MidMarket CRM Spending Remains Strong: Salesforce.com Update
One of the findings of our 2006 SSPA Member Technology Survey was that the largest percentage of spend planned by mid-market (under $1B) technology companies in 2007 was for CRM: 35% of small to mid-size enterprise (SME) members have budget for CRM this year. This is great news for mid-market CRM vendors, who 5 years ago everyone saw as ‘B Class’ vendors, but now the tables have turned: every enterprise vendor now has a mid-market CRM offering. And the king of mid-market CRM vendors is, of course, the original SaaS vendor: Salesforce.com.
I am a fan of SF.com and I’ll tell you why: when every CRM vendor was focused on adding features to appeal to the CIO, SF.com took a new approach: let’s create sales force automation (SFA) tools for the field sales reps, not the sales manager or the C execs. The result? Unlike most environments, in which sales reps hate their CRM tool they are forced to use by management, Salesforce.com customers loved the products, with simple, easy to use applications that are totally Web savvy….not Web versions of client-server applications.
When end users are talking up your product, new deals happen, and Salesforce.com has been on a roll ever since. Of course, the product has grown over the years and it now has the bells and whistles for sales management too. And, SF.com has moved beyond their SFA roots to offer a full CRM suite.
I had a short catch-up call with Salesforce yesterday and asked how they are doing capturing service and support customers. And it sounds like they are doing well. They boast 2,800 customers for Salesforce Service & Support, and these aren’t all small companies either. SF.com gave me examples of multiple deals with large technology companies in which they replaced Siebel, SAP, and even my alma mater Clarify, in support operations with hundreds of agents.
Being that SFA has always been largely a B2B application, the majority of SF.com customers are supporting enterprises. To capture really large support deals, you have to appeal to consumer companies, as consumer contact centers can have 3,000 to 5,ooo agents. There appears to be some progress in this area as well, including some sizable deals with consumer telco companies.
I have long maintained that SaaS is a deployment model, not an application category, and finally it appears that with enterprises adopting SaaS, even large companies are realizing that ‘best of breed’ CRM capabilities are available hosted as well as on premise. The big analyst firms agree:
- McKinsey: the proportion of CIOs considering adopting SaaS applications in 2007 is 61%, compared to 38% a year ago
- Aberdeen: over 50% of mid-market firms plan to deploy SaaS solutions within the next 24 months
- Gartner. 25 percent of all new business software (CRM, ERP, SCM, etc.) will be delivered by means of SaaS by 2011
If you are considering going with SaaS for an application purchase, please keep these things in mind:
- Pick the product first, then the deployment model. With robust applications now available via SaaS, you don’t have to trade off functional requirements. On the other hand, don’t ignore ‘best of breed’ on premise products when evaluating vendors to be sure you understand all the available capabilities on the market. Pick the application that is right for you, then figure out how to deploy it.
- Be wary of ‘hosted’ vs. OnDemand. Hosted applications typically are just on-premise applications installed at a remote data center instead of inside your IT shop. Yes, you don’t need IT staff to install and maintain the apps, but you will be paying an outsourcer to do it for you. OnDemand applications have multi-tenancy built into their infrastructure for improved performance as well. If you go with hosted, be sure to check customer references to find out what ongoing maintenance costs are.
- Understand pricing model completely before proceeding. There as many pricing strategies as there are vendors. In the OnDemand world, we see some typical license based pricing as well as usage pricing. Usage pricing may be based on amount of server space used by the implementation or number of page views of applications. Be very careful when paying by page views: if you have thousands of customers and are using OnDemand for self-service, if you have extremely high adoption by customers, your bill may grow very fast.