Events like these--along with Microsoft's own burgeoning efforts in the area and continued expansion into the space by dominant ERP vendors--raise the question of what the future will be for smaller CRM providers.
Make no mistake, though: There's a future for these companies, says Barton Goldenberg, president of CRM consulting firm ISM. Goldenberg says small and midsize CRM vendors can offer more cost-sensitive systems. That may appeal particularly to the price-sensitive midmarket customers many of these vendors serve.
The price per user for CRM software from large vendors can be $1,500 to $3,000; implementation costs can raise costs another 100% to 250%. Apps from smaller CRM providers run more like $300 to $1,500 per user, and the average implementation costs multiply per-user costs by 50% to 100%, he says. (These figures exclude hosted apps.) "There has been acknowledgement throughout 2001 and 2003 that top-of-the-line CRM software is far too expensive, implementation is too expensive and takes too long and didn't necessarily deliver the results promised," Goldenberg says.
Smaller CRM providers and startups also are finding that they can compete and grow by focusing on an industry niche. That's what Whisperwire Inc. has been doing since it was founded in 2000. The company provides sales software for the telecommunications industry. It has only one customer in what has admittedly been a hard-hit industry the last few years. But its account with SBC Communications Inc. totals more than 5,000 seats, with several thousand more expected soon. Whisperwire says it's negotiating with other telecom clients and plans to expand into another industry.
"You can become a fairly sizeable player by stretching your vertical" opportunities, Whisperwire CEO Michael Heflin says. The company will soon disclose an agreement that will pair its sales-effectiveness tool with CRM software from a "top-tier CRM vendor" to help it address challenges such as moving into international markets, he adds.
Salesnet, which is competing in the suddenly hot hosted market, is partnering with vendors that have particular vertical expertise. Earlier this month, it disclosed a partnership with Encoda Systems Inc., a provider of management systems to the cable and broadcasting industries. In that deal, Salesnet's online CRM apps will be integrated into Encoda's systems and marketed to more than 100,000 sales professionals in Encoda's media customer base.
Salesnet is also talking to leading software vendors in other industries, such as financial services, high tech, and real estate, about forging similar partnerships, chairman and CEO Michael Doyle says. "We have enough customers in place to quadruple the size of this company between now and next year," he says. Salesnet is keeping its options open, though. In the long term, the company can do an initial public offering, continue to run as an independent company, or get acquired by a company that needs to get into the hosting market quickly. "But," Doyle says, "we control our own destiny."