In early December, 2013, Microsoft® is rolling out a new version of its CRM online Software as a Service (SaaS) cloud offer. What’s notable about this update is the removal of the old entry level subscription pricing. What used to cost $44.00 per user is now going to cost subscribers $65.00, which amounts to a price increase of 47.7%.
At the same time, Salesforce.com announced a new “Salesforce 1” program at its annual Dreamforce convention for 2013. A close look at “Salesforce 1” reveals a set of features much more valuable for a customer service organization than for a sales team. Salesforce.com has not announced any kind of substantial price increase for its cloud CRM offer, but such an increase may be just around the corner. As Illuminati Investments wrote on November 20, 2013, in an article published on the Seeking Alpha website, titled Could Salesforce.com Be Fudging Their Sales Numbers?, “Salesforce actually lost a staggering $124 million in just the past quarter alone. This was actually an improvement over the same quarter a year ago, when they lost over $220 million, although that loss was mostly due to a tax related adjustment where they admitted that they probably wouldn’t be profitable soon enough to use as much of their huge tax loss carryforward.”
If Microsoft needs to hike subscription prices by nearly 48%, and Salesforce.com faces quarter after quarter of accelerating losses, then is it safe to say cloud CRM offers aren’t paying off for vendors? I think this is the case. I suspect more of the details of the issues contributing to the diminishing attraction of cloud CRM as a product offering for ISVs will come out over the next few months as more commentators pick up on the magnitude of Microsoft’s price increase and the actual ramifications of Salesforce.com’s new product direction.
The next question, for Microsoft, in particular, is whether there is a risk of contagion from this cloud CRM problem infecting Azure®, or Office 365®.
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