Think on-demand CRM and the first name that will probably pop into your head is Salesforce.com.
Thanks in part to the firm's loquacious chief executive Marc Benioff and its "no-software" marketing message, the fledgling hosting company has been grabbing all the headlines in the customer and sales space.
But as much as Salesforce would like you to believe they originated the CRM on-demand concept - Benioff claims the idea came to him after watching Amazon's success in the consumer space - other companies have been at it a lot longer.
Montana-based RightNow Technologies has been pushing hosted CRM services since 1997 and boasts customers including William Hill, British Airways, Roche, Easy.com, Experian and Nationwide.
Interestingly, its core competency within CRM is almost an exact mirror of Salesforce.com. RightNow specialises in customer service and marketing applications but recently launched a sales support product. Salesforce.com has up till now been focused on sales-side applications but recently announced a customer-support product.
The end game of both companies and the other players in this field is to be the de facto CRM player - offering the complete range of products. RightNow claims it is already there and some analyst firms concur - Gartner released a report recently claiming RightNow is up to two years ahead of Salesforce.com when it comes to product development.
But Salesforce.com is not RightNow's only concern -- entrenched incumbents such as Siebel are not going to let the on-demand players have it all their own way. And don't forget Microsoft. The software giant's Business Solutions division is clearly focused on tearing off a chunk of the small to medium-sized business application market for itself.
ZDNet UK sat down with RightNow's chief executive and founder Greg Gianforte to talk about surviving the first application service provider (ASP) purge and the future for on-demand.
There was a lot of momentum around application service providers and CRM around the time of the dot-com bubble which quickly soured after the slump. What has changed to restore companies' faith in this technology?
In the first go-around the applications weren't written for a multi-tenant architecture. Essentially they were taking client server apps, taking a rank of hardware out of the client's location and putting it in a co-lo facility, adding a margin and charging the customer back. What is different this time is that the applications have been written from scratch for a multi-tenant architecture. The only way you eliminate all these costs is by sharing the infrastructure across thousands of customers.
The second piece is that in the first generation, application service providers tended to be third parties that were hosting somebody else's technology. But in the second generation, the software provider themselves is the ASP. That allows you to do things from an economy of scale perspective and an instrumentation perspective; that allows you to achieve much higher levels of reliability and it can be an inherent part of your value proposition. Our cost to host is 6 percent of our top line - which is less than our tech support costs.
Any company that uses a third party to host, such as Microsoft, SAP, PeopleSoft - you can just list all the dinosaurs - they have failed the litmus test because they are not really believers. Until they re-write their applications from scratch and use it as a primary go-to-market they really haven't embraced this model.
How big a threat do you see Microsoft in the CRM market?
They have a lot of resources but the structural impediment they have is that at its heart, this on-demand model is about eliminating infrastructure - Microsoft's core business is selling infrastructure. To really embrace this model, Microsoft has got to be prepared to cannibalise its core business.
