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Spending on customer relationship management (CRM) software is expected to see the largest increase of all the application software markets worldwide in 2011, according to a survey by Gartner, Inc. Overall, 31% of respondents expect an increase in application software spending in 2011.

In comparing their 2011 fiscal budgets with 2010, 42% of survey respondents indicated that they expect to increase spending on CRM in 2011, compared to 39% on office suites and 36% on enterprise resource planning (ERP), which ranked second and third, respectively.

Gartner conducted an expansive primary research survey of more than 1,500 IT leaders of organisations in 40 countries, which concluded in July 2010. The goal was to determine software spending allocations for IT budgets in 2010 and predictions for 2011.

“We’re expecting the CRM market to recover gradually as buyer confidence returns and as businesses begin refocusing on growing revenue as opposed to just reducing costs,” says Hai Hong Swinehart, research analyst at Gartner. “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.”

Swineheart adds that buyers of CRM continue to focus on investments that promote customer retention and enhance the customer experience, and they are increasingly interested in technologies that encourage development of customer communities and social networks. SaaS adoption continues to be a key driver. 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. Marketing automation remains the market segment with the strongest growth, with the greatest demand coming from campaign and lead management and analytics.

Worldwide application software spending is expected to increase 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.

“Overall, the survey indicates a healthy investment trend for application software. Software application vendors should continue to build, fund and invest in software sales and marketing programs as the market is recovering, to maintain customers and expand revenue opportunities,” says Swineheart. “A market downturn and its aftermath are disrupters that create great marketing and sales opportunities for organisations prepared to take advantage with the right products, market programs and funding.”

For many markets, the greatest new sales opportunities exist within Latin America and Asia/Pacific where “Greenfield” opportunities are prevalent. This trend is not expected to abate. Gartner advises vendors without a direct channel or direct sales to consider expansion into these regions, with the understanding that immediate returns on that investment are unlikely.

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