The various pricing schemes can create confusion among buyers as they try to assess the total cost-of-ownership (TCO) of different CRM services priced under various schemes. For example, there are still several companies offering license-based pricing models. Also, some companies offer a subscription option in addition to a perpetual license option.

In July we did a comparative price analysis of four leading CRM solutions for mid-market organizations. Forrester Research defines mid-market organizations as any organization with revenues of less than $1 billion and/or fewer than 1,000 employees. The CRM solutions included in this TCO analysis are:

• Microsoft Dynamics CRM 2011
• Sage SalesLogix
• Salesforce.com
• SugarCRM

For this analysis we looked at the following costs and requirements: for premise-based solutions we included the server and end-user (named user) licenses and annual support and maintenance fees. For on-demand solutions we looked at the annual end-user (named user) subscription fees. Each solution had to include mobile access, integration with Microsoft Outlook, a customizable reporting engine and configuration and customization capabilities.

We looked at the three-year TCO (total cost of ownership) for a 10-user; 25-user; 100-user and 500-user deployment. We assumed the following storage requirements: 5GB for the 10-user; 10GB for the 25-user; 15GB for the 100-user and 25GB for the 500-user deployments. For this analysis, we used standard list pricing as available in July 2011. Term, volume and other discounts (such as discounts available under the Microsoft Enterprise Agreement) have not been considered.

You can download this analysis here.

Here’s a preview of the 3 year TCO for a deployment of 25 users:

One of the curious things I have seen, however, is that Salesforce.com continually seems to be moving away from its core product message. While SaaS and “the cloud” have permeated the company’s message to date – at least in the early years when the company was ramping up we heard a lot about the actual business software it was developing.

Now, apart from Chatter, I have not heard much about actual CRM features from Salesforce.com in what seems like years. Now, I am sure they are developing the apps – don’t get me wrong. It just does not seem a focal point anymore.

Why? Well, there are a number of possibilities. I’d like to explore two potential options. (Both, one, or neither could be true as I am just postulating here.)

One explanation about the perceived lack of actual feature/CRM development is that the actual Platform capabilities of Force.com are a reality. (And not, as one observer called it – “Farce.com.”) What I mean is that if Force.com is even half as easy to use as say Sugar Module Builder and Sugar Studio – customers can build features they need so that Salesforce.com does not have to do so. This is a possibility – but the limitations of the multi-tenant model make truly deep code-level customizations hard to perform and manage in terms of upgrades etc.

Another option, and this one is far fetched I admit, is that Salesforce in time will shift its revenue model away from application subscription fees and into data services fees of various types.

Huh? You mean Salesforce.com would STOP charging for what has proven a potential multi-billion dollar business?

Well, yes and no. Salesforce.com has created a huge revenue stream for itself, granted. However, it’s prices are proving too high for the market in terms of value received. Even Microsoft is coming down to SugarCRM price levels. For Salesforce.com to compete effectively against better engineered CRM software and highly competitive pricing – it needs to innovate in new ways.

Salesforce.com’s multi-tenant model makes it difficult for the company to offer a lot of different vertical, geographic, etc. solutions, since there is technically “one version” of the system. But – Salesforce.com’s multi-tenant model makes it perfect for another concept – data collection, segmentation and other data-centric services. Having one HUGE database of customer, product, sales information, etc. about thousands and thousands of companies – coupled with data from it’s Jigsaw acquisition and the type of customer sentiment data from Chatter – and that becomes a valued asset.

Salesforce.com seems to be on some sort of track around this, with plans to offer  a free, stripped down version of Chatter to any interested party in the coming weeks. This would allow non-Salesforce.com users to enter data into their huge environment and allow Salesforce to leverage that data in any number of ways. I think of Salesforce taking the cue from Google – understanding thew value of data and information, not plain out of the box apps.

I do not think Salesforce.com would abandon what is a highly valuable revenue-stream any time soon.  But it does seem to have an innovation gap happening in CRM. And if it were to couple seriously interesting (to marketers especially) data services with its core CRM tools, it might be able to at least sustain its bloated pricing rates for the time being.

I have railed against the company’s multi-tenant architecture as limiting for some time. But here I think its huge database might be how it remains a relevant company in the future.

I Really Do Not Want to Search

I use FireFox (and Chrome, Safari,….) and the little box at the top right, yes, the one with the Google logo has an icon of a magnifying glass, and when you place your mouse over it, the word “search” pops up. Great, we are all set, I can now search. I am not sure about you, but when I type something into that little box, I really want to find something. The only time I really want to search is when I open up the refrigerator at 10pm and I really have no idea what I am looking for, but standing there with the door open is a requirement of all males, whatever it is I am ‘searching’ for will certainly find me!

Bing seems to get it, just a little anyway. “Bing is a search engine that finds and organizes the answers you need so you can make faster, more informed decisions.”. Google on the other hand is just search: “Google – Enables users to search the Web, Usenet, and images. Features include PageRank, caching and translation of results, and an option to find similar pages.” What about Wikipedia? “Wikipedia is a free, web-based, collaborative, multilingual encyclopedia project supported by the non-profit Wikimedia Foundation.” oh, and they have a search box. So, who gets it? Ah, found one, it is movie about a fish. If the title were done by Internet techie folks, it would have been ‘Searching for Nemo’, lucky for us, it was not, thus the title stands “Finding Nemo”. (By the way, I am not even going to touch Twitter here, just sayin’)

What is the Relevance?

When you, or your users get ready for work in the morning, or planning your day, you want information to find you. The last thing you want to do is search for things. There is an abundance of information, too much information actually, you need it to find you – when you need it. I am not sure about you, but I open up my calendar and there it is, my schedule for the day (most of it anyway), I did not search for it. When I have an appointment, deadline, phone call, I get an alert, one of my choosing. When you open up your CRM application, whether that is email, SugarCRM, or some other application, how does it help you organize your day? Do you need to search for people to call? Do you need to search for trouble tickets, service requests or support cases? Here is my preference, in order, vendors listen up please:

1. Help the information get to me, the way I want to see it
2. Help me find the information efficiently, quickly and easily
3. If 1 and 2 fail, ok, give me a way to search for what I need, but please focus on finding it!

I am done searching, I want to find what I need, when I need – even better if it finds me!

43% – Email/Spreadsheets

22% – Online data Service (Hoover’s, InsideView, Jigsaw etc.)

18% – Social Network (Facebook, LinkedIn)

12% – Twitter

4% – Other

OK, this tells me a few things. First, and not surprisingly, Outlook and Excel still rule the office world. This can mean one of two things. On one hand, many CRM tools are built to work alongside these office staples. But, if email and spreadsheets are where most people spend their time, there is a chance they may not be getting the most out of their CRM system. I see this as an adoption issue, one that can be cured internally as well as through easier to use technology (something I know we at SugarCRM are always striving towards).

This can also mean that there is simply a ton of potential business still out there. Look, the fact that Salesforce.com was able to drum up over a billion dollars in annual business, and it only sells one product in one deployment mode – means there is a green field still out there. Business, especially the smallest ones, need CRM and are looking for simple, low cost and easy to use tools.

Other insights from the poll tell me that more and more, sales organizations are seeing the value of third party data sources like InsideView. As the social media hype bubble only gets bigger, it is great that companies do realize there are companies encapsulating this explosion of data into useful, compact tools for sales reps and other roles to leverage in their daily business activities. Also, these excellent data aggregators can help append the data in a CRM system (and clean it up) to drive more powerful reporting, segmenting and decision-making initiatives.

Finally, Twitter is not a fad. Or, I should say the medium that Twitter has created (short bursts of communication) is being considered valuable by businesses. For many, this is a “no duh” statement. But there are still millions of small businesses yet to invade the Twitterverse.  These last two points, social data aggregation and social CRM, will be the most interesting to watch in 2010.

I will be taking a short break from Outsiders, but before I go I wanted to throw my two cents into the already overcrowded “predictions” market that observers and analysts so love to do in this industry. Truth be told, I always hated doing these as an analyst. They seemed so canned and vague. In retrospect I think I was too far from the buying market to understand the difference between high-level tech trends and how the IT decision makers would behave in the coming 12 months.

So, let’s see if nearly three years on the front lines has changed anything. I am limiting myself to four major items. I figure this gives me either enough smart predictions to look like a genius, or just enough rope to hang myself this time next year.

Here we go…

SFA Will Take on a Whole New Meaning, and Redefine CRM Once Again.

OK, this sounds very vague, I know. But bear with me; I swear this might make sense. What I mean is that the convergence of the consumer web with business apps, the ever-expanding web-savvy sales workforce, and the growing trend towards simple data integration into apps (social media, sites like Jigsaw and tools like InsideView, etc.) is redefining SFA.

We have moved on from the old model of SFA as a container of static information. The original beauty of SFA was that managers and sales people could share some parts of what were once proprietary (at the user level) contact lists. Soon, activity management, workflow etc. was slapped on top. But now, new ideas about data aggregation and usage, as well as merging online and offline sales activities – has forced the hand of CRM providers.

What will result: far more agile applications that are easier to use and own by sales reps; leveraging all sorts of unstructured data and networks – but yet managed inside the confines of what will look somewhat like traditional CRM. This will allow for better data stewardship and insure compliance inside organizations.

In a larger sense – I see this breaking CRM fully away from the suite approach that was in vogue for a while. As “enterprise CRM” and “SMB CRM” become nonsense words, and tools are built around actual business needs and not how much money the company makes or how many users it has in a system (ridiculous, arbitrary holdovers from the last generation of software development) , we will see more “sales” focused tools gaining market share, as well as “marketing” and “support” tools. Social CRM will play a big part in driving a lot of this, which brings me to my next point…

Social CRM is (Pretty Much) Ready for Prime Time.

What 2010 prediction piece would be complete without something about “social” anything? This has been beaten to death, but I find I have a more middle of the road feeling about social in 2010. Others seem to say “it’s here, man, deal with it or eat dust” or the more impractical “it’s just a fad at this point” (which reminds me of the SaaS naysayers in 2003).

I think in regards to social CRM that 2010 will be an important year – but that we will not see the “killer” social CRM app emerge until later in the year.  Salesforce did a paste up job with Chatter.  And I think the more data-focused applications like InsideView are still figuring out social. They have the unstructured media stuff I mentioned above down pat, and are growing their businesses, but there’s still a little left to do in terms of nailing social.  Another company to watch is Gist, they are doing some cool stuff.

When it comes to traditional CRM players making the move to social, I don’t think the older enterprise players have agile enough architectures to handle the metamorphosis. This is beyond simply slapping a Twitter window into the UI.  I think a simple, focused UI with easy to leverage social media connectors will be the winner here. The tool has to have the ultimate user-configurability, as well as a simple method for importing and leveraging unstructured and social data for traditional CRM workflows and reporting. It will be interesting to see who gets there first.

Open Source is Still Important in 2010, and Still Not a Business Model.

Some have argued that open source is becoming a moot point in terms of CRM. I agree and disagree. Paul Greenberg says that SugarCRM has dominated the open source side of CRM so much that it has left the model off the table for anyone else.

But what I think Paul does not do a great job of explaining is that in order for a CRM product to be successful these days (and a CRM company to do so) there has to be elements of open source in the mix. The software from all providers is looking more and more open (a good thing). And the move towards social and all of the agile and open development needed on top of those platforms will undoubtedly come from open source. So, open source is alive and well in the CRM and apps sector in general.

However, I do agree that just being an open source company will lead to the kind of meteoric growth vendors like SugarCRM experienced. That ship has sailed, sorry guys. What will win the CRM game – and frankly it is sad that this hasn’t always been the case – is smart, agile product supported by a company that understands and engages well with its customer base.

Older SaaS Players Will Begin to See Pressure from True Cloud Applications

Look, I am not claiming Salesforce.com will be seeing huge drops in revenue. However, I do predict that some of the haze will clear around cloud computing, and companies will wise up to the marketing BS that older SaaS guys are spouting.

As more and more true cloud platforms come to the fore, from Microsoft with Azure and of course Amazon and even VM Ware with V Cloud Express, end-user organizations are going to have much more choice in how they deploy applications. Before, it was “SaaS or in your own datacenter.” This is so not the case anymore. Companies can gain the kind of control they need to create differentiated applications, without having to run infrastructure. And companies like webappVM are making this easier than ever to do. What’s more, companies can use these tools to port their apps to and from any environment. Try doing that with a traditional SaaS product.

…Ok, those are just a few of the things I think we’ll see happen in and around the CRM world in 2010. I will of course check back a year from now and see how I did. But feel free to comment now and tell me how insane I am for thinking up these predictions.

I wish all the Outsiders readers, and the greater CRM and Sugar universe, a happy and healthy holiday season, and a prosperous 2010!

Below is my knee-jerk response…I think most of it makes sense in defining true cloud computing vs. multi-tenant SaaS providers stealing the term for their own devices…

…The true essence of cloud is about scalability, and utilizing resources as needed. You can argue that a per-user licensed concept like CRM is anathema to what the cloud promises. What I mean is – the cloud is a delivery platform for either computing resources or applications. The apps themselves are NOT clouds or cloud computing. There is nothing you can do with Salesforce.com (or any other SaaS CRM) that you cannot do in any other environment – actually you have less power in a monolithic multi-tenant cloud environment because you are fixed to the vendor’s resources, SLA and terms of service. The cloud is a limiter, not an enabler here.

Now, if you take a product built for the open cloud such as SugarCRM – now you have choice. Choice in deployment options (public cloud, private cloud, vendor-hosted, partner-hosted etc.) – and you have various access levels therein. And, when needs change, you can move from one cloud environment to another. That limits risk, and opens up options for greater (or less) access, control, costs, as needed. None of the old multi-tenant SaaS products can do this – as they are tethered to that singular, limited environment. It is not a “bad” thing necessarily – but it is simply a limitation and NOT indicative of the openness and portability I associate in my definition of true cloud computing.

How does Microsoft fit in? They are creating an environment that is well suited for application deployment, development, or both. Instead of taking a Salesforce.com lock-in approach and saying “only Microsoft apps are going on Azure!” they realize the value of true, open clouds and are saying “come one, come all!” because it is the flexible, scalable environment (not the lock-in app strategy) that will enable the cloud concept to thrive among businesses of all sizes.

To put it more shortly: Clouds are operating environments that enable users to either scale compute power or deploy applications without having any infrastructure in-house.

Multi-tenant SaaS is NOT cloud computing, it is just a delivery model for static, traditional applications.

Why? Well, for a number of reasons. For one, Microsoft is looking at the cloud as less of a compute power play as many of the early cloud players saw it, and more of a distributed business stack, available at any time and with scale. What I mean is, Microsoft is probably the most application focused cloud player out there. (Note: I don’t believe anything Salesforce.com does is really cloud computing.)

Microsoft owns, operates and understands a full service stack. This is a big benefit when porting to a cloud environment. While it may seem like a limitation, it is actually in my opinion a strong point. Microsoft is able to fully control the OS, database and web servers etc. as it creates a cloud environment. Sure, there is a proprietary aspect – but most of the apps running on top of Azure will not touch anything other than the database in any profound manner. Other cloud providers are working with a few distributions of Linux and other open source back end components – which is great for economy and scale – but these providers do not “own” the system entirely. It’s just a “nice to have” Microsoft has in its favor.

Another big factor is that Microsoft has been playing more of an interoperability game with Azure than it ever has – as far as I’ve seen. I mean, they are working closely with us, a PHP-based application, to make sure Azure can support apps written in as many languages as possible. This is a major development (in a good way) from even a couple years ago when IIS was not the ideal web server for running PHP apps (to put it lightly).

All told, when it comes to applications in the cloud, it will be the large scale providers – not the small, limited vendor-hosted SaaS providers that will realize the potential of running your business in the cloud. Vendor-hosted SaaS is great for some companies and a lot of different business needs, but for truly cloud-based operations – these guys fall short.  It is great to see companies like Microsoft supporting the notion of the Open Cloud.

For those of you not cloud savvy, a bit on Azure:

Windows Azure is an Internet-scale cloud services platform that is hosted in Microsoft data centers. It provides an operating system and a set of developer services that can be used separately or together. Windows Azure offers a scalable infrastructure with a pay-as-you-go pricing model that enables customers to pay for the service as they consume it, rather than buying and managing on-premises technology.

So, basically you get everything you need to run a set of apps – operating system on up – in a pay as you go model. It is the true vision of cloud or utility computing.

What does this mean for Sugar users and developers? Well, it extends the promise of the true cloud. Now, developers can run and test multiple instances (spun up in seconds) without having to download, install, run, etc. anything on site.

Users get a seamless stack of solid infrastructure delivered on-demand, one that will work with all the existing Microsoft stuff they already bought. Here we are seeing Microsoft able to scale in ways only Linux and other open source infrastructures could in the past.  And the best part – you don’t have to perform maintenance a single part of this stack.

Speaking of scale – it is funny that Microsoft with Azure has shown the ability to supersede SaaS in a way. Yeah, Microsoft has its share of “Live” or SaaS applications – but it is really evolving ahead of the curve here. Look, ten years ago SaaS apps were cool and the “next big thing” only because open source or cloud scalability hadn’t been invented. Now, we are beyond SaaS. The Open Cloud means that we are not stuck to a single monolithic, fixed deployment choice: one controlled by a single vendor.

Instead – we can choose a variety of applications from a number of vendors, and run them in any number of locations in the cloud. Or, we can install them in our own private clouds leveraging the web as a platform for both delivery and development.

Yeah, it is indeed blue skies for companies leveraging the Open Cloud…

But the move is a little more than a “Microsoft alternative” situation. While Open-Xchange does of course handle a lot of the tasks as Microsoft’s tool, the Sugar/Open Xchange connection goes a little deeper, and does some really cool stuff.

The collaboration between the two products allows users to aggregate all of their contacts across various social networks (Facebook, LinkedIn, Xing, etc.) and store them in Open-Xchange as mail or phone contacts. And it enables these relationships to be quickly imported into Sugar.

What this means is that users of Sugar and Open-Xchange can now begin the valuable task of not only connecting to the myriad company connections not in their CRM database but rather in the vast world of social networks, but these users can also segment these lists. (Oh, and did I mention all of this data can be accessed anywhere, in the cloud, by any device?)

One of the issues of social media is that it is jumbled and inclusive. The unstructured nature of it all makes the typically neat and ordered tasks of online and direct marketing difficult. But with segmentation tools – and the ability to easily import all these contacts into a marketing automation system like Sugar – companies can now more effectively reach out to these vast contact lists.

SugarCRM and Open-Xchange are starting to bring real business value to the realm of social media. And this is a trend that will only continue.

But on site software is still a popular option, and operating environments do come in to play when it comes time to make a decision.

I have heard a lot of Mac users over the years complain that a lot of popular CRM applications are not well configured to run in Mac OS environments. Again, the SaaS angle has helped – but for those on site deployments, pickings are somewhat slim.

Luckily for Mac-using CRM lovers – it is now easier than ever to get your Sugar deployment screaming on a Mac. Thanks to BitNami – Mac users can now quickly download a Mac-OS ready Sugar stack.

SugarCRM has worked hard to make sure it plays nice with any operating system – Mac, Windows and of course Linux – and here is just more proof, and more choices when it comes to getting up and running in any environment.