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Generic services It is clear that online business applications services are growing impressively and their activities are consolidating in an array of different market segments. One of the best known players in generic services is SalesForce.Com which claims to have 15,500 customers, some 267,000 subscribers and to be operating in 11 Languages. Their activities are generally concentrated in customer relations management (CRM). It is they who promote the concept of "No Software". SalesForce.Com Financials state that they have increased their customer base from some 1,500 in 2001. This grew four fold by 1stQ 2004 to 6,300 and the projection for 1stQ 2006 is 15,500. Subscribers from within that customer base increased during the same period from 30,000 to 267,000. The number of subscribers per customer hovers somewhere below 20. The projected income for 1stQ 2006 is some $64M which breaks down to an average income (from all sources) of around $4,200/annum per customer ($350/month/customer) or around $240/subscriber/annum or $20/month/subscriber. Subscriber number per customer seems to have been falling. The technical provisions in terms of applications functionality of SalesForce.Com are a good deal for businesses which use them. There are lot of other players trying to edge SalesForce.Com out but the fees charged do not leave much room for manouever; at these fee rates SalesForce has created a tough hurdle to jump for the competition. On the other hand to sustain its growth SalesForce is ploughing back 60% of its fee income into marketing and sales. From Generics to Verticals When looking at generic applications like CRM where the field, in terms of available client end and sever end systems is immense; most have similar functionality. Therefore the issue of business impact seems to boil down to the basic costs of having availability of basic CRM functions. Where online business applications are geared to non-generic or vertical applications then the quantification of direct business performance impacts is easier to identify and measure. It is also the case that outside the heavily populated area of CRM there are fewer online operators. One of the notable companies tackling the vertical applications areas is Navatec.Com. Navatec was founded by the Systems Engineering Economics Lab (SEEL) in 2003 to market its software and harware technologies for online business applications. SEEL have been involved in online appd research & development for some time now. Indeed their Seel-Telesis® ARD program was started in 1990. So although Navatec.Com was recently formed it cannot really be considered to be a "start up". Navatec.Com seems to be keenly aware of the need to balance the competitive survival of the service company and that of its customers. The Navatec.Com approach is clearly one in which it sees the potential for strong mutual benefits to supplier and user of services. Navatec.Com has produced some useful information on their approach which provides measures of technical, economic and financial impacts on business activities using well-defined applications functions. We reproduce below some sections from the Navatec.Com web site section which explains the benefits of what they term server end management. Some basics The initial point made by Navatec.Com is that deployment of a new functionality at the server is immediately available at virtually zero cost to all customers; all users are at all times working on the latest system. It terms of technical support the ability to track what a customer is doing means that it is a simple matter to distinguish between a bug and incorrect use of the system. Customer specific functionality can be added without affecting other customers meaning that online business services do not have to be a "commodity product" or a "one size fits all". Customer distributed and opportunity costs One of the most interesting points is how a $20,000 development of new functionality deployed at the server rapidly dilutes down to a per customer cost of less than $2.00 for say 10,000 customers or $20.00 for 1,000 customers. The issue is that if customers made use of development services to install client end solutions, then each customer would spend around $20,000 (most would not bother) so the sector or customer base opportunity cost of not using the online provision ends up around $200M for 10,000 customer or $20M for 1,000. Tough for systems houses The hidden significance of this is that online business applications services are beginning to create havoc for systems integrators who work at the client end. The reality is that they cannot compete and it will become more and more difficult to justify designing and integrating corporate client end systems in the face of the rising sophistication of online provisions. Productivity growth higher Navatec.Com state that the value contribution of online systems can exceed client end systems because of the relatively uninhibited flow of zero cost distribution upgrades and enhancements. In fact the concept of versions and upgrades is replaced by a constant evolution in functionality. Navatec.Com estimate that under this regime functionality in online systems can double every 12-18 months whereas cost constrains and other factors cause the server end functionality to perhaps double each 18-36 months. Clearly the online provision has a higher probability of impacting business performance as a result. Research & development  In what appears to be a significant difference between the SalesForce.Com and the Navatec.Com approach is the fact that SEEL has set a minimum baseline of 20% of all income going into technology development to improve provisions. At least in accounting terms SalesForce.Com seem to spend only 6.7% on research and development. Learning The Navatec.Com approach is that as customers use online systems their demands change and become more sophisticated. Rather than wait to be prodded, Navatec.Com is busy developing solutions. As the number of customers increases Navatec.Com say that the learning of their own teams about vertical sector requirements becomes an essential resource in improving service provisions. |
