Asia's SaaS CRM market heating up

Several large vendors including SAP and Oracle, have entered the hosted CRM scene, but Salesforce.com remains unruffled.
Written by Victoria Ho, Contributor on

The SaaS scene has been heating up with the introduction of new, larger entrants, but market leader Salesforce.com says it is not feeling threatened.

The SaaS (software-as-a-service) CRM (customer relationship management) market, a space long dominated by Salesforce.com, is now gaining the attention of large software houses looking to capture a piece of the lucrative small and midsize business (SMB) segment.

SAP last September introduced Business ByDesign, its SaaS offering for mid-market customers. Designed for companies with 100 to 500 employees, the hosted offering encompasses a CRM application and other tools, such as business analytics and human resources management.

Previously, SAP offered a standalone Web-based CRM product called CRM On Demand, but the software vendor touts Business ByDesign as an offering that is tightly integrated into its business suite.

Another software house Oracle, coins its SaaS offering CRM On Demand. After acquiring Siebel in a move to broaden its CRM portfolio, the company last August launched a new release of the platform. Last week, Oracle added social networking features to allow its users to share data with their business partners to facilitate joint sales and marketing campaigns.

Microsoft also joined the fray late last year with its hosted CRM offering, Dynamics CRM Live.

The AppExchange factor
Despite the increasing competition, Salesforce.com remains confident its AppExchange plug-in database will keep its customers happy.

Jeremy Cooper, Salesforce.com's vice president of marketing for Asia-Pacific and Japan, said in an e-mail interview that there is "phenomenal demand" for AppExchange", which currently boasts some 35,000 customers and 300 independent software vendors (ISVs) worldwide.

The popularity of the plug-in database, which extends the functionality of Salesforce.com's platform, stems from the variety of applications available and that many of the applications are available for free, Cooper said.

Sau Lam, an analyst with AMI-Partners, said in a research note released October 2007 that SAP will need a similar approach to make its Business ByDesign a success.

Lam said: "SAP needs to woo developers that can add vertical and other niche functionality to its base offering... SAP faces stiff competition from rivals, all of whom are heavily courting these kinds of high value-add partners."

Asia's growing SaaS appetite
And the appeal of SaaS CRM looks set to continue growing in Asia.

AMI-Partners' Lam said: "Market demand for SaaS is snowballing... Spending on SaaS applications will outpace spending on packaged software by as much as three times over the next five years."

According to Springboard Research figures, the Asia-Pacific SaaS CRM market, excluding Japan, grew by an estimated 68 percent in 2007, and is expected to reach US$460 million by 2010, up from US$69 million in 2006.

Balaka Baruah Aggarwal, Springboard senior manager for emerging software said in a statement last month: "The market is set to witness unprecedented growth in the SMB sector as [the vendors] promote their CRM offerings.

"Springboard Research believes that a substantial portion of the growth in Asia-Pacific's SaaS CRM market will come from the SME segment. We expect SMBs to go for simpler CRM solutions that are not too complex," said Aggarwal, adding that this momentum will drive traditional licensed software companies to offer stripped-down, SMB-specific SaaS applications.

In an interview with ZDNet Asia, Salesforce.com president and CEO of Asia-Pacific, Steve Russell, explained the interest Asian SMBs has on its SaaS CRM product.

Asia has "very little legacy", Russell said, which means companies in the region have not invested in on-premise software and are therefore not compelled to use such products.

"Asian companies are also risk-averse and conservative," he noted, adding that SaaS's subscription-based model lowers the barrier to entry for SMBs. Two-thirds of Salesforce.com customers globally are SMBs.

Steven Guggenheimer, Microsoft's general manager for application platform and development marketing, said in an interview that for smaller businesses, "it is just easier for everything to be hosted.

"New expectations are going to challenge CIOs," he told ZDNet Asia. Businesses will look to their IT heads to better utilize the company's existing resources, and this is where Web-based offerings can be a viable replacement for packaged software, said Guggenheimer.

According to Salesforce.com's Russell, the next wave driving the hosted software market will focus on the ability to access applications via mobile devices.

"This is where the market's going," he said. "Mobile presents the best opportunity in the region."


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