Gartner Predicts Massive Bounce in CRM Sales, Salesforce Aims for US$ 3bn Revenues

In the run-up to its annual conferences, Gartner (news, site) has a habit of drip-feeding information into the public domain to whet appetites. This year, in the run-up to March’s CRM summit in London, it has released data that shows spending on CRM applications this year will top IT enterprise spending generally, driven by wider use of SaaS applications and the need to develop new customer bases.

It is fortuitous that it has published this research at the same time that Salesforce.com announced it passed the US$ 1.5 billion revenue mark in fiscal 2011 and that in the coming year it expects to pass US$ 2 billion in revenues -- the first provider of cloud-based services in any application category to do so.

But we all knew companies selling cloud applications were going to do well, given the recession the global economy is still fighting to shake off, so CEO Marc Benioff’s US$2 billion revenue targets for this year means US$3 billion targets in the years that follow.

CRM in 2011

However, figures contained in the Gartner research, entitled User Survey Analysis: Application Software Spending, 2010-2011, focus not just on CRM, but on enterprise applications generally.

While spending on CRM is expected to see the largest increase in software markets globally (42%), it is only just ahead of predicted spending on office suites (39%), or maybe surprisingly, enterprise resource planning software (36%).

The research was carried out in the July last year across 1,500 enterprises in 40 countries, and showed that SaaS and CRM services provision is going to be a major player in the IT spending recovery over the course of this year.

SaaS adoption continues to be a key driver within this space. SaaS within the CRM industry is expected to exceed US$ 4 billion in total software revenue in 2014, representing more than 32% of the overall CRM market.

Areas of investment are expected to include the online channel; software as a service (SaaS) -based deployments; and technologies enabling customer loyalty management, cross-sell/upsell opportunities, and more-targeted levels of customer service. Along the way we can expect market shifts as acquisition activity escalates, adoption of SaaS grows and service providers become a more visible force in the market,” said Hai Hong Swinehart, research analyst at Gartner.

Another element of this will be the growing importance of social CRM, which aims not only to retain customers, but also to improve customer interaction with enterprises through the development of customer communities where enterprises can draw information on customers' experiences.

Salesforce’s US$ 3bn Revenues?

If there was any doubt as to how big CRM actually is, all anyone has to do is look at the figures for fiscal 2011 that Salesforce.com (news, site) released at the end of last week.

While it announced that it had passed the US$ 1.5 billion mark, it also said that it expected to hit the US$ 2 billion mark this year, largely on the back of interest in SaaS-based applications.

This was reflected in the fact that Salesforce.com added nearly 20,000 customers during the year, bringing its overall customer base to more than 92,000, with two deals in the fourth quarter alone making eight-figure sums for the company, and 30 seven-figure contracts over the course of the year.

The result was that for the year that ended on January 31 it increased sales by 27% providing US$ 1.66 billion in revenues.

Net income dropped to US$ 64.5 million from US$ 80.7 million in fiscal 2010. However, this is all about an excepionaI expense and in no way reflects on the performance of Salesforce’s products.

Our current outlook puts salesforce.com on track to be the first enterprise cloud computing company to report more than $2 billion in revenue,” said Marc Benioff, chairman and CEO salesforce.com. "While it took us a decade to achieve our first billion dollars, we anticipate reaching $2 billion just three years later.”

He also said that Salesforce had made significant gains against Oracle (news, site) with new or add-on business in the last quarter with customers such as AT&T, Citi, Telefónica and Xerox.

And companies also prefer our [sales team application] Sales Cloud over Microsoft CRM, which just has not kept pace with the social, mobile and open technologies the rest of the world has embraced and offers customers no competitive advantage,” he added.

IT Spending Worldwide 2011

Overall, though, application spending looks to be on the rebound. Worldwide application software spending is expected to increase to 31% in 2011, up 9% from last year, and emerging markets are planning for higher budget growth.

Asia/Pacific is expected to have the largest increase, at 37% in 2011, up from 14% growth last year, followed by Latin America and EMEA showing an increase of 35% and 27% in 2011, respectively.

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