CRM software subscription models: Do they make sense?

Cloud trends have made the software subscription model attractive to companies rather than paying a lump-sum up-front cost.

Salesforce.com just released its numbers for its fiscal year, which just ended. Deferred subscription revenue is part of why Salesforce is growing and will potentially crack the Fortune 500 this year.

Denis PombriantDenis Pombriant

"Salesforce is not an accident," said Denis Pombriant, president and CEO of Beagle Research Group LLC.

"Lots of companies are benefitting from [a software] subscription model because it gives them a new way to cost-effectively deliver solutions to their customers."

Pombriant emphasized that part of the key to success from a software subscription model is to develop metrics to gauge progress. Metrics enable companies to "see who needs help and to proactively offer it rather than waiting until a customer is frustrated" and defects, he said.

Pombriant also noted that subscriptions have permeated the culture of customer relationship management. Customers have come to expect certain levels of service and the flexibility of a subscription model, so vendors who opt not to offer subscription-based CRM should take note that they could disadvantage themselves.

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This was first published in March 2014

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