Updated October 18th – We hosted a survey a few weeks ago asking our readers who they viewed as the leader in CRM. It’s a complex question given:
- Oracle’s acquisition of historical market share leader Siebel Systems;
- Salesforce’s momentum and thought leadership through cloud computing;
- Gartner’s assessment of SAP’s CRM revenue leadership; and,
- The growing momentum of Microsoft Dynamics CRM in the mid-market.
What’s most important in the marketplace, however, is the perception of market leadership, in our opinion. Thanks to several fellow bloggers, the survey was broadcast across the Customer Relationship Management software community, and we got some excellent feedback. The poll closed with 87 responses. Here is what folks had to say.
The overwhelming top dog was Salesforce, garnering a little more than 62% of the votes. Oracle was a distant runner-up with almost 22%. To be honest, we did expect Salesforce to edge out over Oracle, but the disparity was a little surprising. Respected third-party analyst firms such as Gartner continue to rank Oracle higher than Salesforce, using criteria such as market share, customer base, etc. However, it seems that readers are putting more weight on the growing popularity of the cloud computing model.
SAP’s third place position was no big surprise, but we did expect more support for Microsoft. Microsoft Dynamics has entered the on-demand CRM space in a big way, building serious momentum, with a 75% jump in revenue from 2007 to 2008. If this same survey is conducted in a year, we have a sneaking suspicion that Microsoft will show up in a big way.
When asked if Oracle would acquire Salesforce, readers responded with some pretty great feedback. Our comment section was riddled with strong opinions on the topic, and some people were slightly more vocal than others. One response was “God, I hope not!” while another made excellent use of the word “bitchslapping”.
The overall consensus is that Oracle will not acquire Salesforce, and we decided to single out three points that came up consistently in the responses.
Too rich for Oracle’s M&A criteria
Readers pointed out correctly that Salesforce stock trades at a premium. In the past year, Salesforce has grown its market cap to $14.06 billion – about 9 times its expected 2011 revenues. That ain’t cheap, especially compared to the cheap deals Oracle has targeted over the past few years.
Focused on Fusion
Oracle is very focused right now on the Fusion app integration. Ellison and his team are investing all of their efforts in rolling this out and getting businesses to adopt it. They can still see Salesforce out of the corner of their eye, but they have bigger things to deal with.
Thrill of the fight
For some, it’s all about the win. In Ellison’s battle with Salesforce, it’s all about the fight. When asked whether or not he would acquire Salesforce, Ellison made it clear that his interest was not in acquiring his cloud computing rival, but taking it down. His fervor is admirable, but with Salesforce’s recent performance, I think we can expect this battle to continue for quite some time.
The survey turned out much like we predicted, but it’s always fun to discuss these topics and see what the CRM community has to say. If you have more to add to the conversation, please leave your comments at the bottom.
Original post – This week is Oracle OpenWorld and that means more awkward co-opetition between Oracle and its “frenemies.” Once again, Oracle will be sharing the stage with partners/competitors like HP, IBM and SAP. This year, the friction that really seems to have most enterprise software bloggers atwitter is the increasingly intense rivalry with Salesforce.com.
The cloud computing darling – led by Ellison’s protege Mark Benioff – has gained just enough buzz (and market share) to draw withering fire from the vociferous Ellison.
Of course, Salesforce is a large Oracle customer – running its data centers on Oracle databases and middleware. As such, Benioff and Salesforce are featuring prominently on the Moscone Center floor, as well as the stage. Awkward!
Lets take a look back at some of the cloud-computing barbs that have flowed back and forth over the last year. Is it us, or is Larry coming around to cloud computing?
Dueling CEOs aside, there is an important rivalry shaping up between Salesforce.com and Oracle’s CRM On Demand.
It reminds us of Ellison’s decade-long battle with CRM pioneer Tom Siebel (another of his proteges). We all know how that ended: Oracle had the last word by acquiring a battered Siebel (battered by the economy more than Oracle, really). However, we have to think that Tom Siebel rests easy knowing that Oracle needed to own Siebel to own CRM. Afterall, Oracle CRM On Demand is the former Siebel On Demand (which was the acquired UpShot).
Does Oracle need to own Salesforce to own on-demand CRM? Let’s look at some of the factors that might answer that question.
From a market share standpoint, Oracle edges out Salesforce with roughly $1.5 billion in CRM revenue (according to Gartner), versus a little over $1 billion for Salesforce. However, Oracle’s CRM On Demand business is probably more like $400 million of the company’s $874 million in annual On Demand revenue (CRM, ERP, etc.). So, when it comes to cloud-based CRM, Salesforce appears to be a clear leader.
Moreover, Salesforce seems to have the momentum. It’s revenue grew about 25% last year, while Oracle’s On Demand revenue was up about half that at 12%. Maybe CRM On Demand grew faster than Oracle On Demand overall, maybe not. Still, both company’s double-digit gains in revenue are impressive, given the current sorry state of the economy.
Both products have achieved success by offering quick time-to-value, robust usability and low up-front costs. Those are cloud computing table stakes. Next up, we’ll see a battle for functional completeness. The table below illustrates what we believe represents each vendor’s functional depth by application category.
|Sales Force Automation|
|Customer Service 3|
|Partner Channel Management|
|Customer Data Management|
To give some credibility to these numbers, we looked at what industry analyst firms had to say on the topic. Forrester says that both Salesforce.com and Oracle CRM On Demand are gaining ground in the CRM space. Salesforce still leads, but Oracle CRM On Demand is experiencing most of its growth in the Oracle applications installed base. Oracle CRM On Demand has also become a leader in sales force automation (SFA), and with it’s purchase of Market2Lead in May of this year, it is attempting to extend it’s capabilities in marketing automation as well. Oracle CRM On Demand still lags in it’s customer service offering, an area where Salesforce’s Service Cloud 2 reigns. For the market as a whole, Gartner predicts a 6% shift in overall market share for SaaS vendors by 2014. This means more space for Benioff, Ellison and others to duke it out over.
Salesforce is differentiating through its innovation and pure-play CRM story. It certainly seems to have occupied the right mind share – that of the innovative, next-generation CRM vendor with the easy-to-use application. This stands in contrast to the Siebel legacy – complex enterprise software, difficult to use and designed for the largest companies. While CRM On Demand is absolutely a different beast, it’s tough to shed that baggage. Salesforce is also executing on its platform strategy, Force.com, which enables an army of partners to develop application extensions for add-on functionality and vertical solutions. Finally, Salesforce is making a lot of, er, chatter about its new social CRM app, Chatter. That app, a “Facebook for the Enterprise” is certainly not a sure thing, but it is reinforcing the image of Salesforce as an innovator.
Oracle differentiates itself through its Siebel domain expertise, vertical market focus, and its roll as a consolidator. Oracle’s purchase of Siebel catapulted them into a leading position in the CRM market. The Siebel CRM applications remain the most functionally complete CRM apps available. Oracle’s ability to transfer this domain expertise to CRM On Demand makes for a good story, and may well deliver. Finally, Oracle has a strong enterprise-wide story to tell when it sells the vision of front-to-back office integration. Oracle’s broad application suite and Fusion integration story back this up. Even with its partner ecosystem, we don’t expect Salesforce to try to compete enterprise-wide any time soon.
Of course, this Silicon Valley rivalry might be drawing attention away from the very real market share gains of SAP and Microsoft. Gartner has rated SAP as the CRM market share leader again this year. Microsoft has gained considerable momentum with Dynamics CRM. Will personal rivalries lead Oracle and Salesforce to overlook both threats? Or will the competitive intensity drive further innovation for the customer?
If we get out our crystal ball, we see Salesforce continuing to lead in both market share and momentum in the years to come. They are focused, they have a great product and they execute well. Unlike Siebel’s reliance on large, perpetual license deals, the Salesforce subscription revenue model reduces the chance of a major implosion, like the one that made Siebel prey for Oracle.
However, should a prolonged recession or loss of focus at Salesforce lead to stagnation and a drop in share price, we think Larry would scoop up Salesforce in a second. The opportunity to add more recurring revenue while slashing costs is too attractive.