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344 Chapter 12 • Customer Relationship Management

(e.g., Merrill Lynch, ABN Amro, Cisco, and Nortel). 11 A wide variety of services like
customization and data movement from hosted environment to a company server are offered to
lure companies into hosted CRM services. Even though there are many advantages for on-
demand CRM (e.g., avoiding the headaches of installing, upgrading, and maintaining CRM
applications), one key concern many companies have is what happens when the hosted appli-
cation service provider experiences downtime. For example, Salesforce.com’s service was
down due to a major system outage in 2005.
SAP, which started its on-demand services in 2007 with lot of fanfare and great expecta-
tions of having thousands of their small-business customers using the Business By-Design TM ,
12
finds itself struggling with only 100 customers. “It was not as successful as expected. “You can
do everything you want under lab conditions, but when you are in the real world, sometimes
things look a bit different,” says Rainer Zinow, SAP’s senior vice president for Business
ByDesign. SAP’s entry to the on-demand area illustrates a broader and natural business system’s
progression from point solutions to suite solutions—from CRM for the sales and support people
to ERP for all lines of business. While innovators such as Salesforce.com have pioneered and
proved the viability of on-demand business systems, the industry will be further advanced as
vendors expand the scope of their offerings to include fully integrated, enterprise-wide solutions.
While some players such as Salesforce will approach this with heavy reliance on partnership
models (like App Exchange), other vendors such as SAP are delivering a broader and deeper
system with less reliance on third-party solutions. Each approach is valid; however, expect SAP
to replicate their on-premise success in the newer on-demand world.
Small businesses are slowly shifting to on-demand software due to high costs of installation,
maintenance, and security. NetSuite, another company offering on-demand CRM, has added
project management, billing, and other applications to its software suite. Microsoft Corp. has
also introduced a Business Productivity Suite, which offers small- and medium-size businesses
e-mail, Web site, file sharing, and other software services at low monthly leases, which they find
are getting popular with small businesses as they are becoming aware of the benefits of on-demand
software.
According to market researcher IDC, the software-as-a-service (SaaS) industry is slated to
increase sales to $40.5 billion by 2014, up from just $13.2 billion last year. IDC predicts that in
2010 the shift to subscription software will result in nearly $7 billion less worldwide traditional
software license revenue. Around the globe, including Europe, Middle East, and Africa,
on-demand accounts for just a small piece of the software-as-a-service market, 13 percent last
year, according to IDC, versus 74 percent in the Americas. By 2014, this region will increase its
share of such sales to 35 percent.
Microsoft had also announced that Microsoft Dynamics CRM on-demand will be available
in 40 markets and 41 languages by the end of 2010. Microsoft Dynamics CRM 2011 offers
familiar, intelligent, and connection experiences for users both inside and outside an organiza-
tion. It also enables MS partners, including independent software vendors, global system
integrators, and value-added resellers, to quickly create, package, and distribute Microsoft
Dynamics CRM extensions and custom solutions. In conjuction with this release, Microsoft has
started new Microsoft Dynamics Marketplace Web site, integrated within Microsoft Dynamics
CRM 2011, which offers an online catalog for partners to market and distribute solutions to

11 Mohamed, A. (September 5, 2006). Web Services Lead the Way to CRM. Computer Weekly, 34.
12 http://online.wsj.com/article/SB10001424052748703499604575512452496458586.html?KEYWORDS=SAP+AG#
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