SaaS CRM Helps Swimmers in the Shallow End
Small and midsize businesses are increasingly running core operations on Web-based applications in order to compete with larger enterprises.
By Marshall Lager
After years of focusing on larger enterprises, the software industry — CRM in particular — is beginning to pay major attention to small and midsize businesses (SMBs). Recognizing and catering to these relatively smaller companies’ needs is not only an emerging trend, but, according to reports and projections from several industry analysts, one of the most compelling components of market growth for any software vendor offering business applications. One such report, from industry research firm Aberdeen Group, details how SMBs are using tailored CRM solutions to acquire and retain customers. At the same time, recent research from SMB specialist AMI-Partners indicates that more and more SMBs are turning to software-as-a-service (SaaS) to meet their business-technology needs.
The Aberdeen study, “CRM in SME: Sized to Fit,” states that one of the top growth pressures for what the research firm calls the small and medium enterprise (SME) segment is “fragmented customer data.” (Aberdeen defines SMEs as companies with annual revenue of less than $1 billion; the average in this study is a range between $36 million and $56 million.) In fact, Aberdeen’s “Best-in-Class” (BIC) companies — the top one-fifth of respondents in terms of performance — named “fragmented customer data” as their number-one concern, cited in 32 percent of responses. (The problem, it seems, gets worse for less-successful companies: Fully half of all “Laggard” respondents — the bottom 30 percent of Aberdeen’s scorers — also placed heavy emphasis on data fragmentation.)
After fragmentation, the BIC companies are equally worried about:
- expanding their customer bases;
- increasing market competition; and
- expanding the sales force (28 percent each).
“Increasing customer expectations” figured in 20 percent of responses.
Interestingly, the BIC companies aren’t as heavily invested in full-fledged CRM as one might think. Aberdeen reports that the top technology in use by SME sales teams (cited by 80 percent of respondents) is software that tackles only individual contact management. Lead management is next (64 percent), with CRM third (60 percent). And the so-called “Web 2.0″ revolution, fostering collaboration and interactivity, may not have penetrated as deeply as the industry buzz surrounding it: Collaboration tools came in fourth in Aberdeen’s findings, cited by just 52 percent of BIC respondents.
These figures are likely to change in the coming year. “Best-in-Class companies plan to address their fragmented customer data and expanding customer base by organizing their customer and prospect information,” writes Gretchen Duhaime, senior research analyst for Aberdeen and author of the report. “Additionally, the Best-in-Class will develop a sales methodology or culture to deal with their growing sales force and increasing market competition. Coupled together, these strategies provide the framework for continued success, with a formal process for sales to beat their quotas, and access to the most current customer information.”
An unrelated study by AMI-Partners (which CRM first reported here) shows that SMBs (defined by AMI-Partners as those with fewer than 1,000 employees) are increasingly seeking to meet these and other needs with SaaS applications. The study breaks down the data further, finding that, in the U.S., 21 percent of small businesses (fewer than 99 employees) and 31 percent of “medium” businesses (100-999 employees) “currently use SaaS solutions, which is double the percentage of adoption in 2004,” writes Sau Lam, an AMI-Partners research analyst and one of the authors of the report. She attributes the increased popularity to the need for ease of use, implementation, and maintenance of technology for companies with limited infrastructure and technology resources, as well as the greater choice and availability of options.
Despite the documented increase in uptake, AMI claims that SaaS has not yet reached the mainstream. Established vendors — Lam cites Microsoft, SAP, IBM, Google, and Salesforce.com — are now being joined in the battle for small businesses by a new generation of SaaS developers — such as NetBooks, Longjump, and Coghead — and yet the report suggests that additional work is required to propel SaaS to the next level of growth.
“SaaS vendors need to intensify campaigns to educate and spark interest among SMBs that are not yet considering SaaS, identify other needs that existing customers have, and develop and partner to extend their offerings to increase share of wallet,” Lam writes. “In addition, they need to build channel programs with partners that can persuade SMBs that are not yet considering SaaS to give it a serious look.”
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