Salesforce.com Customers Talk: The News Is Good

salesforce.com, the leading evangelist of the subscription-based Customer Relationship Management (CRM) market, is receiving a lot of attention as its Initial Public Offering (IPO) approaches. AMR Research spoke with salesforce.com customers to get the inside scoop on these implementations.

The Bottom Line: salesforce.com continues to build momentum across industries while increasing the average seat size; the six customers profiled here all gave salesforce.com good marks for user adoption and ease of use.

What It Means:

• Companies interviewed included the following industries: Insurance, Financial Services, Software, Information Service, and Manufacturing. This sample represents salesforce.com’s penetration across multiple verticals.
• The number of users ranged from 40 to 5,000--significantly higher numbers than the smaller pilot implementations of two to three years ago.
• Each of the companies cited lower startup costs as the primary driver for the decision. Half of them negotiated significant discounts off of the current list price of roughly $125 per user per month, and averaged between $80 and $110 per user per month for the enterprise (most expensive and feature-rich) version.

The Takeaway: Average deal size is on the rise and industry penetration continues to grow, but customers are still able to negotiate significant discounts off of list prices.

The Stories

• Software Company--The organization has more than 100 users representing roughly 85% of the company across sales, service, finance, and executives. A customer since 2002, it is using the new knowledge base product to boost Web self-service traffic and save 35% in service costs.
• Manufacturing Company--This Fortune 500 manufacturing company is a heavy user of Siebel but now has more than 500 salesforce.com users (and growing). The entry price was the bottom line for the company. The secondary driver was that Information Technology (IT) did not have to be involved in rolling out additional salesforce.com seats. Interestingly, it has no plans to migrate to Siebel’s competing product, Siebel CRM OnDemand, citing the feature gap between the two applications.
• Information Service Company--This organization has an entirely hosted application infrastructure. 50 sales users use the tool today and are very happy with the results. Salespeople do not require significant training to get up to speed on the system, and it has a 100% adoption rate across sales. It has been a customer for more than two years and is not considering a switch.
• Financial Services Company--This roughly $40M financial services firm with 135 users chose salesforce.com because it did not have to go through a reseller, as most midmarket companies do when purchasing software. salesforce.com sells direct as well as through channels. It had the tool up and running five days from signature. It likened the application to “CRM for Dummies,” which made adoption “a breeze.” This company willingly moved from a monthly to a yearly contract to secure an additional discount.
• Insurance Company--This life insurance company is in the process of rolling out salesforce.com to 5,000 independent agents. The captive agents use Siebel, but the cost and complexity of rolling out Siebel to independent agents were too high, according to this company. It is about halfway through the rollout, and all indications from the field are good. Adoption is on the rise, and information is being integrated with Siebel to maintain a centralized version of customer truth across systems.
• Software Company--This emerging vendor has 42 sales users today. It chose salesforce.com based on price and ease of implementation and has been using the tool for two years. It is now looking at the long-term cost of the application and is considering switching to Microsoft CRM, which it perceives to be cheaper in the long run.

Conclusion: With 9,000 customers, salesforce.com is the clear leader in the subscription-based CRM space today and is increasing industry penetration and deal size. salesforce.com customers are choosing ease of use over complex industry-specific functionality found in other traditional licensed applications. What they give up in bells and whistles, they make up in user adoption.

Companies considering salesforce.com should look at the long-term total cost of ownership (after three years, a hosted application could actually be more costly) and weigh that against the low training and high user adoption being achieved by existing salesforce.com customers. Although momentum continues to grow, discounts are still a reality, especially as Siebel’s CRM OnDemand subscription-based application applies pricing pressure by hitting the market at $70 per user per month and offering a 90-day free trial.

AMR Research originally published this article on 4 March 2004.