August 15, 2006 12:31 PM PDT

Report: Hosted CRM is king

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Oracle took the lead in sales of human capital management applications last year, while hosted customer relationship management applications propelled market growth for the second consecutive year, according to a report released Tuesday by AMR Research.

The CRM market grew to $11.7 billion in 2005, up 8 percent from 2004. Thanks to a significant boost from hosted-CRM subscriptions, sales in the CRM industry are expected to continue climbing this year to $12.9 billion, according to AMR.

The market for human capital management (HCM) applications, which are designed to help streamline human resources operations, is considered one of the fastest-growing categories of enterprise applications, generating $5.5 billion in sales last year, a 12 percent increase over 2004. In 2006, the HCM industry is expected to grow 10 percent, to $6 billion in sales, according to the report.

Oracle is riding the wave of growth in HCM applications and led the market last year. Its PeopleSoft acquisition helped propel Oracle to the No. 1 spot in the HCM market.

"Although there were isolated incidents of lost PeopleSoft customers following the merger, Oracle retained a significant portion of its PeopleSoft HCM maintenance and service revenue in 2005, putting it in the No. 1 HCM market share position," the report noted.

Last year, Oracle generated $446 million in HCM licensing and hosting revenues, representing 23 percent of the market. That was up substantially from its 9 percent market share in 2004.

Rival SAP, however, was not far behind last year, with a 21 percent market share in HCM. AMR notes that Oracle's No. 1 ranking may be short-lived as the company lays out its migration plans for PeopleSoft customers that want to transition to the Oracle Fusion platform. Fusion is intended to meld technologies Oracle has amassed--applications developed by PeopleSoft, Siebel Systems and other companies--through its many acquisitions.

Oracle has said, however, that it will not force users to leave PeopleSoft applications behind. The software giant on Monday rolled out PeopleSoft Enterprise Customer Relationship Management 9.

Meanwhile, the CRM industry is getting a big lift from growth in the sales-as-a-service model, AMR noted in its report.

"Although market consolidation of CRM suite vendors continued in 2005, the overall customer management market still grew 8 percent in 2005," the report states. "Hosted revenue...continued to act as the catalyst, with 60 percent growth in 2005."

Salesforce.com, a pioneer in the hosted CRM market, saw its market ranking rise to sixth place last year from 12th. SAP continued its CRM lead in 2005, its second consecutive year in that spot, while Oracle rose to the No. 3 spot from sixth place, largely due to its PeopleSoft acquisition.

See more CNET content tagged:
human capital management, human capital, PeopleSoft Inc., hosted CRM, CRM

 

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