CRM Suite Switchers Empower Customers
A recent customer ownership scuffle between Salesforce.com Inc. and NetLedger Inc. is proving one of the benefits of the CRM hosting model to be true--dissatisfied customers can sometimes easily switch from one CRM vendor to another.
Last week NetLedger announced it had taken more than 30 customers from Salesforce.com, naming six of them publicly. (Read the full story: http://www.destinationcrm.com/articles/default.asp?ArticleID=2737
) After briefly testing NetLedger's three-month-old NetSuite solution, for example, one of the six named switchers, Alain Ghiai, CEO of HandyAll.com, a Web-based provider of home repairs in the San Francisco Bay Area and the Greater Vancouver, B.C. area, publicly supported NetLedger in the company's press release with the following quote: "We were using Salesforce.com, but needed a more complete package delivery," Ghiai said. "After looking at many options, including Salesforce.com, Salesnet, and NetLedger, we decided that NetLedger's NetSuite is the best way to go. NetLedger offers us a complete CRM/SFA/ERM solution at a very reasonable price and an efficiency savings of 30 percent. The back-office/front-office solution is ideal for us, and we can safely say that NetLeger's NetSuite is going to save us $300,000 to $400,000 in the first year of operations."
However, within 24 hours of the NetLedger announcement, Ghiai had a change of heart. He discovered there is no outbound email management or sales opportunity management in NetLedger's NetSuite. As a result of this discovery, he canceled his NetLedger subscription and kept his status as a Salesforce.com customer, which he says never ceased, even while testing NetLedger's NetSuite. Additionally, on Wednesday he publicly stated in a Salesforce.com press release that he never switched to NetLedger: "Salesforce.com has proven itself a better-quality and more robust service versus the others that approached us, and that's why we never made the switch."
NetLedger executives are not stirred by Ghiai's decision to stay with Salesforce.com. "We currently have 33 former Salesforce.com customers, and by the end of the month we'll have 43," says Zach Nelson, president and COO of NetLedger.
Marc Benioff, CEO of Salesforce.com, says this is merely a case of Salesforce.com envy, and the amount of customers that have switched to NetLedger represents less than 1/2,000th of Salesforce.com's 73,000-user base. He also maintains that Salesforce.com is taking business away from NetLedger, as well. He cites Application Technologies Inc., based in Bethesda, MD, as an example. "AppsTech is a NetLedger customer, but has a worldwide sales force and uses Salesforce.com because NetLedger doesn't have opportunity management or the basic things to run a large sales force."
That customers can either switch or mix and match hosted CRM solutions places power back into the customers' hands. This is what analysts say is what makes CRM application service providers (ASPs) so attractive.
"One of the things licensed CRM software companies try to do is lock a customer in with huge 'sunk' investment costs," says Laurie McCabe, an ASP analyst at Summit Strategies Inc., a research and consulting firm based in Boston. "High switching costs has generally been perceived as good for the vendor, but not good for customer. If you find a [hosted] solution that is a better fit for your needs, it is a relatively minimal undertaking to switch. If you were running Pivotal and wanted to switch to Onyx, it would be a much bigger deal."
The ability of customers to easily switch CRM hosting vendors likely means increased competition for existing CRM hosting companies like Salesforce.com, NetLedger, Salesnet Inc., and UpShot Corp. "Hopefully, it's going to make them a lot more customer focused," says Erin Kinikin, vice president and research leader for enterprise applications at Giga Information Group, based in Cambridge, MA.
Like the telecommunications industry, CRM hosting companies will have to come up with innovative ways to keep customers from switching or migrating to a licensed software model. "As an ASP you better get used to the fact that people are intending to switch when they start," Kinikin says.