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NetSuite Macro Level ASP Model Evolution The market potential for ASP-delivered business applications will both attract new entrants and transform through a maturity process than can be understood in terms of evolutional generations. We expect the maturity process to result in market elimination and consolidation in three separate (and somewhat overlapping) waves. We expect the first wave of online CRM organizations to be eliminated will be the ‘low hanging fruit grabbers’. These are the providers that resell non-proprietary software with generic hosting solutions and typically provide very limited services or partner with other organizations for service delivery. These organizations are generally expecting their business success largely as a result of the growth of the industry. We expect the second wave of online CRM ASP organization eliminations to be ‘point solution’ providers. These “niche players” provide an overly application-specific solution to accommodate a specific business need, however, fail to provide a broad solution for the customer. These providers have one small basket to hold all their eggs. When the market changes or when a competitors product is deemed superior, they often become acquired or vanish. We expect the third wave of elimination to remove those ASP organizations that are ‘all things to all people’. These organizations often cobble together whatever anyone asks for and really don’t have areas of excellence. These vendors most notably include publishers who reposition their products on-the-fly in order to try to both sell and rent their solutions or host their applications as a fall-back strategy when the customer demands such an offering. Subsequent to the previously listed eliminations, the market will be left with the most strategic online CRM providers. It is our opinion and strategy that the keys to long-term success include the following critical success factors:
The recent high growth of horizontal ASP solutions and the very recent hyper-growth of hosted CRM solutions in the current economy suggest that the mid-market CRM industry is not recession proof, however, is recession resistant. In fact, research is validating that in a down economy, companies are competing for greater customer share, not market share, and highly successful companies will invest more in customer systems, not less. From the supplier side, customers are unequivocally demanding lower prices and greater value. These procurement criteria speak to the heart of NetSuite’s competitive advantages and growth opportunity.
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