NetSuite's CRM switchers are sign of maturing market

As NetSuite wins a raft of customers from rival Salesforce.com, analysts suggest that switching is a positive sign for all on-demand businesses

Business apps vendor NetSuite has stoked the fires of competition and corporate one-upmanship in the booming on-demand CRM market by announcing a raft of customers who have switched from rival and market leader Salesforce.com.

Among those making the switch are customers from education, manufacturing, telecoms and software verticals, representing thousands of end users.

And while NetSuite is trumpeting these wins as "one in the eye" for Salesforce.com chief executive Marc Benioff, the announcement is good news for the on-demand market as a whole, according to pundits.

Paul Greenberg, consultant and author of CRM at the Speed of Light, said it is certainly further evidence that "the on-demand model is here to stay", adding that for all the customer wins their rivals may announce, the on-demand "school of '98" — NetSuite, RightNow Technologies and Salesforce.com — will all continue to grow in a more mature market where switching simply goes with the territory.

A Salesforce.com spokeswoman said it has customers who have switched from NetSuite.

James Governor, analyst at Red Monk, said this switching between on-demand players — rather than reverting to previous on-premise packaged software alternatives — indicates on-demand businesses have overcome their most major hurdle: convincing businesses that theirs is the right model.

Governor said: "Hosted CRM is a maturing market and there doesn't seem to be a lot of sense in bringing stuff back in-house. Rather than just trying to convince people that software as a service is a good thing, they are now competing on their own merits."

And while no business likes to see customers leave for a rival, Governor says it's likely Benioff will take satisfaction in the maturing of the on-demand model and the long-term opportunities that presents.

He said: "One would certainly expect Benioff to keep beating his chest and saying he was right", though he suggested the first-mover advantage, which Salesforce.com enjoys, should never be taken for granted. "I've seen the Microsoft model work too many times," Governor said.

But despite their many similarities, and the fact CRM is at the core of both companies' offerings, NetSuite and Salesforce.com are heading in different directions, said Greenberg, which means customers who jumped on one bandwagon may well realise they should switch sooner or later.

Dominic Anschutz, chief executive of Turing SMI, one of the Salesforce.com switchers, said his company made the move in search of a broader on-demand ERP offering. That sentiment was echoed by Sandeep Jayasw from French telecoms company Hyperia.

NetSuite is certainly pitching itself as the on-premise business apps alternative, said Greenberg, while Salesforce.com is increasingly transitioning from a software-as-a-service model to "service as a platform".

Greenberg said: "That's what Salesforce.com is aiming at and not what NetSuite is aiming at."

However, both NetSuite and Salesforce.com are still light years from a position where they can decide how they carve up the market, said Greenberg, adding that there remains a major threat from those companies portrayed as industry "dinosaurs" by upstart on-demand chief executives, such as NetSuite's Zach Nelson and Saleforce.com's Benioff — especially as the large companies, most notably SAP, wake up to the need for an on-demand offering and the need to compete for the mid-market.

Greenberg said: "When push comes to shove, SAP could be the big surprise in all this. But both NetSuite and Salesforce.com will continue to grow, as will RightNow, because even the SAPs of the world recognise that despite multiple directions, all those directions involve web services, customers who are on the go and increasingly sophisticated demands by customers to participate in the creation of value that is meaningful to them — all hallmarks of on-demand, not on-premise systems."

Earlier this month Benioff put the boot in to Microsoft's announcement of its own on-demand CRM offering while Nelson called it "the final blow to traditional software".

This morning, RightNow Technologies reported its thirty-fourth consecutive quarter of revenue growth.

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