Seven reasons why Salesforce.com and Microsoft could be vulnerable

As I touched on in last week’s March CRM news round-up, the mid-range CRM market looks to be opening up a little. If you’d asked me last year I would have said that Microsoft and Salesforce.com had a stranglehold on the market, but things seem to be changing. Sugar CRM clearly thinks so too announcing last week another round of investment totalling $33 million. Here are some of the areas that Microsoft and Salesforce may just be a little vulnerable:

An increasing enterprise focus – both organisations have been successful penetrating the larger, enterprise accounts, and both clearly see this as an attractive market place.  However, as companies like SAP have found, it’s difficult to be successful in both enterprise and the SME space, and they may find it difficult to maintain their appeal with lower end customers as they progress up the food chain.

Product focus – I’ve never been wholly convinced how seriously Microsoft takes the business solutions market given their vast range of other interests. Salesforce on the other hand has progressed largely because of their laser-focus on a single market. But, that seems to be changing. A raft of acquisitions, and a strategy that looks less and less centred around CRM, could weaken the strength of their product positioning and allow competitors to make gains.

Innovation – while there’s been a number of key technology jumps over the last fifteen years, particularly to web and cloud-based technologies, for which Salesforce has been a key innovator, progress on the functionality side has been rather more leaden. Microsoft in particular seems to have adopted a strategy of fast(ish) follower, and may well be vulnerable to more adventurous, agile competitors.

The impact of social media – Microsoft seems to have been in denial around the convergence of social media and CRM technology. Salesforce on the other hand has embraced it through products like Chatter, in an attempt to drive its influence far wider in the organisation. Whether Salesforce has the right strategy remains to be seen, but the reality is that the social dimension of CRM represents one of those technology shifts, like the move to the cloud, that may have the potential to change the established order of things.

The interface – it would be interesting to speculate what a CRM system would look like if it was designed by Apple. Very different from the current offerings I’d suspect. While there’s nothing inherently wrong (or right) with either interface, my best guess is this could be an interesting battleground for those that choose to innovate there. Look and feel is important, as Steve Jobs so conclusively proved, and, with a wider range of appliances like phones and tablets to access CRM from, there may just be scope for a user interface revolution.

Business focus – Infusionsoft added 3,000 customers in 2011 alone. Their success is built on consistently hammering home the business benefits of using their software. This is something of a rarity in the jargon strewn world of IT, and the major players in the CRM market are no exception, tending to talk up the technology rather than the operational impact. What Infusionsoft understands that perhaps other have missed is that a) people don’t buy technology for technologies sake, they buy the benefits it produces, and b) the benefits often aren’t obvious to them. There are opportunities for vendors who grasp this.

Price – Microsoft’s debut into the SaaS market last year was supported by an aggressive pricing strategy, but the recent announcement of pricing for their forthcoming mobile client suggests they may not be wholly committed to this approach. Salesforce faces the dilemma of pricing for both their deep-pocketed corporate clients, as well as more price-sensitive SME’s, and this may leave them exposed to competitors who can offer reasonably functionally-rich products at an aggressive price-point.

Despite these potential chinks in the armour, Salesforce.com and Microsoft are hugely impressive, heavily resourced CRM vendors, with fully-featured product sets, large installed bases, and thousands of salespeople and partners. The market is unlikely to change overnight, but when you consider how the SaaS revolution changed the order of things in a few short years, it’s clear that major change in the space can happen relatively quickly. Even if Salesforce.com and Microsoft are not to be unseated any time soon, there’s still a potentially profitable third place in the CRM mid-market to be fought for, and plenty of lucrative market segments available for those that can differentiate themselves. It feels like we have a very interesting few years ahead.

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