CRM as a Service (SaaS)
First to jump into this space in a big way was Siebel Systems, founded by Thomas Siebel and Patricia House in 1993.
Siebel began by offering only sales force automation software, but with the explosive growth in demand for CRM through the ’90s, it quickly expanded to include marketing and customer service applications. By 1999, it was by far the dominant player and was named the fastest-growing company in the United States in that year by Fortune magazine.
Along the way, Siebel pursued a strategy of forming strategic alliances and making acquisitions to provide e-business solutions for CRM and related areas; as of late 2000 the company had more than 700 alliance partners.
The company went public in 1996, and in 2000 its annual revenues broke through the $1 billion mark. A year later that had doubled, and in 2002 Siebel peaked, grabbing a 45% market share. Today, Siebel is a brand name owned by Oracle, which bought out the company in September of 2005 for $5.8 billion. Although its market share has slipped considerably, it is still a major player.
Next to throw its hat into the ring, in 1998, was the giant German multinational software company SAP. It was followed by Salesforce in 1999 and Microsoft’s Dynamics CRM in 2002. Together with Oracle, these companies make up the Big Four of CRM vendors, collectively holding about 60% of market share.
Obviously, three of the four are large, diversified companies, for which CRM represents only a fraction of their revenue stream. Salesforce is the upstart. It’s a company whose NYSE ticker symbol is, fittingly, CRM. That’s what it’s always specialized in (even though of late it has been moving aggressively into the social-networking arena).
The Rise of Salesforce
Salesforce established its position by targeting smaller to mid-sized companies, an area largely neglected by its bigger rivals – primarily because the high cost of the CRM solutions of the day was affordable only by big-budget outfits. It also pioneered the delivery of subscription-based CRM software online. Put the two together, and you have one of the biggest corporate success stories of the new century.
And no wonder. According to its website, “With Salesforce, every step of a sale – from phone calls and emails to collaboration with colleagues – is tracked in one place, so reps stay on top of deals and build stronger relationships with their customers. The average Salesforce.com customer experiences: +29% increase in sales; +34% increase in sales productivity; +42% increase in forecast accuracy.”
Salesforce currently has more than 82,000 customers and over 2 million subscribers. It’s international – with regional headquarters in Switzerland, Singapore, and Tokyo – and its software supports 16 different languages. It is annually recognized as one of Fortune‘s 100 best companies to work for, with a ranking that vaulted from 52nd in 2011 to 27th in 2012.
The company is working hard to utilize social-networking websites and to lock up a dominant role in mobile CRM. It’s a leader of the migration to the Cloud, as can be seen in the way its CRM suite is broken down:
- The Service Cloud enables companies to create and track cases coming in from every channel, and automatically route and escalate what’s important. For their part, customers have the ability to track their own cases 24 hours a day.
- The Sales Cloud provides sales representatives with a complete customer profile and account history, allows the user to manage marketing campaign spending and performance across a variety of channels from a single application, and tracks all opportunity-related data including milestones, decision makers, customer communications, and any other information unique to the company’s sales process.
- The Data Cloud leverages crowdsourcing via its member community to create a highly accurate worldwide business contact list. Sales leads, changes of contact information, and organizational profiles can be viewed within the Salesforce application, all generated from up-to-the-minute data created by real business interactions.
- The Collaboration Cloud utilizes the type of features embraced by Facebook and Twitter users, and with it employees can tap into social, mobile, and real-time technology to collaborate on documents, business processes, projects, and application data. Components include profiles, status updates, and real-time feeds.
- The Custom Cloud is a platform that allows external developers to create add-on applications that integrate into the main Salesforce application and that are hosted on Salesforce’s infrastructure.
For its efforts, Salesforce has been amply rewarded. It’s jumped from nothing to over $2 billion in revenues in 13 years. Its CAGR for the past five years has been 22.2%. It led the field in market share addition in 2010-’11, with a 2.8% increase. Since it IPOed at $11 in June of 2004, its share price has rocketed to around $145 today, a rise of better than 1,200%. And along the way, it steadily buttressed itself (and dampened competition) through strategic acquisitions, gobbling up 24 other companies between 2006 and 2012.
Though nothing in this fast-evolving space is certain, of course, the consensus is that Salesforce will continue to eat market share, as this projection graph against two of its primary competitors illustrates:
And Salesforce is expanding in all the right ways. According to leading technology analysis firm Gartner, the SaaS-based CRM sales the company specializes in are expected to leap to $6.4 billion in 2015, from $4.5 billion this year. That’s the biggest slice of the SaaS pie, as can be seen in this table from Gartner:
At the same time, clients will be integrating social media into their customer service centers; while only 1% of companies adopting CRM are now involved with Facebook, Twitter, and the like, by 2017 that number will reach 25%, Gartner believes.
The Tentacles’ Reach
CRM is continually pushing into new industries, as well. Telecommunications leads the customer list at the moment, with the energy/utilities and financial-services sectors close behind. But health care and public services are coming on strong, and are expected to take over the top spots relatively soon.
There is also plenty of room to broaden the reach of CRM services. Whereas CRM systems originated as uncoordinated, separate department servers, the key word today is “integration.” And there seems to be no end to the number of corporate elements that can be drawn together, as you can see from this near-octopus that depicts the CRM of the future:
(Click on image to enlarge)
The goal – always – is to put customers first, and to offer them a buying experience that is seamless from beginning to end. The vending company’s website becomes the portal through which customers can browse inventory to find what they’re looking for, place orders, track order status, and provide feedback about the results. On its end, the company can gather data about customers, personalize its response to them, and set itself up to generate repeat interactions. All of this allows the vendor to transform itself from a purely static entity to one that is much more dynamic.