Events like these--along with Microsoft's nascent efforts, and continued expansion into the market by dominant enterprise-resource-planning vendors--raise the question of what the future will be for smaller CRM providers.
Make no mistake, though. There is a future for these companies, says Barton Goldenberg, president of CRM consulting firm ISM Inc. Small and midsize CRM vendors can offer a more affordable solution, he says. That may appeal particularly to the price-sensitive midmarket customers many of these vendors serve.
Excluding hosted apps, the price per user for CRM software from large vendors can be $1,500 to $3,000; implementation can raise the price another 100% to 250%. Apps from smaller CRM providers run more like $300 to $1,500 per user, and average implementation expenses multiply per-user costs by 50% to 100%, he says. "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 start-ups 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 three years ago. The company provides sales software for the telecommunications industry. It has only one customer in what has admittedly been a hard-hit industry in 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 sizable player by stretching your vertical [opportunities]," says WhisperWire CEO Michael Heflin. His company will soon unveil 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 global markets, Heflin says.
Salesnet, which is competing in the suddenly hot hosted market, is partnering with vendors with particular vertical expertise. Earlier this month, it revealed a partnership with Encoda Systems Inc., a provider of management systems to the cable and broadcasting industries. Salesnet's online CRM apps will be integrated into Encoda's systems and marketed to more than 100,000 media-sales professionals.
Chairman and CEO Michael Doyle says Salesnet also is talking to leading software vendors in other industries, such as financial services, high technology, and real estate, about similar partnerships. "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 IPO, continue to run as an independent company, or get acquired by a company that needs to get into the hosting market quickly. "But," says Doyle, "we control our own destiny."