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 Chuck Schaeffer Understanding The European CRM Software Market

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 By Chuck Schaeffer

European CRM Software Systems Succeed with Deep Localisation

As business continues to go global it becomes more firmly rooted in a diverse set of local needs. The same holds true for Customer Relationship Management software deployments. No matter how much automation is deployed, the win-or-lose deciding factor is how it performs one-on-one with each customer. For that reason, successfully deploying CRM systems in European countries calls for a great deal more than just translating the language on the user interface.

It is also a mistake to believe that accommodating cultural differences beyond language amounts only to a thoughtful consideration of customer purchase preferences. Europe is a diverse continent composed of myriad cultures, contrasting business processes, unique regulatory requirements and varying states of information systems infrastructure that can affect how CRM software is – and should be – deployed.

For example, reports from respondents in our international CRM deployment poll note that the major cultural differences in Europe are reflected in the degree of CRM offshore outsourcing throughout the region. This one indicator sheds considerable light on the likely service expectations of customers in the region, vendor pricing pressures and user familiarity with CRM processes and products.

The European Dividing Line

"There is a clear north / south demarcation across Europe; in the north of Europe: the Netherlands, UK, Nordics and Germany are open to leveraging offshore resources into deals whereas in the south starting from Belgium, France, Italy and Spain, due to language barriers as well as employment laws and cultural differences, they tend to opt for onshore delivery resources," says Ernest Frimpong, senior director for European CRM Solutions at Avanade.

"The impact for the northern region means that they can be aggressive in bid pricing and consequently we have seen an upturn in demand for our professional services whereas in the south, although we see good growth, it is not as substantive as the north," he explained. "Nevertheless the south regions do retain a strong market presence."

To the south, CRM vendors are seeing more small and midsize business (SMB) deals of 200 and fewer license seats. In the north, CRM software vendors are reporting larger deals in the 1000+ user seat range. This follows the pattern of general business on both sides of the line: large pan-European global businesses tend to populate the northern region while smaller, privately owned companies tend to be more popular in the south.

It is worthwhile to note that CRM systems are widely deployed on both sides of the line. However, larger pan-European CRM solutions are often too pricey for the South and local pure plays and open source CRM software systems do well there.

The Eastern Europe Paradox

Eastern Europe is a cultural and business paradox. The cultures there are old with long and proud histories but many of the countries are new and often building identities from scratch.

Take Russia, for example, a country so diverse and huge that many business executives and CRM vendors are stumped over whether to include it in the European or Asia-Pacific region. Clearly, many of its businesses and considerable masses of its geography can fill the descriptive parameters of either region. Beyond this simple confusion lie the complexities brought about by political changes and a fluid business environment. It was not so long ago that Russia was the U.S.S.R. and an entirely different geopolitical and business climate than it is today.

For sales and marketing purposes, Russia may be viewed as a 15-year-old country that has previously spent its time trying to establish its brands. "As competition intensifies and brand differentiation becomes more critical, marketers are only just beginning to embrace CRM software systems as a critical part of the marketing mix," says Richard Bonner-Davies, CEO of ADV Group Russia and CIS.

It's not that Russian brands are behind the rest of the world; it's that Russia has just now reached sufficient market penetration and brand recognition to warrant the customer engagement, loyalty programs and other efforts to which CRM software is most suited.

It's important to remember that Russian customers are certainly as smart and astute as their European or North American counterparts. Russia and Russian brands may be comparatively new, but the people, culture and procurement practices have existed for centuries. "In fact, Russians are probably more selective and discerning and have a frighteningly keen sense of a brand's value versus its hype," explains Bonner-Davies.

While the market for CRM products is wide open in Russia and Eastern Europe, the population is far too sophisticated for shallow or rudimentary product pitches. CRM software systems must be precisely tailored to the region and not in any way feel like a mass-duplicate of a U.S. or Western European deployment. If it feels like a homogenous system or a translated afterthought, the CRM effort will be refused and it is unlikely that any lost customers can be enticed back in the short-term.

"Perhaps surprisingly to a U.S. audience, Russians are among the world's leaders in terms of social network use. They spend more time on Facebook, foursquare and Russian equivalents than any other nation," says Bonner-Davies.

This behavior is more than a flashy trend however, it is indicative of a deeper communications preference. "Despite the lack of historical CRM initiatives, Russians are much more comfortable being communicated with digitally than through regular mail, for example," he explained.

Therefore, social CRM, or SCRM (CRM with a social media component) will fare well in Russia as long as the communications are seen as authentic and personal.

Regulations Drive Up CRM Deployment Costs

Regulatory requirements in Europe vary from country to country and sometimes even between cities and districts. It is important to remember that even pan-European CRM solutions must be adapted to meet these requirements. Often multiple adaptations to the same processes over narrow strips of customer geographies are necessary. For a CRM product to be successful in the region, it needs to offer such adaptations "out of the box."

Among the most demanding regulations are those that govern data privacy and protection, and more specifically in terms of where data resides and who has jurisdiction over it. Data protection laws can also affect what information CRM practitioners are allowed to ask customers and therefore may require adaptations to the customer interfaces or business processes.

"In countries such as Switzerland, where they have strict rules around data governance and data protection you have to factor significant costs to ensuring any customer relationship management deployments in that region meet the required standard," warns Frimpong. "Countries such as France and Germany also adhere to strict data governance and data protection. Again, one has to factor in significant implementation and deployment costs to ensure the solutions do not breach the local laws." Popular software as a service CRM systems such as and RightNow continue to straddle privacy concerns and regulatory requirements which appear uncertain due to the SaaS CRM systems being hosted in data centers located in America.

CRM Adoption Scales in the European Regions

According to Forrester's Enterprise and SMB Software Survey, North America and Europe, Q4 2009, the poor economic environment created a backlog of business software application upgrade activities for firms, and many plan to address the issue in the coming years. 41% of enterprises and 21% of SMBs plan to upgrade their existing finance and accounting software, 48% of enterprises and 19% of SMBs plan to upgrade their customer relationship management (CRM) applications, and 52% of enterprises and 18% of SMBs plan to upgrade industry-specific software solutions. In addition, more than 20% of all SMBs have firm plans to implement CRM software, or information and knowledge management (I&KM) software in 2010 or later, representing the fastest-growing SMB software market.

This would appear to indicate that the southern parts of the European region, being more of an SMB nature, will adopt new business software systems at a higher and faster pace than the bigger companies in the north. Not so fast, says both Forrester and Gartner, for worldwide recessions have led to a worldwide backlog on enterprise software deployments and upgrades, and new trends such as cloud computing and open source CRM software products are affecting buying decisions.

Gartner says that SaaS CRM continues to penetrate the worldwide customer relationship management market, accounting for nearly 24% of total CRM market revenue in 2009. SaaS CRM exhibits more-general market adoption, ranging between 11% and nearly 40% of total software revenue, depending on the CRM segment. SaaS is forecast to account for 26% of the CRM total market revenue in 2010.

"The market landscape for on-demand CRM continues to evolve and mature as the availability and use of SaaS solutions becomes more pervasive," said Sharon Mertz, research director at Gartner. "Greater market competition and increased focus by the megavendors reinforces the legitimacy of on-demand, mitigating initial objections about security and availability for many, as acceptance of SaaS as a viable model for enterprise computing services grows."

The enterprise software market is seeing a marked shift from on-premise CRM to SaaS solutions.

As of April 2010, Gartner shows SAP as still leading in worldwide CRM software sales but down to 20.2% at the close of 2009 from 22.3% in 2008 and 25.52% share in 2007. Oracle too saw a worldwide market share decline from 16.26% in 2007 to 16.0% in 2008 with a small uptick to 16.3% by the end of 2009. By comparison, the on-demand CRM vendor climbed from 2007 thru 2009 at 8.34% market share to 10.5% in 2008 and 12.5% in 2009. Interestingly, the largest CRM market share was actually "Others," a category comprised of lesser known brands that were almost entirely SaaS CRM offerings.

The next five years are expected to follow the same adoption pattern worldwide.

Using our poll to rank the most desirable CRM software feature sets and functionalities in the European Union and region, the results are: Sales Force Automation (particularly marketing campaigns; opportunity management; pipeline and forecast reporting); relationship management; call center agent CRM application consolidation; and, help desk improvements. End

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Comments (5) — Comments for this page are closed —

Guest Chris Nichols
  Any advice for an enterprise software company considering a European growth strategy?
  Chuck Chuck Schaeffer
    I would start with the notion that instead of a European strategy, you may be better served with a Germany strategy, a Spain strategy, a Nordics strategy and so on. You may choose to focus by language (such as German speaking Europe, including Germany, portions of Switzerland, Czechoslovakia, etc) or by other customer affinity characteristics. However, I would advise against an overly broad European strategy as the market is too diverse.

Guest Chris Nichols
  Do you find customers with operations throughout Europe also need to focus CRM strategy by country?
  Chuck Chuck Schaeffer
    Even within Europe, CRM software may require multi-language, multi-currency and localization capabilities. Regulatory issues, tax scenarios and data privacy requirements may also impose country specific requirements, and may be more complicated as they are more granular, require complex rules (with numerous exceptions) and incur more frequent updates or changes.
  Guest Rolf G
    CRM software pricing is also often different within Europe. The same CRM software product is most likely going to be priced differently in different European countries, which can create gray market complications for vendors selling throughout Europe.


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There is a clear north-south dividing line across Europe; in the north of Europe: the Netherlands, UK, Nordics and Germany are open to leveraging offshore resources into deals whereas in the south starting from Belgium, France, Italy and Spain, due to language barriers as well as employment laws and cultural differences, they tend to opt for onshore delivery resources."

Ernest Frimpong, Senior Director for European CRM Solutions, Avanade


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