Hosted software not strategic

ZDNet's DataPoint highlights a new report from Nucleus Research suggesting that SalesForce.com is not living up to its billing as a revolutionary new tool. While the research revealed that most of Salesforce.com’s customers realized positive ROI, most did so by simply replacing a paper-based or individual contact management solution.  

One of the biggest challenges facing Salesforce.com, according to Nucleus Research, is that 38 percent of Salesforce.com customers are open to switching vendors. "This partly indicates the low switching costs of on-demand but highlights the fact that for many customers Salesforce.com is a commodity product, not a strategic one that impacts the way they do business,” said a press release.

These findings underscore my own view that most of today's hosted packages offer a new model for software pricing and deployment, but not a new model for enhancing business value. It may be time to consider the rest of the value equation. How, in other words, will web-based CRM and other hosted software solutions enable companies to enhance customer-focused processes and practices? How will this option help them transform their business strategies to generate new levels of performance? How will it contribute to enduring growth?

Quite honestly, I can't see how it will. We need to expand our concept of a "solution" if we are to get beyond the commodity mindset that -- quite predictably -- is now pervading the buyers of SalesForce.com. The tool itself is not strategic. Those who thought it was were doomed to be disappointed.