Companies will increasingly look to rent, rather than buy, customer relationship management (CRM) software, as they seek to improve cash-flow levels and reduce the risk of expensive and unsuccessful CRM projects.

That is the view of IT market research firm Aberdeen Group, which says the application service provider (ASP) software licensing model, largely discredited by customers and other analysts, is set to make a comeback.

Aberdeen says the CRM market will reach a value of $17.7 billion by 2006, growing at an average annual rate of 6.7%. “Beneath this seemingly sedate growth, however, is a massive shift in how organisations will acquire and pay for CRM solutions,” says Aberdeen.

It adds: “Purchasing of new CRM application software will rapidly transition to an ASP, subscription-oriented model. The financial benefit and risk mitigation that is associated with this new model are driving companies to abandon the perpetual licence model.”

Of the $17.7 billion in CRM market revenue in 2006, some $2.8 billion — or 16% — will come from subscriptions, according to the analyst group.

Aberdeen suggests that the trend towards rental software will be especially prominent among small and medium-sized businesses, which typically prefer a subscription model because it cuts the cost of deployment, maintenance and upgrades.

Suppliers such as Aspective, Oracle and Siebel, meanwhile, can be expected to give the ASP model a fresh push as it potentially gives them more stable and predictable revenue growth.