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SaaS CRM Software History

It's no secret that SaaS CRM almost died with the DOT COM bubble. While initially hailed as a concept whose time had come in the late 1990's by business software marketing experts, Customer Relationship Managmeent (CRM) software delivered via SaaS initially grew wildly based on inflated expectations and amid the unsupported growth of the dot com bubble. When the bubble burst, SaaS CRM fell from grace along with most other new technologies. However, unlike the majority of over-inflated concepts, SaaS CRM came back and excelled beyond its dot com stage.

In the late 90's, the initial difficulty with CRM SaaS was that the software applications at that time were not intended for hosted delivery. Few people disagreed with the concept of subscription pricing, hosted delivery and outsourced expertise, however, the CRM applications at that time were not designed (and not capable) of operating over the limited bandwidth of the Internet and the software vendors were not interested in changing their pricing model from an all-money-up-front approach to a deferred revenue collection over the life of the customer. The generation of CRM vendors at that time - led by Microsoft, Oracle and SAP - took the approach to ignore SaaS, and even ridicule SaaS CRM, rather than embrace an inevitable application software evolution.

Customer Relationship Management

First generation CRM SaaS products were largely born as point solutions. These niche players included UpShot (later acquired by Siebel), SalesNet (later acquired by RightNow Technologies) and Salesforce.com, and provided an overly application-specific solution to accommodate a specific business need, however, failed to provide a broad solution for the customer. These CRM software providers had one small basket to hold all their eggs and when the market changed and competitors offered superior products, they were acquired or vanished.

The arrogance and/or miscalculations of the on-premise CRM vendors gave way to start-ups such as Salesforce.com, NetSuite, RightNow and Aplicor, who created thin-client, purpose-built SaaS CRM solutions and delivered them as software subscriptions. These applications would later substantiate the promises of the SaaS business model and earn the majority of the industry's market share.

This new way of delivering CRM software utilization is a disruptive technology as defined by Harvard Business School professor Clayton Christensen, author of The Innovator's Dilemma. Disruption starts when a new technology gains a foothold in the low-end of a market, then improves rapidly and attacks higher margin segments with a better value proposition and lower cost model than the incumbents. Christensen says Amazon, Dell, Southwest Airlines and Schwab are examples of industry disrupters.

The adoption of on-demand CRM is a great example of Christensen's theory at work. Major growth drivers include:

  • Ubiquitous Internet access. Broadband access andonline media solutionsare proliferating, with penetration rates reaching 50 percent or more in developed countries, and wireless access is growing by leaps and bounds as well. Amazon, eBay and AOL have trained the public that it's safe to do business and communicate online.
  • Rapid improvement in application functionality. Online CRM systems are evolving from standalone contact managers to full-fledged CRM applications and in many cases, outperforming their decades-old client/server predecessors.
  • Backlash against the software licensing model. Let's face it, software vendors don't have the best reputation. Their business models are based on selling licenses and locking in customers. Unfortunately, there have been far too many sell-it-and-run and drive-by sales organizations. On-demand CRM makes vendors more accountable for keeping customers happy after the sale. It's in their own self-interest, because easy-on also means easier off.
  • Reduced up-front cost and risk. Clearly on-demand CRM solutions are popular because you can turn them on with a modest investment, and that you're not locked in quite the same way as you would be with a non-refundable software license.

   SaaS CRM Evolution