Salesforce.com's newly announced customer win bolsters its standing against CRM's traditional software licensing market leaders, like Siebel Systems Inc.
Innovex, a provider of sales and marketing services for the pharmaceutical industry, has gone live with 450 seats of Salesforce.com's Enterprise Edition in its U.K. offices. The hosted software is allowing Innovex sales reps to capture data, share information with customers and receive reports.
Innovex, which has roughly $140 million in annual revenue and is a unit of Quintiles Transnational Corp., chose the San Francisco-based application service provider (ASP) primarily because of its flexible model. As an ASP, Salesforce.com offers monthly subscription pricing that allows Innovex to change its number of users quickly without having to pay for unused software licenses.
Other vendors Innovex considered, including Siebel, could not offer that level of flexible pricing. "That was the real killer for us," said Richard Purchase, director of service development at Innovex.
In addition, Innovex opted for Salesforce.com because of the ease of stripping down the software, which meant Innovex could offer basic functionality to users.
"The application is so simple to tweak," Purchase said. "We can add fields ourselves without having to go back to a consultant to do that." He said customers he spoke with mentioned that customizing Siebel software often took longer and cost more than originally planned.
David Bradshaw, principal analyst at London-based Ovum, says hosted CRM is the only sector of the market currently growing. He suspects that's so because "disillusionment with the results you get from CRM software products seems to be greater than the cynicism 'ASP' has produced in other markets."
ASPs have largely failed to take off in other software sectors, principally because of organizations' reluctance to let sensitive corporate data sit outside the firewall. Purchase said he performed due diligence on Saleforce.com's security policies and its viability as a company.
Yet the hosted model's sharply reduced implementation fees and simple subscription pricing have resonated with many CRM decision makers, especially in a down economy.
While Siebel remains the dominant market leader, Ovum estimates that the CRM-related ASP industry -- which also includes providers like NetLedger Inc., Salesnet Inc. and UpShot Corp. -- will be worth $720 million by 2008.
The challenge for Salesforce.com will be to continue to penetrate the upper reaches of the midmarket while fending off Microsoft's impending challenge in the low end. Microsoft's inaugural CRM software is due out by month's end.
Still, Bradshaw cautions Siebel not to discount the threat Salesforce.com poses.
"I think I'd take them reasonably seriously," he said. "I'd put them on a level with SAP, [Siebel's] other nearest competitor."
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