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The Magazine

Issue 12

We speak to the key decision-makers looking to steer their businesses through these choppy economic waters.

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Spencer Green
Chairman, GDS International

Sales and the 'Talent Magnet'

A lot is written about being a ‘Talent Magnet’, either as a company, or as President. It’s all good practice – listen, mentor, reward, provide clear goals and career maps. Good practice for the employer, but what about the employee?
25 May 2011

Turning smaller CRM providers into global giants

Magic Software | www.magicsoftware.com

L ooking to enhance your CRM offering? Afraid of the commitment of moving to SaaS? Magic Software’s new application platform may be the answer.

When the economic climate becomes tough, organizations must quickly adapt or face losing everything. By taking control of the situation, companies can not only keep their heads above water during the storm, but also find themselves with a significant advantage when the atmosphere eventually improves.

For Independent Software Vendors (ISVs) providing a CRM offering, one way to take control is to consider ways of evolving their offering to cut costs and gain new market ground. The trick is to be able to launch boldly into new territory, all the while keeping one foot firmly planted on familiar ground – in this case, by maintaining the customers and revenue streams you already have.

With the development of Rich Internet Applications (RIA), and their role in developing the Software-as-a-Service (SaaS) business model, companies today have more choices than ever before when it comes to using software platforms to achieve their business goals.

‘Just-in-Time’ Consumption – the SaaS Model
Everybody’s now familiar with the news of the growing SaaS business model. And industry analysts continue to confirming the growing trend towards SaaS. Gartner currently predicts the worldwide SaaS market to more than double, with SaaS revenues set to reach $14.8 billion in 2012. (“Market Trends: Software as a Service, Worldwide, 2007-2012"). But it’s not all hype. That popularity is based upon the way that we ‘consume’ software. Whereas the Client/Server model requires companies to pre-invest in software, the SaaS model doesn’t require the buying or maintenance of servers, networks, and security. Customers using a SaaS solution only consume the software they need, similar to the ‘just in time’ logistics model. And this means far lower costs for the same, if not superior, performance.

The ISV Dilemma
So what happens if you are a small or medium size ISV, with a nice CRM offering based upon an on-premise, Client/Server model? You may have gained ground over the last few years, building a regional customer base. But what chance do small or even medium sized regional players have in today’s market when companies simply don’t want to pre-invest in software? Yes, those small ISVs may manage to maintain their existing customer base through the loyalty they’ve won over the years, but signing on new customers is going to be a hard slog when global players are currently cleaning up the market with their leaner SaaS offerings. Will these smaller players survive the recession at all?

Smaller players must now quickly adapt their offerings to new market realities or face being out-played by the CRM giants. They require a viable SaaS model.

But there’s more bad news before we get to the other side. Even if ISVs could afford to develop and deploy a solid SaaS-based CRM offering, they’d have to wait a considerable time before they start seeing the sort of revenues they’ve been previously used to. Let’s do the math. A typical enterprise software SaaS seat would cost, say, £100 per month. But until now, our ISV could have sold the same seat on a perpetual basis for about £2,000. The SaaS model simply doesn’t compare. An ISV would have to wait almost two years to make the same revenue that a single on-premise sale would generate.

All this simply means that ISV’s can’t afford to give up their current customer base and their on-premise sales which currently represent the lion’s share of their revenues. So is there a way around the impasse?

The obvious solution is for ISV’s is to develop a parallel SaaS offering, which would retain their current Client/Server CRM application while safely adding a SaaS component offering.
But until now most application platforms haven’t been able to support two deployment models from the same codebase.

Another option could be to re-write or re-develop their solution, either as a Platform-as-a-Service (PaaS) offering like Force.com, or by moving to a future environment such as Azure. But in either case they would still end up deploying two completely separate products. And with all the inherent maintenance cost of both, they won’t be regaining profitability in a hurry. Even in the Force.com development scenario, which uses a declarative metadata driven platform with better productivity and cost-effectiveness, they would still have to separately support an on-premise version of their product for their current customer/revenue base. In either case still not particularly cost-worthy.

The Good News – Two Deployment Models from a Single Development Effort
Magic Software offers a viable and cost-effective solution for ISVs attempting to break out of the dual-product predicament. Rated by Gartner as one of the strategic application infrastructure vendors, the company has recently launched its uniPaaS application platform, a technology that builds upon its previously proven eDeveloper platform, that’s today deployed with a global portfolio of enterprise and ISV customers.

uniPaaS is a new breed of metadata-driven application platform that, while providing the same productivity and cost-effective development process found with platforms such as Force.com, also gives ISV’s the advantage of a single product that can be deployed with existing on-premise customers as well as new SaaS customers. ISVs can run two different deployment models in parallel from the same codebase, requiring only a single development and maintenance effort. Using this approach, ISVs can cost-effectively gain a foothold in the SaaS market and attract new customers, while maintaining their existing bread-and-butter business from an on-premise Client/Server model.

No matter how large or small the CRM provider may be, a tool now exist for ISVs to effectively take control and turn around the effects of current market forces. By adapting their offering to cost-effectively run two deployment models, companies attempting to retain a profitable CRM offering can now set themselves up for success in 2009 and beyond. Who knows? When the dust of the economic storm eventually settles, today’s smaller ISVs may suddenly find themselves on a par with the CRM giants they were attempting to avoid competing with until now.

Magic Software Enterprises (NASDAQ: MGIC) is a leading provider of application platform, and business and process integration solutions. Our technology gives our partners and customers the power to create any type of business applications, leverage existing IT resources, enhance business agility, and focus on core business priorities.