Salesforce.com Evangelizes Software Services Model, Readies Offline Edition
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The ASP model, nearly written off as dead after the dot-com crash, is gathering steam once more, thanks to CRM. The high cost of implementing CRM, coupled with long and in many cases unsuccessful deployments, is paving the way to a hosting alternative. "Hosting applications have come a long way," says Sheryl Kingstone, program manager of CRM Strategies at The Yankee Group, a Boston-based research firm. In fact, a medium-size business can save 50 percent by having its CRM application hosted, she says.
"If you do not want to buy the application but need the functionality, you can adopt a software service model," Kingstone says. "It takes away a lot of headaches and from a functionality standpoint. Software as a service has 90 percent of what most companies need," she says.
Leading the software services charge in the CRM space is Salesforce.com. The company earlier this year came out with its Enterprise Edition CRM suite, building on its Professional Edition's functionality, and is releasing an offline application. In November it is planning to release its E-Business Suite, which will tie closely into back-office applications.
"We can do global rollouts in 90 days with 90 percent customer satisfaction," says Mark Benioff, chairman and chief executive of Salesforce.com.
And it appears many corporations are catching on.
Salesforce.com boasts more than 4,400 customers ranging from medium-size accounts to nearly 1,000-user deployments. Some of company's largest deals involve 500 users with Autodesk, 500 users with Textron, and 700 with Suntory in Japan. "We will break the 1,000-user barrier within the next three to six months," says Cary Fulbright, senior vice president of marketing and products for Salesforce.com.
With this user adoption comes revenue growth. For fiscal 2003 Salesforce.com is expecting its revenue to rise to more than $55 million, nearly double the $23 million it recorded in sales for fiscal 2002, Benioff says. The company will be profitable in the third quarter of this calendar year, Benioff says.
Since its inception two years ago Salesforce.com has recognized revenue on a month-per-month basis and not up front at the point of signing, Benioff says. As a result the company's deferred revenue stands at more than $20 million, he says.
Benioff claims that the software-as-a-service model will continue to gain steam at the expense of some of the CRM mainstays, including Siebel Systems, PeopleSoft, Onyx, and Pivotal. "Fundamentally, we feel the Onyxes and Pivotals are dead. Microsoft will own the software market and we will own the utility market," Benioff says.
True, Salesforce.com is making inroads and has taken accounts away from other CRM vendors, but it will be a long time before the majority of corporate accounts are comfortable with having their valuable CRM applications hosted by another party, analysts and industry executives say. Security and customization are still major roadblocks stopping many companies from trusting the hosting model, and these roadblocks are not going to be moved any time soon, experts say.
In fact, enterprise software maker SAP, which has a CRM offering called mySAP CRM, offers a hosted solution as well as a more traditional software sales approach, says Jon Wurfl, director of global CRM communications for SAP. The company even has a separate business unit, called SAP Hosting, specifically for those customers wanting the service, he says.
Even so, hosting CRM applications is still a small part of SAP's CRM business, Wurfl says. "The bulk of businesses still want to own have their own IT shops," he says.
"Hosted applications have...more success tied to user adoption," Yankee Group's Kingstone says. "However, control and security are still major issues for some. The hosted model is also a reoccurring pricing model and customers have to decide what that is worth to them."
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