There is an important rivalry shaping up between Salesforce.com and Oracle’s CRM on Demand and you know what -Salesforce is one of the large Oracle customer – running its data centers on Oracle databases and middleware. It’s bitter and sweet to have your competitor as your customer too. .
It reminds me of Ellison’s decade-long battle with CRM pioneer Tom Siebel (another of his protégés). 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 .Does Oracle need to own Salesforce to own on-demand CRM? Let’s look at some of the factors that might answer that question.
Market Share
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.
Functionality
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.
Opinions
To give some credibility to these numbers, let look 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.
Differentiation
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.
So Whats up for 2011
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. End of the Day its purely about which one of these could do the CEO Magic , I meant Customer Experience Optimization…
Happy New Year Amigos, Get Ready for the battle w Fun in the New Year 2011
Loving P&C
DC*
Im in the process of interviewing with both of these companies to sell their CRM. This article was the clearest breakdown of the CRM market that I have found on the net. It was very insightful, and I appreciate you taking the time.
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