CRM as a service comes of age

Siemens Power Transmission & Distribution was getting nowhere in its search for customer relationship management software. "The investment dollars required for Siebel [Systems] or another large system were a problem," says Mike Bauer, vice president of sales and marketing of Siemens PT&D, a recently formed unit of the $73 billion German company. "We were stagnant."

As a stopgap solution, Bauer last year turned to Salesforce.com, a provider of CRM software services. "We didn't consider Salesforce to be exactly the same as what we'd been looking for, but we needed something," he says. If the hosted product didn't perform, he figured the data was retrievable and the costs minimal. "I could look at it for $50 [per user per month]," he says; rates have since gone up to $65 per user per month, and trial users can use five seats for free for a limited time. "We deployed it to seven people. It took a couple of days, and didn't require an IT guy to implement it."

Today, Siemens PT&D has about 100 users on Salesforce. Other customers, including Autodesk and BroadVision, have made the same sort of progression from pilot to power users. Now Salesforce, which started a couple of years ago with an eye on small and midsize businesses, is gunning for the enterprise.

"When we started, there were 15 users at our largest customer. Today, we have more than 500 users at one customer - and they're the same one that started out with 15," says Marc Benioff, the former Oracle executive who founded Salesforce in 1999. "We fully expect to have customers with multithousands of users by this time next year."

According to Benioff, privately held Salesforce has 2,800 companies that pay it to manage about 50,000 people worldwide, and it is on track to record some $25 million in revenue this year. "The quality of our revenue is special because it's an annuity, so we know within 1 [percent] to 2 percent what we'll have in revenue next month," he says. The company has cash on hand to take it to breakeven early next year, Benioff says. "Our gross margins are on the order of 70 percent, and we could break even sooner, but we are investing in R&D, marketing, branding and increasing our enterprise capability."

The company scored a big win at the end of July when Time Warner Cable announced it would standardize its Road Runner business Internet access service on Salesforce's hosted CRM platform. The Road Runner business division, in Columbus, Ohio, serves about 2,200 customers. Spokesman Sean Kern said the division opted for the ASP offering after weighing the costs and benefits against implementing an in-house client-server-based system.

To accommodate customers with growing seat counts and to attract new enterprise users, Salesforce will announce new features this fall aimed at supporting larger organizations, says Clarence So, Salesforce's director of product marketing. "We aim to meet 100 percent of requirements for 80 [percent] to 90 percent of companies out there," he says. "We are not highly customized, which is why we can be much faster and cheaper than traditional CRM. If you really need PeopleSoft or Siebel, you'll go with them, but if we meet your requirements, you go with us."

As with any CRM package, the hosted version is only as effective as users make it, and getting salespeople to embrace new software can be tough. "Even if you buy the greatest thing out there, it's useless if they don't utilize it," says John Shope, senior vice president of corporate and institutional services of First Union. "That's one of the best things about Salesforce, frankly - the simplicity. You don't have to look at a training manual. It's very intuitive, so people do use it."

The bank started using Salesforce late last year and now roughly 110 of its employees use it. "We looked at everything from ACT to Siebel. Then I stumbled on Salesforce," says Shope, who needed to replace a creaky, homegrown sales management system. "The things they said in their sales pitch turned out to be true."

Because salespeople, of necessity, travel a lot, CRM is in some ways an ideal application to deliver as a service. "Probably 50 percent of our sales force works out of the house, and they are expected to get on [the application] at least twice a week," Siemens' Bauer says. The application service provider model lends itself to synchronizing data across divisions in real-time, giving all users an incentive to check in regularly. "One division doesn't want to use it if the others aren't - it's a chicken and egg thing," he says. "As a repository of information for all divisions, Salesforce draws users in."

Bauer does cite one downside of the hosted application: its inaccessibility when a user is on a plane or otherwise kept offline. Salesforce acknowledges the problem, and says it is adding increased portability to desktop applications such as Excel that - along with the growth of wireless networks and other forms of extended Internet access - will mitigate such problems in the future.