By INN and Information Management Editorial Staffs

As the economy continues to crumble and people prioritize their spending by searching for the most-affordable policies and eschewing loyalty in favor of the bottom line, insurers are scrambling to do whatever is in their power to retain customers. To this end, maintaining an effective customer relationship management (CRM) system is top-of-mind for many CIOs.

“CRM remains a major focus for business executives, because the goals of acquiring, developing and retaining customers in a profitable manner are timeless,” said Ed Thompson, VP and analyst at Gartner in a press release. “This trend is also confirmed by Gartner’s annual Executive Programs (EXP) survey of more than 1,500 CIOs worldwide that showed that CRM remained a top priority for CIOs who ranked CRM and other enterprise applications their No. 2 technology priority in 2009.”

CRM application pricing has changed dramatically during the past 10 years, with organizations commonly paying $1,000 to $1,500 per licensed user in 2009 compared with more than $3,000 at its peak in 2000. The most common pricing model is still per user, but process-based pricing, fueled by service-oriented architecture and Software-as-a-Service (SaaS) will become commonplace by 2020, up from less than 1% of the time in 2009.

The shift to SaaS will see nearly 50% of all field sales applications be delivered in this way by 2012, compared with less than 1% in 2000. However, the percentage of all CRM applications delivered through SaaS will be only 25% in 2012, and 40% in 2020. As competition for SaaS CRM intensifies, pricing will drop from $800 per user per year in 2009 to near $500 by 2020.

In terms of architecture, CRM applications have fully transitioned from client-server, but there is a notable lag between availability and adoption.

“Fewer than 10% of organizations are currently running the latest version of their CRM suite providers’ technology,” Thompson said. "This will change to 50% of organizations running on the latest versions by 2020, as SaaS applications force users onto the latest releases."

The worldwide CRM application software market grew at a rate of nearly 90% in 2000, then collapsed in 2001, bottoming out in late 2003. Since 2004, the market has grown steadily, at 11% to 23% per year. It is set for 10% growth from 2007 to 2012, despite the recession in 2009 and knock-on in 2010.

Gartner estimates that total revenue for CRM application software market in 2008 amounted to nearly $9 billion worldwide, and will reach $10 billion in 2009, a 7% year-on-year increase. This includes licenses, maintenance and subscription revenues.

While the vendor landscape has changed dramatically, it is likely to change beyond recognition with the number of vendors leaving the market, outpacing the number of new entrants. The five largest CRM application vendors are estimated to represent almost 60% of the market in 2008.

Gartner estimates that three or four large vendors will remain with an aggregate of more than 50% market share in 2020.

Additional information is available in the Gartner report “Looking at CRM in 2000 Foretells Its Future in 2020."

This article can also be found at InsuranceNetworking.com.

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