SaaS CRM taking a new vertical approach

By Barney Beal, News Director 25 Oct 2007 | SearchCRM.com

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Take, for example, Torstar Digital. One year ago, the online arm of the Toronto-based Torstar Corp., one of Canada's largest media companies, was looking for a CRM and ERP application; it considered both on-demand and on-premise, vertical and horizontal options.

Torstar Digital wound up selecting on-demand technology from San Mateo, Calif.-based NetSuite because of its flexibility and combination of back-office and customer-facing functionality, even though it didn't have an industry-specific version for media and publishing.

Yesterday, however, NetSuite released a version of its Software as a Service (SaaS) for media/publishing companies, based on many of the configurations it had created working with Torstar Digital.

"A year ago when we made the decision, it was a really tough call," Jeff Sherman, vice president of finance and operations, said of the technology selection process. "We felt [NetSuite] was flexible enough to be used in our environment. If we had seen this [industry-specific version] a year ago, it would have been a no-brainer."

You find all these crazy niche industries out there. No software company is going to build a specific application for the pig-farming industry." Rob Bois Analyst, AMR Research

While SaaS CRM vendors have offered vertical versions for years, the latest slew of releases has taken on a different character. NetSuite, for example, this week released SuiteBundler, a configuration tool built into the NetSuite application that allows the company's partners to build micro-vertical applications.

"Everyone acknowledges these days that Software as a Service has fundamentally changed the way software is delivered, but no one's looked at what that means for service companies," said Mini Peiris, NetSuite's vice president of product marketing.

SaaS, where the vendor maintains the application in its own datacenter and where customizations carry forward with each upgrade, has removed a revenue stream for resellers. With SuiteBundler, NetSuite is providing a new revenue stream for its partners while providing more industry-specific offerings for its customers.

"The whole idea is to be able to take anything you can configure or customize in NetSuite and package it together as an option and automate that delivery process," Peiris said. "We've looked to partners to reach verticals. This is the final tool that is going to enable them to build it into a repeatable solution."

In addition to the media/publishing version being released this week, NetSuite is releasing seaport marina management, shipping material franchises and electronics wholesale distribution versions.

NetSuite is not the only SaaS CRM vendor that has built a configurable CRM application and looked to partners and its own customers to create vertical versions. Last month, San Francisco-based Salesforce.com announced Visualforce, a tool that lets users build their own user interface, and has been steadily promoting its evolution from CRM provider to on-demand platform provider. It has also been releasing vertical versions itself. In April, Salesforce.com released a financial services application. At the same time, RightNow Technologies released a higher-education version, and last month the Bozeman, Mont.-based company released versions for the consumer electronics and high-tech appliance manufacturing industries.

"Having vertical versions is more important for some vendors than others," said Rob Bois, analyst with Boston-based AMR Research. "NetSuite's biggest challenge is they're selling to smaller organizations on an SaaS message. These businesses have specific needs because of the industry they're in; they don't expect to go out and spend a lot of money on services. For NetSuite, this is a way to address those industries that have specific needs with CRM, ERP or e-commerce, and it helps get them some service partners that can do these deployments in a more repeatable fashion."

For more on SaaS CRM See what Salesforce.com offers for financial services firms Get a demo of the SaaS CRM vendors' core applications

Microsoft, which later this year is set to release a multi-tenant version of its CRM Dynamics 4.0 version that it will host in its own data centers, has relied on its large partner base to deliver specific functionality not offered in the core product. And partners that do not offer additional integration or functionality with hosted CRM will ultimately find themselves competing with Microsoft itself when the company releases CRM Live, its SaaS version, later this year. Earlier this week, in an effort to build momentum for the partner-hosted version of its product,Microsoft slashed partner hosting fees. With partner hosting, Microsoft partners can modify the application, but ultimately they, not Microsoft, are the ones to host and maintain the application.

CRM has taken a vertical approach to software for years, but developments by the SaaS CRM vendors differ from predecessors like Siebel and SAP, which built out vertical versions themselves.

"Where the Software as a Service guys are different from Siebel is [that] Siebel built out separate code bases," Bois said. "In a multi-tenancy environment, by definition you can't split the code base out. Vendors are clever; they've built a template out. The idea is it will allow companies to take upgrades without having the thing break. It's a cost-effective approach."

It's a relatively new model for vertical functionality, however, and while some businesses will be happy to see software makers finally cater to their specific needs, others need to exercise caution.

"You find all these crazy niche industries out there. No software company is going to build a specific application for the pig-farming industry," Bois said. "For those industries where there isn't an alternative, companies will embrace the notion that anyone is writing an application for their particular challenges."

Established companies, particularly the larger enterprises where SaaS is beginning to make inroads, are going to want to get that industry-specific functionality direct from the vendor rather than a partner, Bois advised.

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