Software as a Service (SaaS)

Despite talk of recession and economic slowdown, the global market for CRM spending remains healthy, according to Gartner Inc. The Stamford, Conn.-based research firm’s latest projections say worldwide CRM software revenue is projected to surpass $7.8 billion this year, a 14.2% increase from 2007.

By Barney Beal

Despite talk of recession and economic slowdown, the global market for CRM spending remains healthy, according to Gartner Inc.

The Stamford, Conn.-based research firm’s latest projections say worldwide CRM software revenue is projected to surpass $7.8 billion this year, a 14.2% increase from 2007.

The past year was a strong one for CRM, helped partly by some of the larger vendors, which report in non-dollar currencies. Yet, despite indications of a weakening economy, first-quarter guidance and returns from CRM vendors continue to be positive. Gartner predicts that healthy growth will continue through 2012, when total worldwide CRM software revenue will reach $13.3 billion.

“Historically, CRM is subject to economic fluctuations,” said Sharon Mertz, research director at Gartner. “It’s tough to predict the outcome of the sub-prime economic fiasco, but to date businesses are still spending money. They see CRM is critical to their business strategy. We are keeping a very close eye on it. The forward vendor guidance continues to be good.”

Gartner bases its figures on license sales, upgrades, maintenance and support, and subscription fees for on-demand software. It does not include professional services.

Organizations are now more carefully targeting their CRM investments, particularly in the areas of customer analytics and Web- and self-service applications, according to Mertz. In addition, Software as a Service (SaaS) is doing well and has the potential to remain strong as organizations redirect their capital investments in hard times. SaaS deployments require less upfront investment.

CIOs still prioritizing CRM spending

In Gartner’s annual survey of CIOs last fall, respondents indicated that they would be spending the same or slightly more on IT projects in 2008.

“We went back and tested the waters again in the first quarter of this year,” Mertz said. “A small percentage said they would spend less, but it was still positive. [Business intelligence] and enterprise application software were still the top two priorities on the list, and that bodes well for CRM.”

In fact, CRM software is a good place to make investments when the economy goes south, according to Mertz.

“Be open to some of the newer technologies that make business more competitive, optimize productivity and enhance the customer experience,” she advised. “When the economy slows down and consumers don’t spend as much, businesses need to fight harder for every dollar of consumer spend. Customer experience will only help that.”

North America remains the largest market for CRM software, accounting for $4.3 billion in revenue in 2007 and projected to reach $7.6 billion in 2012, according to Gartner research. The strongest growth will come from Asia/Pacific markets, where revenue is forecast to rise from $410 million last year to $840 million in 2012.

Gartner: CRM spending looking up

By Barney Beal

Google and Salesforce.com made public today one of the worst-kept secrets in Silicon Valley — they are teaming up to bring their business applications together.

“Many rumors have been circulating around the Web in the last week and those rumors are true,” said Kraig Swensrud, vice president of applications for San Francisco-based Salesforce.com. “Companies can run their business in the cloud with a unified set of applications from Salesforce.com and Google.”

This is not the first partnership of what many would call natural allies, competing with formidable opponents such as Microsoft and Yahoo. The two vendors have partnered around each company’s respective philanthropic organizations, and several years ago Salesforce.com bought Kieden Corp., a company, founded by Swensrud, that integrates Salesforce.com with Google AdWords. The technology ultimately became a Salesforce.com product last year, in coordination with an agreement between Salesforce.com and Google to sell each other’s products.

Today’s move brings Google applications — Gmail; Google Docs, its word processing, spreadsheet and presentation software; Google Talk, its instant messaging application; and Google Calendar — together with the Salesforce.com CRM applications.

“We believe this is an entirely new way for people to work,” Swensrud said. “People can collaborate and communicate online in real time. There’s no integration required, no software, no hardware; with upgrades and versioning you always get the most current upgrade.”

Google adds its presence

Indeed, the collaboration functions that Google brings to Salesforce.com are a significant step, according to Sheryl Kingstone, director for customer-centric strategies with the Boston-based Yankee Group.

“This is what I wanted to hear last year,” she said. “I love the seamless integration with Google mail. I also love the integration of Google Talk for presence and IM. One of the things we see in our enterprise surveys is the top requirements are around collaboration.”

Integration between the two on-demand platforms allows users to push Gmail messages and Google Talk conversations into the Salesforce.com application to, for example, share information about a lead, Swensrud said. Additionally, sales teams can access and collaborate on documents like sales presentations.

“Historically all these things have been managed with software,” Swensrud said. “Someone would create a document, email different versions around, with no one able to work on the document at the same time. Then you go on sales call and no one knows who’s got the right version of the presentation.”

While Salesforce.com could not give an exact figure for the number of its users who are running Google applications, the Salesforce.com universe of 1 million paying subscribers and the 10 million Google applications users mean “huge numbers in the intersection and a huge opportunity to expand beyond that intersection,” Swensrud said.

Office killer?

However, don’t expect this partnership to be the end of Microsoft Office applications. Companies are still struggling to get reports created in anything but Microsoft Excel, and Microsoft Outlook remains the primary interface for many a sales force.

“The negative is, large enterprises are not going to displace Microsoft Office just because of the integration, but it does provide alternatives to companies that want to use something else for now,” Kingstone said “It’s perfect for small and medium-sized businesses that don’t necessarily want to invest in the Office suite.”

In fact, today’s announcement should benefit both Google and Salesforce.com equally, according to Jeff Kaplan, managing director with Wellesley, Mass.-based THINKstrategies.

“This is not necessarily going to represent the downfall of Microsoft Office anytime soon, but it certainly represents an escalation of Google apps as a viable alternative and certainly strengthens Salesforce’s CRM,” he said. “It enhances Salesforce because it provides added productivity and collaboration while at the same time it helps to legitimize Google as having enterprise-quality capabilities.”

Salesforce.com’s new partnership integrates Google Apps directly into the Salesforce.com application. (Click to enlarge image.)

One current Salesforce.com customer sees the potential benefit in the partnership. For Prasan Vyas, a director in charge of sales projects with UST Global, an IT services company based in Alisa Viejo, Calif., Salesforce.com’s integration with Google apps makes Google a lot more appealing. UST Global has roughly 6,000 employees and 60 Salesforce.com users and sends a lot of spreadsheets around the organization, Vyas said. When Salesforce.com first offered Office integration capabilities about five years ago, it made life much easier for the company.

“If you can get something right in the Salesforce environment without having to install anything it takes the whole thing to another level,” Vyas said. “I think this will really make a lot of people sit up and take notice.”

While there’s no chance that UST Global will rip out Microsoft Office overnight, the company would consider a move to Google Apps in the future, he said.

Salesforce.com is not suggesting customers have to move off of Office either. In fact, they can make piecemeal changes, Swensrud said.

“In some cases Outlook might be the right choice for a company; what we’re announcing is really freedom of choice,” he said. “One thing those customers can do: They may choose to continue to run their email infrastructure on Microsoft but completely embrace Google’s online docs and Google Talk as corporate chat. The option will always be there for them to move into cloud computing.”

Salesforce for Google Apps pricing and availability

Salesforce for Google Apps, as the integrated product will be known, is available immediately for no additional charge to Salesforce.com users. Later this summer, Salesforce.com will also offer a support option. Salesforce.com will provide support for Google premier applications for a charge of $10 per user per month.

Google and Salesforce.com will also bring together their development partners. One partner, Appirio, has developed an application that links Salesforce.com and Google Calendar information together. A sales person, for example, could see that they are meeting with a client on the same day the marketing department is running a webinar and encourage the client to attend in preparation for the meeting.

“Google and Salesforce are serious about collaborating and building a strong working relationship, which not only represents a direct relationship between the two of them that’s formidable, but also the two ecosystems of partner organizations which extends the impact of this still further,” Kaplan said.

Ultimately, however, the big impact of the integration will be on enterprise application usability, Kingstone said.

“What it really points to is the consumerization of the enterprise,” she said. “The younger generation is demanding an easier-to-use application. They don’t need all the bells and whistles enterprise applications bring together today. They need to do what they do quickly and collaborate with colleagues. They’re all about the Web and putting things online and the last thing we want to do is push them into a siloed desktop environment, because we want to promote what they do best.”

Google and Salesforce.com form alliance

Posted by Vauhini Vara

Zach Nelson says he hates jargon. So when Nelson, chief executive at NetSuite, saw a jargon-filled draft of a press release written by his “product people,” he took a black pen to it to make line edits. Then he thought: “Ah, I’ll just start typing.” He spent 15 minutes rewriting the release, he says, cutting out “technical detail” in favor of explaining what the product does and why it’s useful.

Don’t let Buzz write your press releases

We give Nelson an A for effort but a C for output. Even after his edit, the first sentence of said press release reads: “NetSuite Inc. (NYSE: N - News), a leading vendor of on-demand, integrated business management software suites that include Accounting / Enterprise Resource Planning ( ERP), Customer Relationship Management (CRM) and Ecommerce software for small and midsized businesses and divisions of large companies, today announced NetSuite OneWorld, a cloud computing solution which enables multi-national and multi-subsidiary companies to manage their global business operations in real-time.”

We know he can do better than that because he spoke real English when he translated the release for us: A new NetSuite feature lets companies cheaply manage all their regional and operational subsidiaries with one software system, instead of spending lots of money to cobble together several different systems.

Then again, Maybe Nelson was just trying to use all that jargon to get his press release picked up by search engines.

Business Technology : Breaking Up (With Jargon) Is Hard To Do

A new study from Gartner predicts that, by 2010, 90 percent of software-as-a-service providers will incorporate some component of open-source technologies into their infrastructures.

By Christopher Musico

During the CRM market’s well-documented move from on-premise-only offerings to the on-demand world of software-as-a-service (SaaS), not as much attention has been given to the role that open-source technology can have in this shift. One aspect in particular that may have been overlooked, according to a recently published report from Gartner, is the extent to which open-source technologies are used in the infrastuctures of SaaS offerings.

The report — “Open Source in SaaS, 2008″ — was written by Robert DeSisto, a Gartner vice president and a distinguished analyst specializing in applications strategies and government. “[The study is] more of an awakening of what is going on behind the scenes,” DeSisto says. “The point is, no one ever asks what’s going on behind the scenes with SaaS. The problem is, when people do it, they don’t tend to worry about details — so we’re exposing [in this study] what’s going on.”

DeSisto explains that several CRM vendors — in particular Salesforce.com, RightNow Technologies, and SugarCRM — all use open source in one form or another. Salesforce.com, he says, uses an open-source database on its laptop disconnected version, while RightNow and Sugar use an open-source infrastructure stack on the server side. While particular vendors may use open source differently, DeSisto says that infrastructure isn’t becoming a competitive differentiator — and that is a good sign. “[Vendors] are not looking to differentiate on infrastructure,” he says. “[They] are looking to differentiate on other elements on what they’re providing.”

DeSisto stresses that open source is not a negative — leveraging open-source technology has its value propositions, which may explain why the Gartner report predicts that 90 percent of SaaS providers will utilize some form of open-source technology by 2010. DeSisto explains that leveraging an open-source framework can help vendors lower software development costs, which in turn could lower acquisition costs to end users — but that’s not a guarantee. The report acknowledges the posibility that “vendors may choose to improve profitability or increase R&D efforts with their savings.” DeSisto also stresses that just because a SaaS vendor might opt for open source does not automatically improve its overall offerings. “If open source can enable [vendors] to not spend a lot of money they would have to pass on to users, themselves, whatever the case may be, then it is valuable,” he posits. “But you can go open source and still have terrible practices or operating software so any advantage would be lost anyway. [Open-source technology] is not a magical secret sauce — it’s just one piece.”

So what benefits can end users gain by buying from vendors that use open-source technology? Lower costs might be one, but DeSisto points to another long-term benefit: user communities. These self-forming groups can sprout up around application and platform providers, especially those utilizing open-source practices, often to share best practices or even entire applications. According to DeSisto’s research, by 2010 open-source applications will make up at least 30 percent of a platform-as-a-service (PaaS) provider’s ecosystem of available applications built on its native platform.

This statistic, however, is dependent upon the mass adoption of PaaS–and there is a chicken-or-egg kind of challenge that may impede this adoption. DeSisto explains that while some companies have the platform (such as Salesforce.com’s Force.com) for this type of community, other companies (such as Microsoft and IBM) have the developers necessary to build out the application ecosystem. Having the combination of platform and developers is essential, he says. “The engine fuel is the [adoption of the] platform,” he notes. “If the application platform has difficulty getting adopted, then I think we won’t see as much open source in SaaS as we predicted.”

destinationCRM.com: Open Source Is an Open Book for SaaS Providers

Microsoft rolls out its Dynamics CRM Online package with prices and options aimed at undercutting software-as-a-service leader Salesforce.com.

By John Pallatto

Playing catch-up in the on-demand customer relationship management market, Microsoft announced the general availability of Microsoft Dynamics CRM Online with aggressive pricing and data storage options that seek to take business away from Salesforce.com.

Dynamics CRM Online is a full suite of on-demand sales, marketing and customer service applications along with business process automation and workflow automation, said Bill Patterson, Microsoft’s director of product management for the online CRM package.

To try to entice Salesforce.com customers to switch to Dynamics CRM Online, Microsoft is undercutting Salesforce.com’s prices and offering more data storage capacity.

Microsoft is offering its on-demand CRM package in two editions. The Professional Edition offers 5GB of data storage, 100 configurable workflows and 100 custom entities at an introductory price of $39 per user per month through the end of 2008. The regular price after that is $44 per user per month. More details on pricing and options are available at Microsoft’s Dynamics CRM Online Web site.

The Professional Plus Edition provides offline data synchronization along with 20GB of data storage, 200 configurable entities and 100 custom entities. This package is priced at $59 per user per month.

In contrast, Salesforce.com’s Professional Edition costs $65 per user per month and provides 1GB of storage.

More than 500 organizations have been using the product for nearly eight months as part of an early release program, Patterson said.

“For some of these businesses this is their first CRM system; for others, they are replacing other CRM investments such as Salesforce.com” and Oracle’s Siebel CRM On Demand package, Patterson said. Interest in the Microsoft product isn’t limited to small and midsize businesses, he said, but departments and divisions within large enterprises are also showing an interest.

Patterson said the average deployment size is about 15 seats per customer but some of the larger sales in the pipeline are averaging about 27 seats per customer.

Microsoft has also been working with about 300 VARs on the product introduction and about 150 ISVs that are building industry vertical applications that run on top of CRM Online or software that integrates CRM Online with other applications.

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Microsoft Prices CRM Online to Undercut Rivals