October 22, 2008, 11:14 AM — On-demand business software vendor NetSuite is trying to grab CRM (customer relationship management) customers from its rival Salesforce with an aggressive discount offer.
Under the deal, current users of Salesforce's stand-alone salesforce automation product that drop it in exchange for NetSuite's CRM+ offering will be charged 50 percent of the cost of their Salesforce implementation. The offer is valid through the end of this year.
NetSuite's move follows the prediction made by Salesforce Chief Financial Officer Graham Smith last week that a pricing war could soon erupt among SaaS (software-as-a-service) vendors amid a weakened global economy. Smith also said Salesforce is "able to match pricing."
Salesforce spokesman Bruce Francis said the company would not comment on NetSuite's announcement.
NetSuite has pulled this tactical arrow from its quiver before, offering a similar deal in 2005.
The company began formulating the latest campaign only a couple of weeks ago, as the economic woes in the world's financial markets reached a crescendo, according to Mini Peiris, vice president of product marketing. "It seemed like a good opportunity to take advantage of what's top of mind for people."
Smith's comments were not "directly related, but helped reinforce our idea to offer this program," she added.
NetSuite's discount offer includes customer support and implementation, but "if a customer wants a lot of custom scripting and changes made, that would be extra," she said.
Even at a 50 percent discount, NetSuite will turn a profit on any deals it lands through the program, according to Peiris. "Our margins are very healthy."
The list price for CRM+ is $129 per user per month, compared to $125 for Salesforce's enterprise edition. NetSuite typically discounts off list by 20 percent to 30 percent and believes Salesforce does roughly the same, Peiris said.
One industry observer called NetSuite's move "refreshing" but questioned how many Salesforce customers will actually make the switch, given the potential headaches of moving to a new CRM system.
"There's going to be some internal effort by the customer to get over to the new service, but [NetSuite] may find some number of Salesforce customers that find the cost savings is worth the effort," said Denis Pombriant, managing principal of Beagle Research Group in Stoughton, Massachusetts.
A gambit like NetSuite's is also difficult to pull off because "the incumbent can always make a counter-offer, and the counter-offer doesn't have to be as sweet as the challenge," Pombriant added.
