24 August 2005 Corporate spending on customer relationship management (CRM) software increased by 10% in 2004 – well in excess of any IT budget increase – marking a renewed appetite for the applications.

According to a report from analyst house AMR Research, global spending on CRM rose to $11 billion in 2004, the first increase for five years.

The report also noted that hosted CRM applications – those that are run via the Internet rather than installed on-site – showed 105% growth during 2004.

Currently, hosted applications account for just 9% of the total CRM market, but AMR predicts that on-demand applications will increase as the market grows.

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

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

Two leaders in the hosted CRM market, RightNow Technologies and salesforce.com, enjoyed 97% and 83% growth rates respectively. Salesforce.com climbed ten places to number 12 in terms of total CRM revenue

Meanwhile, the battle for leadership in the traditional on-site CRM market intensified. According to AMR German business applications giant SAP has overtaken Siebel as the leading CRM vendor, although currency fluctuations and the complexity of working out what proportion of SAP’s revenues can be attributed to CRM cloud the picture somewhat.

“As a German company, SAP has had a currency advantage thanks to the falling Euro,” said Bois. “But no matter how you slice it,” he added, “they are definitely gaining traction.”

AMR estimates that SAP’s CRM revenues grew to $1.66 billion during 2004, increasing 30% year-on-year. In contrast, former market leader Siebel showed a decline of 1% to $1.33 billion.

In terms of market share, SAP retained 15% of the market, followed by Siebel with 12%, and Oracle/PeopleSoft with 7%.