tools that help sales reps close deals at the point of sale. This expansion will include solutions such as product configurators and other interactive selling systems. Additionally, TAS vendors are expected to expand aggressively into the marketing automation space. Acquisitions will quicken as pointsolution providers join forces to prevent larger vendors with more comprehensive product footprints from making them obsolete. • Market-leading ERP vendors are expanding their CRM offerings, and AMR Research expects the leading vendors to offer complete CRM suites by 2000. With their automatic integration with back office, ERP vendors are expected to win business in their installed base. To compete, CRM vendors must develop cost-effective interfaces or partnerships with companies that can provide packaged integration. In addition, ERP vendors will work to expand CRM’s reach into manufacturing verticals that have been relatively untapped by many of the best-ofbreed CRM players. • Customers will implement CRM applications over time because owing IT bandwidth issues make it nearly impossible for large companies to implement an entire CRM suite at once. This leads to the potential for multi-year revenue streams once an initial sale is made, as companies absorb modules in a sequential order. • Legacy field service systems will remain in place until competitive pressures drive them out. Changing the primary work tool of a geographically dispersed workforce is difficult and risky. Most internally created field service systems still work, albeit less and less effectively as the service environment becomes more and more complex. Competitive pressures will require more changes to legacy systems than IT departments will be able to make on a timely basis, driving companies to application vendors. • Today, field service vendors have few reference accounts, but as they develop, more companies will be willing to risk their field operations to an outside supplier. A substantial number of reference accounts will be available by 2000, making applications easier to sell and less risky to purchase. Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. Competitive pressures will require more changes to legacy systems than IT departments will be able to make on a timely basis, driving companies to application vendors. 29 Table 16: Aggregate CRM Revenue, 1997–2002 Revenue Type 1997 1998 1999 2000 2001 2002 Licenses 762 1203 1900 3002 4744 7495 Maintenance 177 278 438 716 1168 1914 Services 227 352 555 855 1321 2052 Other 5 19 29 46 66 69 Total 1171 1850 2923 4619 7298 11530 Table 17: Aggregate CRM Revenue Share by Type, 1997–2002 Revenue Type 1997 1998 1999 2000 2001 2002 Licenses 65% 65% 65% 65% 65% 65% Maintenance 15% 15% 15% 16% 16% 17% Services 19% 19% 19% 19% 18% 18% Other 0% 1% 1% 1% 1% 1% Total 58% 58% 58% 58% 58% 58% Figure 12: Aggregate CRM Revenue by Revenue Type, 1997–2002 Source: AMR Research, 1998 30 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. APPENDICES APPENDIX A: RELATED RESEARCH The following Reports will be available as part of The AMR Research Market Analysis and Review Series: • Industrial Enterprise Applications Software Report • Plant Operations/Maintenance Management Software Report • Enterprise Resource Planning Software Report Related Research . . . . . . . . . . .31 • Supply Chain Management Software Report • Customer Relationship Management Software Report These Reports present four views on the specific markets: by software vendor, technology, customer base, and market forecast through 2002. • Software Vendors – Revenue and growth rates from 1995 to 1997 Research Methodology . . . . . . .32 Vendor Information Request (Survey Instrument) . . . . . . . . . .42 Reader’s Acronym List . . . . . . . .44 – Revenue from software licensing, software maintenance, implementation service/training/consulting/custom development, original equipment manufacturer (OEM) royalties, hardware from turnkey systems sales, and “other” – Revenue by software application segment • Technology – Revenue by client/server architecture – Revenue by operating environment – Revenue by database system • Customer Base – Revenue by customer size – Revenue by geographic region – Revenue by vertical industry – Revenue by sales channel • Forecast, 1997–2002 – 1998 revenue forecast for individual software vendors – Five-year forecast of total company revenue by type of revenue Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 31 APPENDIX B: RESEARCH METHODOLOGY AMR Research’s Primary Research Group tracks the Industrial Enterprise software market from the bottom up. For this purpose, AMR Research has developed a database of 300+ software vendors that provide solutions to manufacturing enterprises worldwide. Selection Criteria for Application Software Vendors AMR Research’s goal is to capture the leading 80% (by revenue) of industrial enterprise application software vendors that are actively pursuing business within the United States. To be included in AMR Research’s effort, vendors must meet the following qualifications: • Develop and sell packaged application software products either directly to end-users or through a third party distribution channel. (This excludes third party distributors and developers that OEM source code exclusively.) • Achieve a minimum of $1M in total annual revenue or provide a fastgrowing new technology or functionality (for example, Internetenabled APS applications). • Provide packaged software applications that AMR Research tracks. (This excludes vendors focusing on software development tools or systems management tools, for example.) • Provide systems hardware as part of a turnkey solution only. (This excludes hardware vendors like Sun, which does not provide application software.) • Provide implementation services including consulting, customization, systems integration, and training as part of its application software business, and not as stand-alone services only. Information Collection Information on application software vendors is derived from a number of sources: • Software vendor surveys, distributed every January (see Appendix C) • End-user surveys, detailing application software suppliers and company spending • Vendor and end-user communications with AMR Research • Annual reports, 10Ks, 10Qs, IPO prospectuses • Trade publications, seminars, and conferences • Electronic data sources such as Computer Select and CorpTech • The Internet 32 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. AMR Research has developed a Vendor Information Request survey form (see Appendix C) that is distributed to each company in AMR Research’s software vendor database. AMR Research then follows up with each company to ensure the timely return of the completed survey. Inconsistencies or questions are resolved between AMR Research and each company before entering the data into the AMR Research database. It is easier to gather detailed company information from publicly held companies or those close to an IPO than from privately held companies. In cases where companies do not share performance information with AMR Research, AMR Research estimates results based on a number of factors. These can include, but are not limited to, customer information, information by business partners and/or competitors, resellers, and analyst estimates. AMR Research shares these estimates with the company for confirmation or correction before entering them into the database. Companies that do not want to see their revenue published or that are smaller than $1M in total revenue are included in “other.” AMR Research estimates that share at approximately 20%. “Other” also includes the segment of vendors that are currently uncaptured by AMR Research. Database for Software Vendors Based on the selection criteria outlined above, AMR Research has built a software vendor database that provides detailed information for each company on the following metrics: • Number of employees • Total company revenue and revenue by product type (software licenses, maintenance, implementation, OEM royalties, hardware, and “other”) • Number of installed and new customers/sites • Software revenue by functional application segments • Software revenue for client/server architecture • Software revenue by operating system • Software revenue by database management system • Software revenue by customer size • Software revenue by geographic region • Software revenue by vertical industry • Software revenue by distribution channel Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 33 Number of Employees The number of employees reflects the full-time or equivalent to fulltime employees (FTE) on a vendor’s payroll. It does not include outside consultants who may work as subcontractors providing implementation or similar services. Company Revenue by Revenue Type Most application software vendors sell more than software licenses. They also provide installation, implementation, training, and other services. Furthermore, many vendors get revenue from selling turnkey solutions. In order to understand a software vendor’s business model and its future revenue potential, AMR Research establishes the share of its revenue coming from the following segments: • Application software licenses generally provide the highest profitability and signal future growth opportunities. Application software license revenue can be derived either from licenses paid in full or from one-year license fees/leases. Application software license revenue does not include revenue from middleware, database runtime licenses, or one-of-a-kind software products developed for a specific customer. • Software maintenance provides a stable revenue stream. However, a maintenance share higher than industry average can indicate a lack of new customer growth or market momentum. Generally, software maintenance includes free upgrades, bug fixes, access to bulletin boards, and some software support. It does not include implementation service, training, consulting, software customization, or custom development, among others. • Revenue from implementation services, training, consulting, custom development, among others is harder to manage and generally provides lower profitability than software licenses. Most application software vendors prefer to hand off a share of these revenue opportunities to systems integrators (SIs) or value-added resellers (VARs). • Revenue from OEM royalties tends to provide a strong revenue stream for startup companies. However, profitability of OEMed source code is often lower than for packaged software. Another disadvantage is that it does not allow the development company to establish its own brand recognition. OEM royalties are defined as payments by channel partners for software source code or products that these partners OEM (i.e., sell under their own label). When sizing the overall application software market, OEM revenue is deducted to avoid double-counting. If sizing small submarket segments, OEM royalty revenue is deducted only if the partner deriving end-user revenue from the code is part of the same submarket. 34 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. • Revenue from computer hardware: Turnkey systems sales by software vendors have been losing momentum during the last few years. However, there remain market niches among midrange manufacturers that demand complete solutions. AMR Research does not include computer hardware sold without application software by companies like Sun Microsystems. Functional Application Segments AMR Research segments the Industrial Enterprise Applications market as follows: • Maintenance Management: Computerized Maintenance Management Systems (CMMS), Asset Care Management Systems, Work Order Management, Maintenance Resource & Control, Equipment History, and Purchasing & Services Contracting • Product Data Management/ Electronic Document Management: Configuration Management, Documentation Tools, Enterprise Document Management Systems, Specification Management, Vault for Engineering Files, File Access Control, Management of Engineering Change Orders (ECOs), Review and Release Control, and Workflow Systems • Computer-Aided Process Planning/Engineering: Process/Routing Simulation, Manufacturability Analysis, Engineering Process Development Tools, and Generative Planning • Scheduling: Finite Capacity Scheduling, Rough Cut Scheduling, Schedule Modeling and Analysis, Schedule Dispatching & Messaging • Quality Management: Laboratory Information Management Systems (LIMS), Quality Documentation, Plant-Wide Statistical Quality Control (SQC), Inspection and Testing, ISO 9000 Support • Transaction-Oriented MES: Production Management, Resource Monitoring and Tracking, Production Workflow Management, Production Reporting, Resource Performance Analysis, Lot History/Genealogy, and Time/Attendance/Labor Tracking • Process Management: Man-Machine Interface, Supervisory Control and Data Acquisition (SCADA), Real-Time Statistical Process Control (SPC), Cell, Batch Process Execution, Data Historian, Diagnostic Tools and Support, Advanced Process Control, Recipe and DNC Program Library and Management Software, Computer-Aided Operator Support, and Emerging Software-Based Control Products • Customer Order Management: Order Entry, Order Processing, Configuration Management, Available-to-Promise (ATP), Pricing, Discounting, and Shipping • Manufacturing Resource Planning/Scheduling: Business Planning, Sales and Operations Planning, Production Planning, Master Production Scheduling, Materials Requirements Planning (MRP), Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 35 Rough-Cut Capacity Requirements Planning (CRP), Bill of Materials (BOM), and Distribution Requirements Planning • Materials Management: Purchasing, Inventory, Statistical Inventory Control, Receiving, Dock-to-Stock, Return Handling • Decision Support: Data Warehousing, Query & Reporting Tools, OLAP/ROLAP, Data Mining, Executive Information Systems (EIS); excludes Spreadsheets and Databases • Supply Chain Planning and Execution: Transportation Resource Planning and Management (TRPM), Site Location Planning, Distribution Resource Planning, Stock Replenishment Systems, and Vendor Managed Inventory (VMI) • Demand Planning/Forecasting: Demand Planning, Sales Planning, Distribution Planning, and Production Planning • Advanced Planning & Scheduling: Constraint-Based Planning & Scheduling, Finite Capacity Planning & Scheduling, Material Planning, Simulation, and Optimization • Warehousing & Distribution Center Operations: Warehouse Management and Managed Warehouse Systems • Transportation Administration & Management: Load Building & Planning, Routing, and Fleet Management • Technology Assisted Selling: Marketing Campaign Management, Telemarketing/Telesales, Lead Tracking, Sales Management, Mobile Sales Support, and Sales Presentation/Product Configuration • Customer Service: Customer Support, Internal Help Desk, Knowledge Bases & Diagnostic/Inference Engines, Quality Tracking, and Web Support • Field Service & Logistics: Field Service, Depot Repair, and Spare Parts Distribution • Finance/Accounting: Accounts Payable (A/P), Accounts Receivable (A/R), Fixed Asset Management, General Ledger, Invoicing, ActivityBased Cost Management, Project-Based Billing, Financial Control & Budgeting System, Financial Forecasting & Planning System, and Cash Flow Forecasting and Management • Human Resources: Payroll, Time & Labor, Personnel, and Benefits Administration Customers, Sites, and Seats • Customers are companies that operate under their own logo, although they may be wholly or partially owned by a parent or holding company. For example, General Motors owns Delco, but Delco operates under its own logo. • Sites are physical locations, manufacturing sites, or distribution centers where companies execute their business. 36 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. • Seats are terminals and client or single-user platforms that run or allow access to complete application software packages or components. Geographic Revenue Distribution AMR Research provides information on vendors’ worldwide revenue distribution by five geographic regions. (As before, vendors included in this analysis are active within the United States, although their headquarters may be elsewhere.) AMR Research maps its geographic regions according to four principles: • Adopt the definitions used by major software vendors • Group together areas with similar cultural requirements (e.g., double-byte support) • Reflect actual sales territories • Develop a clear picture for areas of new growth potential As a result of these considerations, AMR Research defines the five geographic regions as follows: • North America: United States, Canada • Europe: Western and Eastern Europe, including Russia and other parts of the former Soviet Union • Asia/Pacific: Australia, China, Hong Kong, India, Indonesia, Japan, Korea, New Zealand, Pakistan, Singapore, Taiwan, Thailand, and other states in the region • Latin/South America: Mexico, Central America, the Caribbean, South America • Rest of World: Africa, the Middle East Client/Server Architecture The shift from host-based systems to client/server architectures has created major revenue opportunities throughout the industrial enterprise software market. AMR Research defines client/server architecture as follows: • Client/Server Architecture: An architecture where application processing is partitioned across several platforms to take advantage of the unique strengths of both graphical user interfaces and high-performance back-end servers. Client/server’s initial goals were to support the deployment of a PC-based graphical user interface that utilized a network to interact with server-based applications and databases. Several generations of client/server architecture that support different styles of this application partitioning are currently in the market. Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 37 Operating Environments AMR Research reports on application software revenue achieved in a range of different operating environments. AMR Research currently focuses on 13 operating environments and on “other.” Clearly, these 13 environments do not represent an exhaustive coverage of the market. AMR Research focuses on those environments that are economically the most relevant, either as fast growers or as large installed bases. AMR Research’s decision to include certain operating environments is based on market demand, not on the technical merits of the operating environments. • IBM and other Mainframes • IBM OS/400 • DEC Open VMS • Hewlett Packard HP-UX • IBM AIX • Sun Solaris • DEC UNIX • Other UNIX flavors • DEC Alpha NT • NT client/single-user (Intel) • NT server/multi-user (Intel) • MS Windows 95 • MS DOS/Windows 3.x DATABASE MANAGEMENT SYSTEMS AMR Research Reports application software revenue by database management systems for software markets where database management systems (DBMSs) are used. AMR Research currently focuses on five DBMSs and on “other.” While these five systems do not represent a comprehensive view of the market, they exhibit the largest demand and the fastest growth. AMR Research’s decision to include some DBMSs and not others is based on market demand, not on the technical merits of the DBMS. • IBM DB2 • Informix • Microsoft SQL Server • Oracle • Sybase Other DBMSs that are mentioned by application software vendors include Progress, Ingres, and Access. 38 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. Customer Base by Revenue Size AMR Research reports on application software revenue derived from sales to companies with the following ranges of annual revenue: • Less than $50M • $50M to $249.9M • $250M to $999.9M • $1B or more This allows AMR Research to be up to date with trends relating to the movement toward the middle market. Distribution Channels While most large application software vendors rely almost exclusively on a direct sales force, midrange and smaller vendors rely on a mix of distribution channels. AMR Research reports the share of software revenue from direct versus indirect channels. The revenue reported from indirect channels represents the software revenue flowing from the channel to the independent software developer. It does not represent the revenue achieved by the channel from the end-user. AMR Research defines direct and indirect sales as follows: • Direct Sales: Sales from manufacturers directly to end-users. This includes sales generated by manufacturer-employed quota-carrying sales organizations, manufacturer representatives working on commission, agents, and direct response marketing. • Indirect Sales: Sales generated by systems integrators, distributors, resellers, and value-added resellers, among others. – Systems Integrators: SIs act as general contractors to provide endusers with complete IT solutions, including consulting, implementation, maintenance, and professional services. – Distributors: Distributors provide products primarily to business resellers; services include warehousing, order processing, shipping, and credit extension. – Value-Added Resellers: VARs provide a comprehensive or total solution, which may consist of application software, hardware platforms, network integration, customization, training, and support. – Control Vendors: Control vendors act as third party sales channels for software vendors or as OEMs. For example, some control vendors distribute external software applications complementary to their own control products but maintain those products’ labels. As a case in point, control vendor Modicon sells USDATA’s Factorylink product, acting as a third party sales channel for USDATA. Control Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 39 vendor Schneider, on the other hand, takes USDATA source code, repackages it and sells it under the name Monitor 77 as part of its own product suite. In this case, Schneider OEMs Factorylink and pays royalties to USDATA. • Channel Distortions: AMR Research’s revenue reports reflect the software license revenue stream to independent software vendors (ISVs). While vendors relying on direct distribution record full software revenue, ISVs with indirect distribution report about one-third to onehalf less software revenue, which represents the discount they grant their resellers. In addition, they achieve less or no consulting, implementation, and training revenues, leaving these revenue streams to their VARs. As a result, comparing market share by software revenue is only meaningful if the involved companies use the same—either direct or indirect—distribution method. Vertical Industries AMR Research has divided the addressable manufacturing market by 15 industries and “other.” The guiding principle behind this segmentation is to group together industries that require similar functionality, and thus those that can be serviced by the same software vendor or the same sales force. AMR Research’s vertical industry segmentation allows us to group the market into discrete manufacturing (D), process manufacturing (P), and other (O). AMR Research’s vertical industry segments are as follows: • Automotive Assembly, Parts and Equipment (D) • Other Assembly & Fabrication, including Fabricated Metals, Appliances, Packaging (D) • Aerospace & Defense (D) • Electronics/High Tech/Telecommunications (D) • Semiconductor (D) • Industrial Products, including Mechanical and Electrical Equipment (D) • Mills, including Paper, Textile, Metals, Building Materials (P) • Apparel (D) • Food & Beverage/Consumer Packaged Goods (P) • Medical Devices (D) • Pharmaceuticals/Biotech (P) • Chemicals/Petrochemicals (P) • Oil & Gas, including Refining, Distribution (P) • Utilities (O) • Transportation/Distribution/Warehousing (O) 40 Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. Below is a brief description of some of these vertical industry segments: • Automobile Assembly is a distinct segment with specialized systems custom developed by each manufacturer. • Automobile Parts and Equipment includes manufacturers that focus on automotive assemblers. • Other Assembly and Fabrication covers volume production of consumer goods and component manufacturers. This group has been growing over the years as manufacturers simplify their processes and outsource component production. • Food & Beverage/Consumer Packaged Goods (CPG) products have recipe-based processes, followed by high-speed discrete packaging to feed the supply chain. In addition to food and tobacco, this segment includes soaps, cleaners, toiletries, et al. • Pharmaceuticals/Biotech are characterized by stringent regulatory requirements, including detailed record-keeping on both materials and processes. • Chemicals/Petrochemicals is the traditional continuous process market, with large dedicated plants and extensive control automation producing bulk fuels, petrochemicals, and chemicals. Forecasting AMR Research provides two forecasts. The first is a one-year forecast by revenue for each software vendor included in AMR Research’s database, plus “other.” The one-year forecasts are rolled up into growth projections for the overall market for the vendors on which AMR Research reports. The second is a five-year forecast by type of revenue. • One-Year Forecast: The one-year forecast is developed by AMR Research with input from a number of sources: – Vendors’ own growth expectations – End-user spending plans – Wall Street analysis – AMR Research’s competitive analysis – Regional and worldwide economic growth expectations • Five-Year Forecast: The five-year forecast focuses on revenue of all major software vendors active within the United States. It is based on long-term growth expectations by AMR Research analysts. These growth projections are primarily based on the following factors: – Past and present performance by application segment – End-user IT investment plans – Emerging/declining technologies – Worldwide business drivers AMR Research’s forecasts do not account for fluctuations in currency exchange rates. Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 41 Appendix C: Vendor Information Request, 1997 Company Name: Year of Company Foundation Fiscal Year Ending Total Company Revenue Calendar 1996 Calendar 1997 Calendar 1998 Projection Number of Employees 1996 1997 ______ ______ ______ ______ _____% Growth ______ ______ Percent of Revenue by Product Segment Application Software Licenses Revenue Application Sw. Maintenance Revenue Implementation Service/Training/ Consulting/Custom Development Revenue OEM Royalties Revenue Computer Systems Hardware Revenue Other (please specify) Total ______ ______ ______ ______ ______ ______ 100% Number of Customers, Sites, and Licenses—1997 Total Number of Customers _____ Number of New Customers in 1997 _____ Total Number of Sites _____ Number of New Sites in 1997 _____ Total Number of Seats _____ Number of New Seats in 1997 _____ The Following Questions Refer to Application Software License Revenue only! 1996 Application Software License Revenue: 1997 Application Software License Revenue: $_____ $_____ Percent of Application Software Revenue by Geographic Region North America Europe Asia/Pacific Latin/South America Rest of World (ROW) Total Software Revenue _____ _____ _____ _____ _____ 100% Percent of Application Software Revenue from Products based on Client/Server Architecture Client/Server Non-Client/Server Total Software Revenue Percent of Software Revenue by Application Maintenance Management Product Data Management/Electronic Document Management Computer-Aided Process Planning/Engineering Scheduling Quality Management Transaction Oriented MES Process Management Customer Order Management Manufacturing Resource Planning/Scheduling Materials Management Decision Support/Data Warehousing Supply Chain Planning & Execution Demand Planning/Forecasting Advanced Planning and Scheduling Warehousing & Distribution Center Operations Transportation Administration and Management Technology Assisted Selling Customer Service Field Service & Logistics Finance/Accounting Human Resources Computer-Aided Design including Solid Modeling (CAD) Computer-Aided Engineering Analysis (CAE) Computer-Aided Manufacturing (CAM) Component/Supplier Management (CSM) Other: (please specify) _____________ Total Software Revenue _____ _____ _____ 100% _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ Average Order Size (in $) for Application Software Licenses in 1997: $________ Percent of 1997 Application Software Revenue Achieved from Companies with Global Annual Revenues of less than $30 million $30-$249 million $250- $999 million $1 billion and more Total Percent of 1997 Application Software Revenue from New Customers/Sites vs. Add-on Software into Existing Customer Sites % Application Software Revenue from new Customers and new Sites % Application Software Revenue from Add-on Software Sales into Existing Sites Total Percent of Application Software Revenue by Operating Environment IBM & other Mainframes IBM AS/400 DEC Open VMS HP-UX IBM AIX Sun Solaris DEC Unix Other Unix Flavors DEC Alpha NT NT client/single user (Intel) NT server/multi user (Intel) MS Windows 95 MS DOS/Windows 3.x Other (please specify) Total ______ ______ ______ ______ 100% Software Revenue Software Revenue Software Revenue _____ _____ _____ 100% Software Revenue _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ 100% _____ Please return to: AMR Research, Inc. Michael S. Joseph Fax: (617) 542-5670 e-Mail: mjoseph@amrresearch.com Tel.: (617) 542-6600 http://www.amrresearch.com Name of person filling out survey __________________________________________________________ Phone number If Indirect Sales, what Percent is Generated from: Systems Integrators _____ Control Vendors _____ Distributors _____ Value-Added Resellers (VARs) _____ Other _____ Total 100 % Percent of Application Software Revenue by Industry Automotive Assembly, Parts and Equipment Other Assembly & Fabrication, incl. Fabricated Metals, Appliances, Packaging Aerospace & Defense Electronics/High Tech/ Telecommunications Semiconductor Industrial Products, incl. Mechanical and Electrical Equipment Mills, incl. Paper, Textile, Metals, Building Materials Apparel Food & Beverage/Consumer Packaged Goods (CPG) Medical Devices Pharmaceuticals/Biotech Chemicals/Petrochemicals Oil & Gas, incl. Refining, Distribution Utilities Transportation/Distribution/ Warehousing Public Sector Other Manufacturing (please specify) _________ Other non-Manufacturing (please specify) _________ Total __________________________________________________________ 42 _____ _____ _____ _____ _____ _____ 100% _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ 100% Percent of Application Software Revenue Achieved on these Databases: IBM’s db2 Informix MS SQL Server Oracle Sybase Other (please specify) Total Percent of 1997 Software Revenue Generated from Direct Sales Indirect Sales Software Revenue Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. Software Revenue _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ 100% NOTES Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. 43 AMR Research, Inc. is the preeminent industry and market analysis firm specializing in enterprise applications and related trends and technologies. Tracking more than 400 leading software and service providers, AMR Research helps Global 1000 companies evaluate, select, and manage new systems for every part of the enterprise, including logistics and supply-chain Reader’s Acronym List Founded in 1986, Boston-based ACRONYM DEFINITION A/P Accounts Payable A/R Accounts Receivable ATP Available-to-Promis BOM Bill-of-Material CAGR Compound Annual Growth Rate CAM Customer Asset Management CMMS Computerized Maintenance Management Systems CPG Consumer Packaged Goods Your comments are welcome. Reprints are available. Send any comments or questions to: AMR Research, Inc. Two Oliver Street, 5th floor Boston, MA 02109 Tel: 617-542-6600 Fax: 617-542-5670 www.amrresearch.com West Coast Office: 1920 Main Street, Suite 210 Irvine, CA 92614 Tel: 949-477-5353 Fax: 949-477-5350 ECO Engineering Change Order EIS Executive Information Services ERP Enterprise Resource Planning FTE Full-Time Employee IEA Industrial Enterprise Applications Initial Public Offering ISV Independent Software Vendor IT Information Technology LIMS Laboratory Information Management System MES Manufacturing Execution System MRP Materials Requirements Planning OEM Original Equipment Manufacturer OLAP On-Line Analytical Processing ROLAP Relational Online Analytical Processing SCADA Supervisory Control and Data Acquisition SCM Supply Chain Management Sales Force Automation Systems Integration SPC electronic/Internet commerce. Capacity Requirements Planning SI Execution Systems (MES), and Customer Relationship Management CRP SFA Planning (ERP), Manufacturing CRM IPO management, Enterprise Resource Statistical Process Control SQC Statistical Quality Control SQL Standard Query Language TAS Technology-Assisted Selling TRPM Transportation Resource Planning and Management VAR 44 Value-Added Reseller VMI Vendor Managed Inventory Customer Relationship Management Software Report, 1997–2002 © 1998 AMR Research, Inc. ...
View Full Document

Ask a homework question - tutors are online