Integrating Customer Relationship Management through Software As A Service

The CRM Marketplace

According to the research firm Gartner, in the past year alone, more then $3.5 billion (USD) was spent on new customer relationship management (CRM) software licenses, but the top four CRM vendors (SAP, Siebel, PeopleSoft, and Oracle) accounted for only 38 percent of this total CRM revenue.

Part two of the Comparing On Demand Customer Relationship Management Service Alternatives series.

So, despite Oracle's CRM buying spree (including its acquisition of PeopleSoft and its planned acquisition of Siebel), when all is said and done, the combined CRM market share controlled by Oracle in 2004 will be a mere 21 percent, while SAP controls approximately 17 percent of the market.

In other words, 62 percent of the total CRM market is being served, not by the on-premise, full-suite CRM "big three" (soon to be the "big two") vendors, but by smaller vendors, including those that support the software as a service (SaaS) model, and vendors that specialize in best-of-breed offerings for specific CRM functions and industries.

Although at present, on-demand CRM applications make up a small segment of the overall CRM market, throughout 2004 and 2005 the demand for CRM SaaS offerings has been booming. IDC, a global market intelligence firm, has projected that the SaaS market will to grow to $10.7 billion (USD) by 2009, and will likely continue to grow in the foreseeable future.

In fact, salesforce.com, the industry's leading on-demand CRM service, grew its new subscription sales by 84 percent in 2004 and they anticipate approximately $300 million (USD) in revenue for 2005.

To put this growth in perspective, most of saleforce.com's revenue comes from subscriptions, not from professional services or maintenance fees. Accordingly, when its projected 2005 revenue of $300 million (USD) is compared to SAP's 2004 license revenue of $525 million (USD) (as estimated by AMR Research) there's little doubt that salesforce.com is rapidly gaining market share.

Industry experts see software on-demand and SaaS having a pronounced market presence in the future. According to Erin Traudt, IDC's SaaS research analyst, "The software on-demand delivery model is helping to reinvigorate the software industry and turns an attentive ear to customer needs and wants Ultimately, customers want their business problems solved and the on-demand model provides another option to help accomplish that important and necessary feat."

Likewise, Rob Bois, a senior research analyst with AMR Research notes that "the software as a service category has changed the whole perception of customer management with faster implementations, quicker time to value, and easy customization."

What's more, it appears that rising stars like salesforce.com and NetSuite, which support the CRM SaaS model, have a unique window of opportunity while SAP, Oracle, and Microsoft get their product strategies together.

CRM Evaluation Considerations

As discussed in Comparing On-demand Customer Relationship Management Service Alternatives, there are three categories that CRM functionality tends to fall under: non-core functionality; vertical, industry-specific features; and accounting related features. Users need to be aware of the potential issues that may arise from these features. For example, non-core functionality that is not used by the enterprise can negatively impact usability, industry-specific functionality may impair customization, and standalone solutions with accounting features may be difficult to integrate with a back-office accounting system.

In this article we'll explore one of the key differences between the salesforce.com service (a standalone CRM solution) and the NetSuite CRM+ service (a fully-integrated business solution/CRM application integration.

CRM Application Integration

There are three approaches that a company can consider with regard to CRM application integration:

• invest in a fully integrated business solution (enterprise resource planning [ERP] or accounting, operations, and CRM) from a single technology vendor,
  
  
• invest in a variety of pre-integrated best-of-breed business applications from multiple vendors, or
  
  
• use the CRM solution's integration tools to manually integrate the CRM solution with a variety of desired or already existing legacy systems.

The first option involves purchasing a fully integrated business suite from a single software vendor. This vendor would offer the marketing, sales, customer service, accounting, e-commerce, web site management, etc. functionality needed in a fully-integrated suite of software modules.

The big industry players also recognize the impact of fully integrated suites in the market. Recently, the founder of Siebel, Tom Siebel, talked about the market impact of integration in terms of Oracle's acquisition of Siebel. "What really brought this (Oracle's acquisition of Siebel) together was a shift in market dynamics," Siebel said in a recent conference call. "Businesses are no longer interested in connecting standalone applications (like Siebel's CRM applications) and want integrated business suites from a single vendor."

It's clear that both Oracle and SAP support the notion that the integration of CRM into broader suites of business applications (including accounting, supply chain management, and other horizontal and vertical operational systems) is appealing to many Fortune 2000 companies.

But how important is a comprehensive suite of business applications from a single vendor to small and medium companies?

That's one of the primary areas where a fully integrated business suite like NetSuite and a standalone CRM solution like salesforce.com have very different go-to-market strategies.

NetSuite CRM+ versus Salesforce.com

NetSuite aspires to become the Oracle or SAP of the mid-market segment. It wants to be the main choice of enterprises looking for a single-source provider of a fully integrated suite of accounting, e-commerce, and CRM solutions. Zach Nelson, NetSuite's chief executive officer (CEO) recently noted that "such applications have been previously available only to the world's largest companies. NetSuite gives that power to small and medium enterprises (SME) at a price they can afford and with the ease of use they require."

Salesforce.com on the other hand, aspires to be the leader in the second approach to application integration, purveying pre-integrated best-of-breed business applications from multiple vendors. To support this strategic approach, salesforce.com has developed and released a new application-sharing service, AppExchange.

With AppExchange, salesforce.com is attempting to accomplish something that hasn't been practical or cost-effective in the past. Namely, it wants to provide a service that allows companies to find, try, buy, and install a variety of useful pre-integrated business applications (in this case, on-demand applications) with just a few "clicks" of a mouse.

Marc Benioff, salesforce.com's CEO noted during the Dreamforce '05 user conference that

The AppExchange is the world's first on-demand application sharing service. It's [a] new on-line center where salesforce.com subscribers, partners, and developers can share their on-demand applications for everything from tracking purchasing, recruiting, accounting, industry-specific applications, and beyond. Best of all, it will make finding and installing new on-demand applications as easy as downloading a song or buying a book on-line.

The third approach to CRM application integration is to use the tools provided by the CRM vendor for customizing, extending, and integrating its application with other third-party or legacy business applications. These tools typically include tools for customizing the database, form views, and reports; Java applets and Active X controls for use in creating dynamic links to other Web services; and Web services to facilitate the integration with other systems.

Summary

One of the first things you should do when considering a new CRM implementation is to evaluate the existing technologies and systems that are currently in place.

We believe that every business should start out by understanding that their CRM system(s) and their ERP and accounting system(s) ultimately need to be integrated. The only question is how this integration will come about.

In this article, we briefly discussed the three approaches to CRM application integration; determining which approach is best for any given enterprise should be a key component of the CRM evaluation and selection process and one which requires thorough analysis by experienced IT and business management personnel along with a CRM industry/product expert.

About the Author

Jim Berkowitz is the founder and CEO of CRM Mastery, Inc., where he provides independent CRM technology research, analysis, and technology-enabled CRM planning and implementation guidance services to the SME marketplace. He is also the editor and primary contributor of The CRM Mastery E-Journal (http://www.crmmastery.com/weblog/). Berkowitz has over twenty-five years of experience and has helped hundreds of companies design and implement CRM solutions, including Sprint, Apria Home Healthcare, Hewlett-Packard, and Times Warner. Berkowitz has a bachelor of science in business administration (BSBA) in business management from Boston University, and a master of business administration (MBA) in accounting from Babson College.

For detailed reviews and analysis of the salesforce.com and NetSuite CRM+ on-demand services, see the CRM Mastery web site at http://www.crmmastery.com.