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Table of Contents
On-demand application services also contrast with solutions offered by first-generation application service providers, commonly referred to as ASPs,
which host third-party enterprise applications on behalf of their customers. Since these ASPs are deploying traditional third-party enterprise software
applications with each customer typically running on a separate instance, or copy, of the software, ASPs remain challenged by the time and expense problems
associated with purchasing, implementing, integrating, maintaining and supporting these applications. Additionally, because ASP hosting typically involves
the installation of one dedicated server or set of servers to support a small number of customers, ASPs are challenged to cost-effectively scale to support a
larger customer base.
We believe the shift to on-demand application services provides significant benefits. Businesses are able to realize many of the benefits offered by
traditional enterprise software vendors, such as a comprehensive set of features and functionality and the ability to customize and integrate with other
applications, while at the same time reducing the risks and lowering the total costs of owning enterprise software. As a result, we believe the emergence of on-
demand application services will continue to bring about a fundamental transformation in the enterprise software industry as businesses will be able to replace
their purchased software with subscriptions to a wide range of application services.
The Opportunity for On-Demand CRM Application Services
One category of enterprise software applications in which businesses have made significant investments is CRM. CRM software is intended to enable
businesses to automate three key functional areas: sales, customer service and support, and marketing. The objective of CRM is to improve interactions with
customers by providing a means for recording, managing, accessing and analyzing information regarding all aspects of a company's interactions with its
customers.
The difficulties that companies have faced in deploying and maintaining enterprise software applications in general are particularly relevant to CRM.
Despite the significant potential benefits that can be attained from CRM, many enterprises have failed to successfully deploy the CRM software they have
purchased.
We believe that traditional CRM applications have generally suffered from the following challenges:
• Low deployment rates and low user adoption. Customers have been reluctant to deploy traditional CRM applications as well as add-on
applications developed by third-party developers because of the complexity involved in implementing, customizing and integrating them and
because end users have not been willing to invest the considerable time and effort required to learn to use these applications.
• Lack of ubiquitous access. Given the mobility and geographic diversity of most enterprise sales organizations, ubiquitous access to customer
information and application functionality is critical to the effectiveness of CRM applications. As enterprise CRM software application
functionality has not been available or has been difficult to access over the Internet and through laptops and PDAs, full realization of the benefits
of sharing access to information and resources has been hindered.
• Low return on investment. The cost, time and effort required to implement an enterprise CRM application, combined with low user adoption,
have made it difficult for companies to quickly, or ever, realize the benefits of their investment.
• Inability to serve businesses of all sizes. Many small and medium-sized businesses seeking the benefits of CRM have been unable to afford the
costs associated with traditional enterprise software CRM applications.
We believe that the CRM market is one of the first markets to benefit from the on-demand application services delivery model. As a result of the high
total cost of ownership, low deployment and usage rates, and poor return on investment of traditional CRM software, we believe that businesses are especially
open to a new delivery model for CRM. The emergence of on-demand application services, combined with the deficiencies associated
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