Is CRM Failing to Make the Grade as Profitable Cloud Offer?

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®.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Cost Overruns for IT Projects for the Pentagon Are, Unfortunately, Consistent with Enterprise Experience

This post constitutes our final annotation of an article published on February 11, 2013 by the Wall Street Journal, Send in the Tech Reinforcements. The article was written by Arthur Herrman and John Scott. We found three points in the article to be worth an expression of our own opinion:

  1. One of the clearest presentations that we have seen of a tangible benefit offered by cloud computing for enterprise business and other large organizations in the public and not for profit sectors
  2. A controversial position on the question of whether or not it makes sense to implement operational risk management policies and procedures over IT project implementations
  3. and, finally, a presentation of substantial cost overruns as a characteristic emblem of IT projects implemented on behalf of the Pentagon here in the United States of America

With regard to 3), we are in full agreement with the article authors. The substantial gap between planned IT project costs and the actual cost of delivering the very same IT projects for the Pentagon is extreme and certainly worth an effort to control. We, ourselves, wrote quite early in this blog on a similar topic, albeit strictly with regard to the history of IT project implementation for enterprise business.

In our piece we noted our own lack of familiarity with the concept of Portfolio Management for IT. We then provided a definition for this function for modern enterprise IT organizations, and our opinion that the function has taken on the prominent position that it presently has in enterprise IT organizations as a direct result of the same extensive gap between planned IT project costs in the private sector and the actual expenses associated with them once these projects have been completed.

Now that we read the same type of information in an article on IT project implementation experience in the public sector (the Pentagon), we have to go a step further and posit that, despite 30-40 years of methodology evolution (and a good bit of that evolution effected by prominent, well respected universities like Carnegie Mellon), IT project management continues to fail to deliver on organizational expectations.

Larger ISVs and the consulting firms that typically partner with them on behalf of larger customers, have to do a better job of projecting costs. But is the empirical process of analyzing past experience, and, then projecting a likely outcome, itself, flawed and highly unreliable? In the aftermath of reading an article like the one written by Messrs Herman and Scott we have to answer in the affirmative on that one.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved