Software as a Service: Price Wars Coming?
It was inevitable. As Salesforce.com continues to ring up record sales, rivals, startups and even managed service providers are saying they can offer the same quality software as a service — at a lower price.
A case in point: InfoStreet Inc. (www.infostreet.com) has launched a new version of its online CRM application. It targets small businesses, “particularly those which do not wish to spend $65 and up (per user) price of other Web based CRM offerings,” according to an InfoStreet press release. If you didn’t take the hint, InfoStreet was pointing to Salesforce.com pricing, and the company says its SaaS service can be had for about $10 per month per user.
But this is more than a SaaS play. There’s a managed services angle here, too.
InfoStreet is blending the worlds of SaaS and managed services. In addition to hosting a CRM service, InfoStreet offers email, email archiving, anti-virus and anti-spam services, file sharing and other managed services.
InfoStreet’s strategy reinforces the convergence of managed services and SaaS, a key theme that continues to pop up regularly on MSPmentor. Level Platforms CEO Peter Sandiford tackled the issue of SaaS and managed services head-on in his January blog contribution to this site.
I doubt InfoStreet will steal many — if any — customers from Salesforce.com. But that’s not the point. MSPs must continue to target market segments with clear messages that differentiate themselves from the competition. Today, InfoStreet essentially raised its hand and said “we’re the low-cost alternative to Salesforce.com, and we’re bringing CRM to the small business masses.”
That’s a pretty strong statement … assuming InfoStreet can truly generate a profit at those price points.
Yes, you are right about the price wars. $10/user seems to be the sweet-spot among Salesforce’s competitors (Disclosure: I work for one, though not in CRM). And Salesforce is indeed aware of the threat and its implications…
Quote from a recent Forbes article.
http://www.forbes.com/2008/02/22/mitra-zoho-india-tech-inter-cx_sm_0222mitra.html
[quote]Well, Zoho does everything that you would do with Microsoft Office. It also has a hosted customer relationship management service that is free for very small companies and only costs $10 per user per month for larger ones. It competes with Salesforce.com (nyse: CRM – news – people ), which charges $65 per user per month.
Marc Benioff, chief executive of Salesforce.com, has made an offer to buy Zoho for an undisclosed amount. Benioff seems appropriately nervous, since Salesforce.com’s sales and administration costs are high, eating up most of his earnings. Can he afford to compete if Zoho undercuts him at such a dramatic scale?
Vembu has turned Benioff down.[/quote]