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SaaS CRM industry news and trends

This section of the guide offers an overview of SaaS and on-demand CRM vendors and the competition in the industry.

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Introduction to SaaS and on-demand CRM
SaaS CRM software evaluation and implementation
SaaS and CRM on demand vendor guide
SaaS CRM industry news and trends
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  SaaS CRM industry news and trends  

The Software as a Service (SaaS) and on-demand market has evolved since its inception. In recent years it has become more crowded, with traditional CRM vendors throwing their hats into the on-demand ring. Get the lowdown on trends in the SaaS CRM industry and find out how analysts and experts view the major players in this market.

SaaS vendors moving beyond CRM

Though key SaaS vendors may have started with only CRM or customer service products, on-demand vendors are expanding their offerings beyond CRM.'s Apex programming language set it up to provide on-demand platforms beyond CRM, though a news story found that the company's rivals questioned its success and plans, taking shots at its data model and security. touted Apex as the first on-demand, multi-tenant programming language and platform. Apex code and applications run on's service, allowing businesses to focus on development rather than infrastructure, according to the company. also released Partnerforce, its Partner Relationship Management (PRM) system. Customers can distribute sales and marketing information to channel partners and resellers through a customized portal. Previously, several standalone vendors, Siebel Systems Inc. and SAP AG had served that market.

In early 2006, NetSuite Inc. and both announced software functionality to allow companies to move other business processes to on-demand models. Salesforce's AppExchange enhancements were designed to supplement what the company didn't provide, and NetSuite's NetFlex program extended its customization, back-office and ERP capabilities.

The news story said "Trailblazers like San Francisco's; Boston's Salesnet Inc.; San Mateo, Calif.'s NetSuite Inc.; and Bozeman, Mont.'s RightNow Technologies have paved the way for companies to house their CRM applications and data in a vendor's off-site data center. In fact, the hosted model -- also known as on-demand or Software as a Service (SaaS) -- has been steadily gaining momentum, and SaaS CRM vendors are already looking to extend beyond CRM."

SuiteFlex, NetSuite's programming tool, uses third-party add-ons to target broad market verticals. For example, NetSuite's channel of around 150 partners will be able to build out very specific functionality for an industry such as a window and door manufacturer, where specific measurements and designs need to be added to the order and sale processes. All development and extensions are housed in NetSuite's data centers and can be upgraded in sync with the company's core applications.

Midmarket and vertical CRM growing steadily

In early 2007, several research firms highlighted promising growth for midmarket CRM, with one predicting that SaaS technology would continue to pick up steam.

"According to New York-based Access Markets International Partners Inc., almost 40% of midsized businesses use CRM applications today, and almost one quarter plan to adopt CRM in the next year. That amounts to some serious spending. Cambridge, Mass.-based Forrester Research Inc. predicts that small and midsized businesses, companies with 1,000 employees or fewer, will account for 38% of total CRM spending by 2010, reaching $4.2 billion. Meanwhile, Gartner Inc., based in Stamford, Conn., said this week that the SaaS market will grow from $6.3 billion in 2006 to $19.3 billion by 2011."

SaaS is now expanding beyond CRM and human resources to procurement and compliance management, according to Gartner.

In 2005, Siebel released vertical versions of Siebel OnDemand -- editions for wealth management/insurance, high-tech, medical and automotive, designed to take aim at rival

The following year, NetSuite released an application especially for software companies as the first of its vertical software options.

The NetSuite-Software Company Edition adds back-office functionality like revenue recognition, advanced billing and maintenance renewal tools. Its software industry-specific front-office functionality includes software sales forecasting, software commission management, partner relationship management, software-specific marketing tools and self-service customer portals to access order history, outstanding invoices and trouble tickets.

In early 2007, started a push toward the financial services industry by signing 25,000 subscribers at Merrill Lynch & Co. and the release of a new wealth management edition. The company planned to take on Bloomberg LP with the release, a combination of its CRM technology and mashups from management and financial services partners, offering client tracking information, team calendaring, client action plans and household management tools.

Open source CRM's piece of the market

Open source provider SugarCRM Inc. announced in late 2006 that it had reached 1,000 paying customers. While it has gained ground on SaaS CRM, open source still hasn't seen the success some predicted.

Online application exchanges, though, have brought open source and on-demand CRM together in a kind of convergence.

SugarCRM launched a marketplace for business applications based on its open source CRM tool, paralleling's AppExchange. The project, SugarExchange, offers developers a place to capitalize on SugarCRM's commercial open source model. SugarExchange complemented, the company's online development community.

SaaS and on-demand CRM vendor competition

NetSuite went public in summer 2007, becoming the third on-demand CRM provider -- after and RightNow Technologies -- to do so.

Larry Ellison, CEO of Oracle Corp., continues to exert his influence on the CRM market. According to NetSuite's S-1 filing with the Securities and Exchange Commission, Ellison and his venture firm own 74% of NetSuite.

SaaS CRM expert Denis Pombriant told a reader that NetSuite's IPO "does a lot to help validate the on-demand model of CRM. On-demand is a paradigm shift that is disrupting enterprise computing, so NetSuite's IPO is another proof point of the model's soundness."

IBM, a vendor not frequently discussed in the CRM market, stands to benefit from competition among SaaS CRM vendors. It started to emerge as an on-demand CRM player with recent partner deals with SAP and with Siebel in 2003. IBM acted as hosting, consulting and marketing partner in these deals, and works with smaller firms as well.

RightNow Technologies Inc. bought Salesnet for sales force automation in 2006.

On-demand CRM vendors continued to vie for supremacy in the market after that purchase, as took another step toward becoming an on-demand development environment. The company announced an original equipment manufacturing program so partners that had developed on-demand applications for AppExchange could offer the tools to non-Salesforce customers. And NetSuite Inc., continuing to highlight its back-office and front-office on-demand integration, took a shot at SAP as it strives to become "SAP for the midmarket."

Siebel and, meanwhile, duked it out over the call center SaaS market in 2005. Both companies added customer support applications to their hosted CRM products, with releasing Supportforce and Siebel releasing its Contact OnDemand product. The two rivals traded barbs in press releases and marketing messages about customer bases and development requirements.

    Hear from Salesnet's president on on-demand CRM and

    Find out how SAP's competitors reacted when it joined the SaaS CRM race.

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