CRM FYI

On my calendar, Friday, August 27, 2010 has had a special inscription on it for the past year and a half. It’s a date that could change the world I work in. It could be the day by which Software as a Service (SaaS) all out collapses and Salesforce.com, it’s poster-child, goes under. Well, that could be the case if the words of Harry Debes, the CEO of Lawson Software were to come true in the next 212 days.

It was August 27, 2008 when an interview with Debes was published by ZDNet Asia. Reading the story caused me to do a double take at least four times to see if what I was reading was really what he said. As a man who has made his living in enterprise software for many years, Debes was reassuring his shareholders, board, and customers that this SaaS thing was really just a reincarnation of the Service Bureau and ASP model; that they really didn’t need to take notice of this SaaS stuff as it would be just a flash in the pan and gone within two years. That made me go to my Google Calendar and mark August 27, 2010 as the day I’d have to see if Debes was right.

My Calendar

While that interview and a subsequent one from 2009 reiterate Debes’ position that SaaS is not profitable, he won’t take his company that way, and it only has a one-trick-pony, Salesforce.com, it would appear that the appetite for SaaS is growing tremendously; significantly more than that of the Enterprise Resource Planning (ERP) space that Lawson lives in.  (Lawson itself had to issue guidance of earnings below estimates, 6 out of the past 7 quarters) (In that same period, Salesforce issued guidance below estimates once, in-line with estimates 3 times, and above estimates twice)

Revenue and customer count for Lawson have been flat the past 18 months at about $800 million and 4,500 respectively. By contrast, Salesforce has increased revenue 20% ($1.07 billion to $1.29 billion) and customer count by 42% (47,700 to 67,900) in the same period.  I read those numbers and the recent growth of Salesforce.com and SaaS as indicators that the market is gravitating towards solutions that require less time to implement, less people to maintain, and are much more nimble to the changing business environment than the traditional software solutions previously available.

Another key to the growth of Salesforce has been the complete delivery of four major releases in the past 18 months to every customer. In that same time, if a traditional enterprise application even saw one release, it would be amazing; let alone surprising if anyone had the time, people or budget to plan a project around implementing that new release. With Salesforce, the customer pays nothing for the upgrade and continually gets additional features with every release; talk about value!

So where does that leave us at the beginning of 2010? Judging from current trends, it looks like the SaaS is flourishing pretty well and Salesforce.com in particular is going to make 2010 a very interesting year, especially with it’s $1.5 billion piggy bank, ready to hit the acquisition trail.  Just what they’ll buy is really anyone’s guess, but so far, each acquisition they’ve made has been integrated to their core product rather quickly and added differentiating power to their application lineup.

Myself, having worked for an enterprise software company for 11+ years and quite a few mergers and acquisitions, the product fit, and speed to integrate with existing product lines is really important. I saw some very good products die on the vine just because they were acquired and not properly integrated to the core product competencies of the company. By contrast, with the acquisition of Instranet, Salesforce has even proven that you can take a previously on-premise application and re-architect it for SaaS in a relatively short amount of time.

Where do you think the market will take SaaS this year? If you missed it, I recommend you take a listen to the replay of Appirio’s Forecasting Fisticuffs, a great roundup of some great minds in Cloud Computing. Hear what Dennis Howlett, Vinnie Mirchandani, Phil Wainewright, Narinder Singh, and the referee Ryan Nichols think will happen in this and coming years. (For an interesting commentary on each of the points Debes made against SaaS in the ZDNet article, it’s worth reading Ryan Nichols’ response) These are heavyweights in the Cloud and offer a great deal of insight and entertainment about what’s to come.

As to my original question of whether we only have 212 more days until the collapse of SaaS, I guess we’ll have to wait until August 27 rolls around for sure, but if I had to place a bet, I think I’d put it in the cloud.  The market is evolving, but in a way that’s advantageous to the cloud and its customers. That’s what I see. And as for the demise of Salesforce, I don’t think 2010 is the year for that. Continued good news, innovation, expanded product offerings, increased reliability, and vision have me believing that 2010 will be a stellar year for Salesforce.