Sonoma Partners Microsoft CRM Blog

New Forrester Wave reports released, and look who's ahead of Salesforce.com!

Analyst firm Forrester recently released new reports that evaluate and rank CRM business applications. I was very happy to see that Forrester ranked Microsoft Dynamics CRM as a "leader" in both the enterprise and mid-market space. Even better, Forrester gave Microsoft Dynamics CRM a better ranking than Salesforce.com. Very nice!

Forrester summarized Microsoft Dynamics CRM with the following:

Microsoft Dynamics CRM. Over the past five years, Microsoft has established itself as a major
CRM player thanks to deep capital investment, a formidable strategy, and strong branding. The
product is strong in SFA, internationalization, and usability. Arguably its greatest strength is
its native Microsoft Office user experience. The solution is set up to look, feel, and function
like Outlook. Sales analysis tools, opportunity management, and setup and configuration
capabilities are the application’s key SFA strengths. The product also is available in multiple
deployment options and is attractively priced below many of the alternative products in the
market. The solution is built on the Microsoft .NET framework and integrates seamlessly with
other Microsoft productivity tools, like Office, Outlook, and SharePoint.

Where the solution is weaker, however, is in support for eCommerce and industry business
process support. The product does not possess deep industry vertical capabilities, and offers
minimal partner relationship management (PRM) capabilities natively, forcing buyers that
want deeper PRM capabilities to augment the application through integration to BLUEROADS.
Microsoft Dynamics CRM is best suited for organizations that are Microsoft-technology-centric
for their business applications and technology

You can download the full Forrester reports if you want read all of the details:

• Forrester Wave Midmarket report: click here.
• Forrester Wave Enterprise report: click here.

Microsoft CRM Workflow...the Salesforce.com killer?

We are working with a prospect to switch them from Salesforce.com to Microsoft CRM. As part of this process, I'm learning all sort of colorful details about why Microsoft CRM is a superior platform! Tonight I stumbled across one I just could not believe, so I thought I would share the goods!

First and foremost, Salesforce.com does NOT include workflow in all of their editions. If you want a workflow engine, you will need Enterprise Edition or Unlimited Edition. That means instead of paying $65/per user per month for their Professional Edition, you'll be paying $95 or $120 per user per month for their Enterprise or Unlimited Edition. As a reminder, Microsoft Dynamics CRM includes workflow with ALL versions of the software (on-premise, Online or partner hosted). The Microsoft Dynamics CRM Online version includes workflow, and that costs just $39 (or $59) per user per month. That's quite a savings when compared to $95 or $120 per users per month! Assuming you have 30 users, you would save about $30,000 per year by going with Microsoft Dynamics CRM Online at $39/month instead of $120/month!

Now Benioff might say that Microsoft is less expensive because it's not as good. Well if you're just looking at workflow, it only took me about 3 minutes to find one significant flaw in Salesforce.com's workflow (when compared to Microsoft Dynamics CRM):

You can't nest workflow rules within another? Even if you cough up the extra $$ for the Enterprise or Ultimate Editions? Yikes! Now let's take a look at Microsoft Dynamics CRM workflow:

As you can see, it couldn't be easier to have workflow rules reference one another in Microsoft Dynamics CRM! From here, you can create incredibly sophisticated and complex rules to automate all of your business processes. Enjoy!

Scoble interviews Salesforce.com CEO, he mentions CRM just once

I just listened to Robert Scoble's interview of Marc Benioff, and I thought the following was interesting:

• Scoble kept asking Benioff to introduce himself, but Benioff wanted to do more small talk. Awkward.
• Benioff mentioned their CRM offering JUST ONCE in this 25 minute interview. It is obvious to me (and it should be obvious to customers) that Salesforce.com is really focused on their platform as a service offering...which isn't great for their CRM customers since they are playing second fiddle.
• At the 14:20 minute mark, Scoble mentioned a startup that was funded with just $8,000. Benioff says "Well thank god they're not using the Microsoft infrastructure" insinuating it would have been more expensive. Scoble says "Well they were actually using .NET..." and Benioff just talks right over him!
• Benioff has a giant Salesforce.com surfboard outside his office. Not sure why, weird.
• He might be worth $1 billion dollars, but Benioff doesn't know how to pronounce Bono correctly. :)

Overall, I think it is worth a listen if you get a chance.

Salesforce.com customer list stolen

Just one more thing customers need to consider before moving all of their critical customer data online...how much do you trust the company hosting your data?

Salesforce.com customer list stolen

Robert McMillan, IDG News Service
07 November 2007

Salesforce.com's customers are targets of malicious hackers and scammers, after an employee was tricked into handing a corporate password to a phisher.

In a note to customers, Salesforce said that criminals have been sending customers fake invoices and, starting just a few days ago, viruses and key logging software. The emails were sent using information that was illegally obtained from Salesforce.com.

The problems began a few months ago, when a Salesforce.com employee fell for a phishing scam and divulged a company password that gave attackers access to a customer contact list. With this password, the criminals were able to obtain first and last names, company names, email addresses and telephone numbers of Salesforce.com customers.

"As a result of this, a small number of our customers began receiving bogus emails that looked like Salesforce.com invoices," Salesforce.com said.

Some of those customers also fell for the scam and gave up their passwords too. When Salesforce.com started seeing malicious software being attached to these emails, the company decided to issue a general alert to its nearly 1 million subscribers.

According to the Washington Post, Suntrust Banks was one of the customers victimised by this scam.

Jan Sabelstrom noticed that something was amiss when an email purporting to be from the US Federal Trade Commission landed in his inbox. This attack contained information about one of his company's customers that would have been available to Salesforce.com, but not the public at large, he said.

Sabelstrom, managing director of CaSa Customer Solutions, a Chicago-based CRM consultancy, said he emailed Salesforce employees, including CEO Marc Benioff, about the message on the same day last week that Salesforce.com notified its customers of the problem.

"I basically shot them an email saying... I would like to understand how this came to be," he said. "It seems a little bit dubious to me that there's this connection between me and my customers."

Reaction to Salesforce.com's quarterly earnings

Salesforce.com released their Q2 FY08 earnings last Wednesday, and I spent some time reading up on people's reactions to the news. Overall, it seems like there was both good and bad news and I'll try my best to summarize:

Good News

• Earnings of $0.03 per share beat estimates of $0.02 per share
• Salesforce.com reported some impressive enterprise customers, including one customer with more than 30,000 subscribers.
• They increased their earnings forecast to $0.08 to $0.10 per share for the rest of FY08.
• Salesforce.com reported a total of 35,300 customers and over 800,000 subscribers.

Bad News

• Cantor Fitzgerald analyst Mark Verbeck, said that Salesforce.com's profit in the quarter was goosed by "a lower than expected tax rate."
• Pacific Crest Securities analyst Brendan Barnicle said in a note that Salesforce.com's cash flow in the quarter was disappointing, and fell below his expectations for the third quarter in a row.
• Revenue growth is slowing from 84% in Q1 2006 to 55% in Q1 2008.
• The company is still barely profitable at $0.03 earnings per share.
• Principal Accounting Officer William Dewes recently resigned, despite the fact he was promoted from his previous post as "Chief Accounting Officer" just 3 months ago (back in May 2007)
• Insiders are busy selling off 91.4% of their salesforce.com shares (over the last six months).

I am not a professional investor but I did kick around some additional numbers that I found interesting. Page 4 of Salesforce.com detailed financials lists their customer and subscriber growth by quarter. You'll notice that they didn't report subscriber numbers last quarter and it just said 800,000+ subscribers for this quarter. Out of curiosity, I did some quick math in Excel to try and determine two things:

1. What is their average deal size?
2. How many subscribers did they add each quarter?

Since Salesforce.com withheld subscriber details in Q1 FY08, I had to make some assumptions (red italic numbers in the table) around their performance. Again, the numbers in black are from their financial reports so they are accurate. I also just assumed 800,000 total subscribers for Q2 FY08 even though their report actually says ">800,000"...we're just ballparking anyway.

	Customers	Subscribers	Average # of Subscribers	# of Subscribers Added
Q1 FY07	22,700	438,000	19.3
Q2 FY07	24,800	495,000	20.0	57,000
Q3 FY07	27,100	556,000	20.5	61,000
Q4 FY07	29,800	646,000	21.7	90,000
Q1 FY08	32,300	717,000	22.2	71,000
Q2 FY08	35,300	800,000	22.7	83,000

Looking at this chart, two things jumped out at me:

1. It appears that Salesforce.com probably had a significant dip of subscriber adds in Q1 FY08 since by my guess they only added approximately 71,000 subscribers.  I wonder if this apparent decrease had anything to do with the fact they decided to not report the number of subscribers that quarter. :) As a reminder, Microsoft reported that they added more than 85,000 Microsoft CRM users last quarter so we're running stride for stride with Salesforce.com in subscriber adds.
2. They did a good job of increasing their average deal size to 22.7 subscribers per customer, which is an 18% increase compared to their 19.3 subscribers per customer in Q1 FY07.

Impressed with this increase in average number of subscribers, I started thinking about those large enterprise deals that they reported this quarter. They mentioned the following customers:

• Two customers have more than 30,000 subscribers each
• Four customers have 20,000 subscribers each
• Five have more than 10,000 subscribers each
• 68 customers have more than 1,000 subscribers each

Doing some calculations on these numbers, 79 customers are responsible for at least 258,000 subscribers. That means just 0.2% of Salesforce.com's 35,300 customers account for 32% of their 800,000 subscribers! Even worse, just 0.03% of their customers (the largest 11 customers) represent almost 25% of their entire subscriber base! Holy cow. Talk about putting all your eggs in one basket. I don't know if this is typical or not but those numbers seem shocking to me. If we exclude those 79 largest customers and re-calculate the average number of subscribers per quarter we get just 15.4...significantly less than their 22.7 overall average. Considering that Microsoft announced that their CRM Live pricing will be about 50% of the Salesforce.com pricing and the product functionality is nearly identical, I guess that Salesforce.com is sweating bullets about the possibility of losing those top 11 accounts. By my math, I figure those top 11 Salesforce.com customers would probably save millions of dollars in subscriber fees EVERY year by switching to Microsoft CRM Live from Salesforce.com.

Unfortunately, Microsoft doesn't provide quarter by quarter updates on user counts so we can't run a similar analysis on Microsoft CRM...but I had fun digging into these Salesforce.com numbers. Don't get me wrong though, Salesforce.com is a very serious competitor but I still like Microsoft's chances of a runaway success with CRM Live.

85,000 seats of Microsoft CRM sold in the last quarter

I saw in Information Week that "there were 85,000 seats of Microsoft CRM sold in the last quarter, which is roughly comparable to the sales of Salesforce.com." This stat absolutely blew me away for a few reasons:

1. Microsoft is tight with publicly releasing details about the total number of CRM customers and the total number of CRM users, but through FY06 (last June 30th) they said there were 10,000+ customers and 400,000+ users. Since Microsoft released version 1.0 on 12/26/2002, it took us 3.5 years to reach 400,000 users. With those numbers as context, the fact they added 85,000 Microsoft CRM users in just the last quarter is amazing. In other words, in the last 3 months of FY07 they sold more than 20% of what it took the previous 42 prior months to sell. Wow. You can really see the momentum building behind Microsoft CRM.
   
   
2. I am extremely encouraged that we added the same number of users as Salesforce.com considering everyone knows it is easier to sell a hosted CRM service like Salesforce.com to smaller companies. At their price point, Salesforce.com can add lots and lots of 5, 10 and 15 users deals relatively easily. Customers can pull out their credit card and go. Those types of smaller opportunities can be more challenging to sell with Microsoft CRM 3.0 since right now we only have an on-premise option for customers. The on-premise deployment (mostly) requires them to pay for the CRM licenses up front and purchase the system pre-requisites (like SQL Server) which is sometimes an issue for those smaller deals. Therefore if Microsoft CRM kept pace with Salesforce.com last quarter without a CRM Live option to offer customers, I expect that Microsoft CRM will start outpacing Salesforce.com for seats sold early next year when CRM Live is available!

All in all, this is great news for Microsoft CRM customers and partners like us.

On a side note, if anyone knows the new total number of Microsoft CRM customers and users worldwide through the end of FY07, I would love to see those numbers so that I can include in them in my future sales presentations. Please send them our way!

Google and Salesforce.com teaming up?

Monday's Wall Street Journal reported:

"Internet giant Google Inc. and Salesforce.com Inc., are discussing an alliance that could help them compete more effectively with Microsoft Corp., according to people familiar with the matter. The companies are still hashing out details of a potential partnership, expected to be announced in the next few weeks. But one outcome, these people said, could be a Web-based offering that integrates some of Google's online services such as email and instant-messaging with those of Salesforce.com, whose "customer-relationship management" tools help salespeople track their accounts."

My initial reaction when I read this was "WOW! This is big news". Everyone knows that Google and Microsoft hate each other with a burning passion, and I think it is also pretty much common knowlege that Salesforce.com is the #1 competitor for the Microsoft CRM product. Therefore, those two companies teaming up will definitely get Microsoft's attention.

After thinking about it a little more, I am not sure exactly what this "alliance" would mean for end users of Salesforce.com. The WSJ mentioned integrating Google's email and instant-messaging with Salesforce.com, but this seems like a really trivial integration point. Over the past 5+ years I've spoken with hundreds of customers and prospects and not ONE of them ever asked for something like this. So unless they have something else up their sleeve, this doesn't seem like a big issue for a company like ours that sells Microsoft CRM. I can't ever imagine losing a deal because Salesforce.com integrates with Gmail!

On the plus side, I am almost glad Google and Salesforce.com are teaming because it will put them squarely in the Microsoft cross-hairs! Whenever Microsoft sets their sight on a target, they almost always win.

I guess Saturdays don't count for "on demand"

Salesforce.com will be performing system maintenance for SIX HOURS tomorrow. I hope any Salesforce.com users weren't planning on catching up on any work this weekend!

Also, why did they schedule this interruption for "prime time" from 9am to 3pm? Most system maintenance time slots are like 10pm to 2am so as not to interfere with users. Not good.

Needless to say, Microsoft CRM customers don't have to worry about someone else scheduling downtime for them. A lot of our customers (particularly those in the real estate industry) do most of their business on the weekends...so this type of outage would be completely unacceptable to them.

Salesforce.com and Oracle problems

Yesterday was a bad day for Salesforce.com (a hosted application that competes with Microsoft CRM) and Oracle. Salesforce.com was completely unavailable to its CRM customers for large portions of the day. Customers were irrate to say the least:

Charlie Crystle, CEO of Mission Research, a software company in Lancaster, Pennsylvania, said: "This is not just an inconvenience. We're losing sales. It's a busy time of the year." Mission Research experiences Salesforce outages that typically last an hour or so about once per month, according to Crystle.

Another customer, an East Coast consulting firm, has been struck by outages about a half a dozen times over the past year, according to the firm's vice president

First Albany Capital analyst Mark Murphy wrote in a research note. "We believe this is the most severe and widespread outage Salesforce.com has experienced."

What is worse is they are completely flat-footed with customers on this. Their phone system cannot deal with it. I call tech support and the phone just hangs up on you. I call sales, at the 1-800 NO SOFTWARE line and a message says there are no reps who can take my call at this time, just leave a message.

Salesforce.com blamed the problem on a database cluster crash and it's no secret that Salesforce.com uses Oracle databases.

Microsoft CRM 3.0 offers customers the best of both world because you can choose to install it onsite or have it hosted at a third-party provider. If you choose to host Microsoft CRM, and then decide later that you would rather install the software onsite...that's no problem. If you're a Salesforce.com user and you decide that you want to install and manage the software onsite, well you're out of luck. You'll be stuck paying that monthly service fee forever.

Nucleus Research gives more bad news to Salesforce.com

Fresh off the heels of Gartner's harsh analysis of Salesforce.com, Nucleus Research unleashed an equally indicting analysis of SalesForce.com. Among their findings:

• Nucleus found no customers that had deployed to more than 2000 users; 93 percent of Salesforce.com customers had fewer than 500 users.

• 28% of customers had deployed another CRM solution to supplement the functionality in Salesforce.com

• The cost barriers to switching from Salesforce.com to another solution were relatively low.

• 38 percent of Salesforce.com customers are open to switching because "it is a commodity product, not a strategic one that impacts the way they do business".

Yikes. This must be a tough week for companies who invested a lot of time and resources into Salesforce. However, as the Gartner and Nucleus reports point out...the switching costs are low so now is the time to get on the Microsoft CRM bandwagon!