Competition in the SaaS CRM Marketplace Heats Up

Competition in the CRM SaaS marketplace is heating up as indicated by the recent announcement that Microsoft has cut the price of its SaaS to compete with Oracle CRM and Salesforce.com: http://tinyurl.com/28hfukt

According to ABI Research, the global market for hosted services will exceed $34 billion in 2012, of which $11.6 billion will be from the North American market, primarily from SMBs. The SaaS model is also being adopted more often by enterprise companies, as evident with the 2007 Salesforce.com deals with Dell and Merrill Lynch for a 15,000-seat and a 25,000-seat license, respectively.  The two major drivers of accelerated adoption of SaaS in enterprise companies are its obvious cost advantages and its increased proof of data security.  Companies wanting an inexpensive, low risk CRM application will be attracted to its typically reduced startup costs, speed of deployment and no need for hardware investment.  Moreover, the growth of online Social Media applications has lead to a need to interface Social Media applications with CRM databases that are additionally online.  This interface will ensure that customer data will not be outdated and will promote a degree a bi-directional information exchange on topics that are important to all contacts in the CRM database.

So look out for a decline in the price of CRM SaaS applications as the SaaS model becomes the norm in the CRM marketplace.  Each SaaS CRM vendor will furthermore  increase the functionality of their SaaS application to provide a competitive advantage against their competitors.  The likely consequence of these two trends will be a movement towards the SaaS model as the dominant method of organizations utilizing CRM applications.