2001 Oct 01
Hosted Sales Automation: Salesforce.com and Upshot
David M. Raab
DM News
October, 2001

Like so many Internet concepts, the idea that software would be delivered as a Web-based service rather than sold for internal operation no longer seems quite so brilliant. Objections range from higher operating costs, to limited customization, to lack of integration with other company systems, to a fear of losing control of critical data. The financial problems of many service providers add yet another level of risk.

But when customization and integration needs are limited, the idea is still plausible. Add a need to serve many different users at shifting physical locations and it makes a fair amount of sense. One application that meets these requirements is sales force automation.

Salesforce.com (www.salesforce.com; 800-667-6389) and Upshot (www.upshot.com; 888-700-8774) both provide salesforce automation software as a Web-based service. While there are differences between the products, the business approaches are identical: in return for a monthly fee based on the number of users, clients receive browser-based access to an application managed by the vendor.

This hosted approach speeds implementation, since clients need not buy hardware or install software on their workstations. Compared with conventional sales automation software, implementation is also faster because customization is strictly limited: users can add new fields to the existing data tables and make small changes in how screens are arranged, but cannot make more substantial alterations.

Integration with external systems is also extremely limited. Both systems can import and export data in batch processes, and Salesforce.com can send also transactions to other systems in real time. But neither vendor supports two-way, real time integration, although they do plan to permit this some time next year. Both also allow users to access an external Web address from within their system–say, to run a company’s order processing system. But they cannot transfer data to or from this other location.

In return for accepting these limits, users can complete an implementation in about two weeks rather than the conventional two to three months. Cost is similarly lower: about $200 per user rather than $2,000 to $3,000. (These figures are based on vendor estimates; your mileage may vary.)

On-going costs are likely to be cheaper as well, although the math gets a bit complicated. The hosted systems cost $600 to $800 per user per year, while conventional products have one-time costs of about $2,500 to $3,000 per user, including fixed and per-user license fees, plus $500 to $600 per year for maintenance and support. In other words, the annual maintenance fees on conventional software nearly equal the annual charges for the hosted systems. Add the initial license fees, hardware and staffing costs, and running a conventional system in-house is clearly more expensive.

So if costs are so much lower, why doesn’t everyone buy a hosted system?

Perhaps some day they will. But some firms need the customization and integration that the hosted systems do not yet provide. Nor are the hosted systems as functionally sophisticated as the conventional products. True, the basic sales automation capabilities are available: users can define sales territories, import leads and distribute them to salespeople, track sales opportunities, manage day-to-day tasks and contacts, generate personalized form letters or emails, coordinate calendars among team members, produce sales forecasts, and report on results. In fact, these functions are quite well implemented, although they lack some refinements. For example, Upshot cannot assign different roles to the same person for different sales opportunities. Salesforce.com cannot define a sequence of tasks to follow as a project progresses.

Where the hosted systems fall short is in supporting functions. Most conventional sales automation systems can store price lists, build quotes, configure complex products, run telemarketing scripts, provide different screens to different users, and automatically schedule new tasks as old ones are completed. Salesforce.com and Upshot cannot. Custom reporting is also quite limited, because users cannot access the hosted files with standard tools like Crystal Reports. Instead, they must either rely on the hosted systems’s own report writers, which are quite limited, or export the data on a periodic basis.

Not all users need these functions, but those who do will have to look elsewhere. Users may also reject the hosted systems if they want access while not connected to the Internet. Conventional systems let users download extracts of the central database to their personal computers, make changes, and later load the changes back to the central server. Although reconciling and distributing changes is a complex and error-prone process, this approach does give full functionality to detached users. The hosted vendors offer partial solutions, including wireless access through Palm organizers and cell phones and exchange of some data with Microsoft Outlook or Palms. While Outlook and Palm files must themselves be synchronized with the hosted database, this is relatively simple because only some types of data are involved.

In short, the hosted solutions are not for everyone, but are an appealing alternative for users with fairly standard sales automation requirements. Of course, Salesforce.com and Upshot themselves are far from identical. Upshot is limited largely to sales automation, while Salesforce.com also offers customer service capabilities including case assignment and tracking, rule-based routing, automatic escalation of unresolved cases, and a knowledge base of solutions to common problems. Salesforce also has a somewhat more sophisticated data structure, with separate tables for leads, competitors and business partners. Upshot’s advantages include automatic notification of new or changed items, automatic creation of new tasks after a previous task is completed, integrated bulletin board and discussion lists, agents that can automatically scan for changes in designated Web sites, and more precise control over the functions available to each user.

Both vendors introduced their Web-based system in 1999, although Upshot started with a non-Web product in 1997. Salesforce.com charges $65 per user per month with a one-year minimum, while Upshot charges $65 per month with no minimum or $50 per month to users who commit for a year. Both offer a free trial, of 60 days for Upshot and 30 days for Salesforce.com.

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David M. Raab is a Principal at Raab Associates Inc., a consultancy specializing in marketing technology and analytics. He can be reached at draab@raabassociates.com.

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