The CRM sector seems to be in a overdrive - One of the hallmarks of software markets is that they change quickly. Quite recently, companies that wanted to buy the best-reputed software for managing sales and customer service went mostly to Siebel Systems. Lightweight Web software was small potatoes, and Microsoft wasn't even in the game. How times have changed.
Instead of hefty deals for perpetual licenses to CRM software, many companies are opting for so-called "subscription" CRM agreements that require less upfront cash in return for not really owning the software. We are seeing online CRM vendor Salesforce.com saw a 900% increase in profits for its April quarter, and claims 15,500 customers (that's organizations who've bought in, by the way, not end-users, who number many more). Siebel recognizes the trend, and it's updated its hosted product, Siebel CRM OnDemand, eight times in less than two years. Other big software companies are sniffing the on-demand ground as well. SAP demonstrated a browser-based version of its CRM software recently. Now Microsoft is touting "subscription" pricing of the new version of its CRM suite due early next year. Coinciding with a broad beta test of CRM 3.0 this month, Microsoft said it would give its channel partners the option to host the product on behalf of customers. Downside - CRM 3.0 still comes on CD-ROMs, and upgrades won't be seamless like they are with all-online offerings like Salesforce's. In addition to the changes underway at the big software vendors, a raft of startups is also hoping to sell Web-based CRM. A sector that looked sewn up just a couple of years ago might once again be wide open.
Chris Selland points out that Enterprise software is not dead and highlight's
Burnham's point that enterprise applications aren't going away at all, but that buyers are rapidly moving to a new model of deployment - specifically Software as a Service (SaaS - at least it's a FOUR letter acronym). The shift is felt as:
- On-premise deployment
- Multi-year, multi-million $$$ implementations
- High cost, high pressure sales tactics (and 'hockey stick' quarterly and annual revenue curves)
- High percentages of unhappy customers
All of those factors are indeed dead. The new model - SaaS, Enterprise Software, On-Demand, or whatever you want to call it - is still early but growing (remember that Salesforce.com is still less than 20% of the size of Siebel on a revenue basis - but has nearly 50% of their market cap.
However, I do not subscribe to the on-demand model that easily – see my views here - but I do agree that traditional CRM sales seems to be petering down but I also want to highlight a few relevant points(Its not a clean sweep yet):
- I was speaking to an Asia based CIO – he just decided in favour of a traditional CRM – as to why he did not consider hosted solution – his answer – local office non existent in the case of hosted application providers.
- I am also seeing that in a number of big enterprises – CRM is not an independent decision – when several applications are sewn together to integrate – it is difficult to consider hosted applications
- Large scale of success of hosted solutions are not yet in as Cisco experiment with Salesforce.com shows.
- A majority of large enterprises have anyway a on-premise enterprise class application already in place – I am not seeing any substantial evidence of them moving to the hosted model( which will be difficult by three folds –switching costs, change management and integration issues)
- Analysts reported that Siebel sold more number of seats last year compared to several previous years seat sale number put together - while value realisation obviously was far less - volume traction is certainly a key indicator to watch.
Category :Enterprise Solutions, CRM.