Article

Salesforce.com, partners face new hosted CRM market competition

Colin Steele, Executive Editor

Traditional customer relationship management (CRM) software vendors are expanding into the Software as a Service (SaaS) market,

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but don't expect hosted CRM market leader Salesforce.com to move into the on-premise world, channel partners said.

Study after study has reported steady growth in the SaaS market and predicted that the trend will continue. For example, IDC forecasted last fall that SaaS revenue worldwide would increase from $3.7 billion in 2006 to $14.8 billion in 2011. And a report last month by Saugatuck Technology found that 84% of all companies surveyed are satisfied with the SaaS offerings they have implemented.

"I'm not that close to the decision makers over there [at Salesforce.com], but I can't imagine what would entice them to get into the on-premise market," said Len Couture, CIO practice managing director for Bluewolf, a Salesforce.com partner in New York.

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Microsoft, SAP, Oracle and other CRM software vendors put their core products at risk by moving into the hosted CRM market, said Narinder Singh, co-founder of Appirio, a Salesforce.com partner in San Francisco. Salesforce.com would be taking the same risk by getting into on-premise CRM, Singh said.

"Any time you've got the kind of confusion over, 'Is it on-premise? Is it on-demand?' pushing the channel to try to do both of these is a losing proposition," he added. "If you believe in what on-demand, Software as a Service is doing, then why would you recommend the other? … I would find that shocking, and it would be a mistake."

But not everyone thinks that expanding from the hosted CRM market into on-premise CRM software would be a bad idea for Salesforce.com. Bob Laliberte, an analyst with Enterprise Strategy Group in Milford, Mass., said it could help Salesforce.com attract new customers and better serve existing clients.

"It would make sense, as many large enterprises want to have control of [their] data," Laliberte said in an email. "It may also be better economics at a certain point for an enterprise to bring it in-house. It also enables Salesforce.com to have a flexible model to accommodate its customers' wants or needs."

For now, Salesforce.com partners are busy trying to meet increased demand and adjust to additional competition in the hosted CRM market. Couture said SaaS is experiencing some of the fastest growth he has seen in 17 years as a chief information officer -- not only in terms of the number of vendors in the market, but also the breadth of services being offered.

"The tendency is more toward on-demand," he said.

Singh said he hasn't experienced much competition with other vendors' channel partners because the hosted CRM market is growing so quickly that there's enough business to go around for everyone. The low startup cost of SaaS is driving that growth, he said.

"By far the largest pattern is someone saying, 'Let me try a pilot,' and from there it takes off," he added. "That's something you could never do in enterprise software. It's a big safety net."


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