The Software-as-a-Service (SaaS) Customer Relationship Management (CRM) market in Asia (excluding Japan will grow at a compound annual growth rate of 61 per cent between 2006 and 2010, according to Springboard Research.

The research firm pegged the SaaS CRM market in Asia at US$69 million in 2006, and expects it to reach US$460 million by 2010.

Australia, Singapore, Hong Kong, Korea, India, and China are the key SaaS CRM markets in Asia Pacific. Of these, Australia remains the top market, accounting for 35 per cent of all SaaS CRM sales generated in the region.

Springboard's senior manager for emerging software, Balaka Baruah Aggarwal, said SaaS CRM has gained mainstream acceptance and higher adoption rates by enterprise can be expected in the coming year.

"At the same time, the market is set to witness unprecedented growth in the SME sector as a spate of new initiatives by vendors such as SAP, Microsoft, and Oracle promote their CRM offerings,"Aggarwal said.

Increased adoption among larger enterprises will be the turning point in the uptake of SaaS CRM and will bring the model a legitimacy that it did not have when it was mainly used by small and medium enterprises (SMEs).

Already, leading vendors like Salesforce.com, who had traditionally targeted the SME market, are now eyeing larger enterprises.

Aggarwal said as traditional software players step up their activities by offering proprietary SaaS CRM applications, large enterprises will be lured to the market, creating an entirely new base of customers who had previously been fence sitters.

Springboard Research also forecasts that the SaaS CRM market is set for consolidation as the number of players increase and bigger players make serious forays into the marketplace.

"We currently estimate SaaS CRM represents the largest segment of SaaS application expenditures in Asia at 45 per cent, followed by collaboration, ERP/PLM/SCM applications, and human resource applications," she said.

"Within the SaaS CRM segment in Asia, Salesforce.com has captured a very dominant position in the market. Other prominent vendors in the region include RightNow, Oracle, and Netsuite. "Springboard Research believes that a substantial portion of the growth in Asia Pacific's SaaS CRM market will come from the SME segment.

"We expect SMEs in Asia Pacific to go for simpler CRM solutions that are not too complex," Aggarwal said.

"This will drive CRM vendors, especially the traditional licensed software companies, to sell stripped-down versions of on-premise offerings or to develop SME-specific applications for distribution via the SaaS model." Aggarwal described SaaS as a disruptive innovation that has the potential to transform the software industry.

Many new players are entering the SaaS market, while established software companies are scrambling to compete against these new entrants by developing SaaS products themselves.