According to Forrester Research, Inc. (Nasdaq: FORR), hosted sales applications continued on a path of sustained growth in 2004 and the first quarter of 2005. Market leader salesforce.com alone increased its customer base by more than 140 percent in 2004, despite mounting competition from emerging vendors — like Entellium and SalesCenter — and established customer relationship management (CRM) players — like Siebel and RightNow, all vying for a piece of the market. To help make sense of an increasingly intricate landscape, Forrester evaluated this market by assessing eight of the major players: NetSuite, salesforce.com, Salesnet, and Siebel CRM OnDemand, along with newcomers Entellium, NextSale, RightNow, and SalesCenter.
“Software as a service has taken off as the next major trend in sales applications despite its slower adoption rate in other types of applications. These purchases are often end user-driven by sales VPs and managers, who like the idea of being able to control the system and the purchasing decision without involving IT or getting big upfront budget sign-off,” according to Liz Herbert, an analyst on Forrester’s Enterprise Applications team.
According to the research, hosted sales force automation (SFA) vendors are proving to be essential for smaller and midsize businesses. These firms are often seeking flexible systems with the capability of being rolled out rather than implemented through a risky big-bang approach. The SFA market currently consists of three categories of vendors:
- Hosted CRM specialists.
- Hosted all-in-one vendors.
- Licensed CRM vendors with hosted plays.
Using the Forrester Wave™ methodology, Forrester evaluated key product features like setup and configuration, sales management, sales analysis, usability, offline and wireless access, and integration, in addition to vendor strategy and market presence. The methodology consists of hands-on evaluations, vendor surveys, and customer reference calls.
Overall, Forrester found that salesforce.com and Siebel OnDemand emerged as leaders, just as they did a year ago. Both maintained their competitive edge by making significant enhancements to their systems through multiple product releases in 2004. The Strong Performers category and the Contenders bucket saw the most movement, both appearing more crowded in 2005. This flood of new entrants has resulted in vendors competing to differentiate based on:
Cost-effectiveness. As the number of hosted SFA options increases, vendors must compete on price and value in addition to functionality.
- NetSuite prices its solution competitively by delivering bundled back- and front-office functionality for less than what other vendors charge for standalone CRM.
- Entellium is getting into the game by offering an innovative, modular pricing scheme.
Specialization. Forrester determined that the best way for new vendors to compete in today’s SFA market is to focus on specializing.
- Salesnet is the best example of this; it has positioned itself as the sales specialist and partnered with boutique sales consultants and methodology vendors like CustomerCentric and Miller Heiman.
- NextSale has also found a niche, focusing on quotations, literature requests, and inventory and order management.
Forrester predicts that future leadership depends on how well SFA vendors incorporate key characteristics like scalability and globalization in addition to proven high adoption rates and ROI. Competency in these areas will be especially important for gaining confidence from the high end of the market, as larger firms do not see hosted as a viable alternative to on-site CRM deployment. Currently, salesforce.com, Siebel CRM OnDemand, and RightNow are best-positioned to penetrate the enterprise segment.
The Forrester Wave Methodology
The Forrester Wave methodology is open, rigorous, and unbiased. Forrester starts with an open criteria review process, verifies findings against customer interviews, and checks facts with vendors. This research is performed without sponsorship to help user companies make better vendor selections. Forrester does not charge vendors to participate in a Forrester Wave.