2006 was a quiet year for buyers and sellers of enterprise applications as Part 1 of this series explains. There were no startling leaps of new functionality; no dramatic bids for competing vendors; and no large plunge in revenues thus prompting vendors to give way at the negotiating table.
The year wasn’t as quiet for small and medium-sized buyers of these applications, however. Undoubtedly, vendors of enterprise applications have had SMBs in their sights for the last several years.
Moving downstream — either by redeveloping an existing application designed for large companies or by acquiring a new company and rebranding it — has been a favored play by these companies eager to pick up additional revenue and market share.
For the most part, it hasn’t worked. Developments over the course of last year, however, suggest that vendors are finally starting to get it right for this still largely untapped and underserved market.
Much of this new functionality available to SMBs comes from erstwhile SMB providers, now large companies thanks to the success of their applications in the marketplace. The most dramatic examples are Software-as-a-Service (SaaS) providers RightNow Technologies, Salesforce.com and NetSuite.
“The mid market has been driving a lot of revenues for the CRM industry — and that trend continues today,” John Ragsdale, vice president of research for the Service and Support Professionals Association, told CRM Buyer. So it is not surprising, he said, that most of the new functionality being developed is aimed at this space.
“Last year was a strong year for Salesforce.com, RightNow and Siebel On Demand. They became functionally mature, equal to on premise competition,” Ragsdale noted.
On the other end of the spectrum are the large vendors that finally got it right for SMBs. Companies like SAP introduced their own versions of SaaS CRM software, following Siebel’s earlier launch of its hybrid on-premise on-demand application. Called SAP CRM on-demand solution, it is a hybrid application that allows users to move to an on-premise system without much integration or migration work.
SMBs, in other words have had a wealth of options to choose among — not only in the point applications available, but also in the integration of these systems.
“Over the last year we have seen the SaaS model touch every part of CRM, not just sales force automation,” Martin Schneider, an analyst with the 451 Group, told CRM Buyer.
One driving force has been the platform environments introduced by Salesforce.com and NetSuite — to name two examples — that allow third parties to leverage existing CRM technologies to develop new applications or industry specific verticals.
For instance, this time last year NetSuite introduced more than 30 vertical applications developed by partners using one of the company’s integration tools, called the NetFlex Applications Program. Versions of NetSuite were introduced in such industries and functional areas as architecture and construction, application integration, collaboration, contact center/chat, data services, e-commerce, healthcare, productivity, professional services, retail and shipping services.
Perhaps just as important, SaaS providers have also focused on integration tools to give companies better flexibility in deploying their products especially in an on-premise environment.
“Exchanges like AppExchange or Netflex also allow for easer methods of integrating functionality,” Schneider claimed. “Now firms can do it outside of the firewall instead of having to hard code integration as part of development.” What this means, he said, “is a lot of the interoperability and compatibility available to large firms has now been pushed down to smaller companies.”
Consider Salesforce.com’s ApexConnect, a family of integration tools the company introduced last fall, designed to help a user build a range of integration tasks, from data exchange between systems to the integration of complex business processes and disparate platforms.
Other vendors have focused on providing SMB customers with an integrated suite product — NetSuite’s forte. Other firms, though, have rolled out sophisticated, well integrated products aimed at this space.
FrontRange Solutions, for example introduced GoldMine IP Voice early in the year, which linked the telephony layer to the CRM application — an integration that has not been easy to master even among the large scale vendors.
The application, which combines contact management and VoIP telephony in one package, is integrated in the GoldMine Corporate Edition CRM suite.
Microsoft — an iconic SMB software provider — also embraced the suite concept for its CRM application, better integrating the product with its ERP and other productivity systems like Outlook.
Then there was the maturation of Web services technology last year for those SMBs that like to build systems the old-fashioned way — assembling best of breed products, customizing them and integrating the moving parts into one whole.
Smaller companies now also have the advantage of leveraging Web service interfaces to streamline integration, according to Richard Smith, vice president and CRM strategy practice director for Green Beacon Solutions. Web services are revolutionizing the way companies can move data from one place to another, he told CRM Buyer.