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NetSuite's Salesforce.com discount indicative of SaaS CRM pricing pressures

SaaS CRM vendors are coming under increasing pressure to lower prices, with Microsoft entering the market and NetSuite offering discounts to woo Salesforce.com customers.

NetSuite today took direct aim at Salesforce.com customers, offering to replace their current Salesforce.com implementation with NetSuite CRM+ for half the price.

Under the RenewForce Program, customers will pay 50% of their current Salesforce.com license for a comparable NetSuite CRM+ license for a minimum one-year contract. NetSuite is also offering up to 100 hours of professional services to help with data migration and mapping the application to business processes, or what NetSuite "feels is what you would normally go through for an implementation," said Mini Peiris, vice president of product marketing. The offer is good through the end of the year. The list price for CRM+ is $129 per user per month, compared to $125 for Salesforce's  

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"A lot of Software as a Service customers have two- or three-year contracts. It's not like they can tear up that paper," said Rob Bois, analyst with Boston-based AMR. But for companies that have a contract coming up in the next six to 12 months, "it might get some companies thinking, 'We might start looking now.' "

In fact, SaaS CRM vendors will be seeing a lot more pressure to lower their prices over the coming months. Because many organizations have bought SaaS departmentally with business users making the purchase, it hasn't gone through the stringent pricing and negotiation that on-premise software has had to face, leaving companies with multiple CRM applications running in multiple departments.

"There's been a lot of rogue purchasing," Bois said. "A lot of organizations are doing an audit right now. They're already looking at ways they can start to save money. Then you have NetSuite doing a 50%-off promotion and Microsoft undercutting the market -- I expect people will start taking open source a little more seriously, or even Zoho."

Last summer, Microsoft released its Dynamics Live CRM (now CRM Online) at a bargain price of $59 per user per month for its enterprise edition, a contrast with Salesforce.com's $125 per-user fee for its enterprise version.

What's more, just last week, Salesforce.com CFO Graham Smith told investors the company was ready to lower prices to remain competitive.

In recent weeks, according to Peiris, prospective customers have been far more focused on pricing.

"That's what inspired the plan to put an offer like this together," she said.

While SaaS applications by their nature are easier to migrate onto and off than their on-premise counterparts, these types of promotions have served more as a marketing initiative than a spur to a flood of conversions, Bois said. Similar attempts to woo customers were made when Siebel acquired UpShot and RightNow bought Salesnet.

"We certainly saw an uptake in terms of customers taking us up on the offer," he said, "as well as getting more of a message out there."

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