Salesforce.com continues its on-demand quest

With months of foreshadowing and preannouncement, salesforce.com released its latest (18th) generation of the on demand CRM software platform. Phill Robinson, salesforce.com senior vice president of global marketing said: "In three years time, we believe all applications will be delivered on demand." That's more wishful thinking and evangelism than bonafide research. On demand, hosted applications, software-as-a-service, is a growing part of the overall market and a compelling concept, but it's not for everybody.

Here's a modest example. Athena Health was an early salesforce.com customer, with 250 users. Recently the company has been weaning itself off of salesforce.com, replacing it with an on-premises version of open source SugarCRM. According to Athena Health CTO Bob Gatewood, the company ran up against some limitations of salesforce.com in routing and tracking user support cases, as well as having to add user licenses for those who dealt with bringing the cases to resolution. Gatewood said he decided that integrating CRM with the company's athenaNet software would be easier and less costly using SugarCRM. On a price basis, on-premises SugarCRM was about $14 per user versus $100 per user for on-demand salesforce.com.  More importantly, Gatewood said, he wanted access to the code. "We have a fundamentally different persepctive on the account data object, and because we can't tweak salesforce at that level, we had to change the way we do things." For Gatewood, owning the functionality and integration and modifying the data structures was important, and his company has expertise in building and deploying production class systems. What Athena Health saves in lower monthly subscription costs is partly diminished by having to pay developers to customize the software, but that's the tradeoff, and one that the company can justify financially.

Salesforce.com's new release has more flexibility for customizing applications and can run multiple applications simultaneously. But on demand is not just a technology issue--it's a cultural choice, and it will take way more than three years for enterprises to wean themselves off owning their own infrastructure...

Update 6/21/05 4:45pm: For what it's worth--Athena Health and SugarCRM share a common VC investor,  
Draper Fisher Jurvetson.