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CRM software market keeps slipping

A slow economy and the shifting priorities of IT buyers forced the CRM software industry to face its second year of declining new license revenue in 2002, a study shows.

A slow economy and the shifting priorities of information technology buyers forced the customer relationship management software industry to face its second year of declining new license revenue in 2002.

New license revenue for worldwide CRM software totaled $2.8 billion in 2002, a 24.7 percent slide from a 2001 revenue of $3.7 billion, according to technology research firm Gartner. The market had already declined 6.4 percent in 2001.

"Smaller deals, tactical projects, longer sales cycles, and heavy competition have caused CRM vendors to struggle," Tom Topolinski, an analyst at Gartner, said in a statement.

To make matters worse, the multibillion-dollar industry is mired in an upheaval as a result of Oracle's hostile bid to acquire PeopleSoft. CRM software customers are tentative about upgrades or new system purchases as they wait for the hostilities to settle and see if the proposed merger of PeopleSoft and J.D. Edwards pans out.

Rivals are already hoping to poach customers from one another during this turbulent time. For instance, SAP this week launched a worldwide ad campaign to siphon customers unnerved by Oracle's bid for PeopleSoft.

Siebel Systems continued to hold the No. 1 position based on worldwide new license revenue for CRM software, with a 24.9 percent market share. But the company, buffeted by financial concerns, saw its market share slip more than 3 percentage points in 2002, according to Gartner. SAP and PeopleSoft were the only top-tier vendors to experience a gain in market share in 2002.

CRM software is designed to track sales leads, accounts and orders and help service representatives handle customer complaints.