Saturday, September 10, 2011

Dynamics CRM vs Salesforce: User Adoption July 2011

Last year I reviewed the subscription numbers of Dynamics CRM and salesforce. At that time I came to a few conclusions:

  • Your average Dynamics CRM customer has about 50% more subscribers than a salesforce customer
  • Average company size for both is growing but appears to be tapering to 30 for salesforce and 50 for Dynamics CRM
  • Subscriber growth continues to grow and the market has not yet matured
  • Based on the subscriber and customer ratios, Dynamics CRM is catching up on salesforce
  • Salesforce will make 3 million subscribers by October 2010 and Dynamics CRM will make 1.5 million subscribers by December 2010

If you saw my “Microsoft Dynamics CRM vs Salesforce: The Main Event” presentation at Decisions Spring earlier this year, you will have also seen me predict:

  • Subscriber difference appears to be tapering
  • Subscriber ratio is heading towards 1.5
  • “Dynamics CRM” is catching up on “salesforce.com” in Google trends
  • Microsoft’s numbers will be buoyed by their international online rollout

Given Microsoft released some figures at the Worldwide Partner Conference and salesforce recently released figures as part of their second quarter results, I thought it was a good time to revisit. Unfortunately, with Microsoft only intermittently releasing numbers and salesforce confirming, in the quarterly results call, this would be the last quarter where they release customer numbers, it will be difficult to do this kind of review in the future. However, as salesforce is diversifying outside of their stock ticker namesake (CRM), a direct comparison of numbers is becoming less relevant, unless we start bringing in the Microsoft ERP, CMS and BI solutions as well.

Customer Size

Here are the numbers for salesforce taken from the salesforce detailed financials:

Year

Month

Subscribers

Customers

Average Company Size

2003 Q4

Dec-02

76,000

5,700

13

2004 Q1

Mar-03

85,000

6,300

13

2004 Q2

Jun-03

96,000

7,000

14

2004 Q3

Sep-03

107,000

7,700

14

2004 Q4

Dec-03

127,000

8,700

15

2005 Q1

Mar-04

147,000

9,800

15

2005 Q2

Jun-04

168,000

11,100

15

2005 Q3

Sep-04

195,000

12,500

16

2005 Q4

Dec-04

227,000

13,900

16

2006 Q1

Mar-05

267,000

15,500

17

2006 Q2

Jun-05

307,000

16,900

18

2006 Q3

Sep-05

347,000

18,700

19

2006 Q4

Dec-05

393,000

20,500

19

2007 Q1

Mar-06

438,000

22,700

19

2007 Q2

Jun-06

495,000

24,800

20

2007 Q3

Sep-06

556,000

27,100

21

2007 Q4

Dec-06

646,000

29,800

22

2008 Q1

Mar-07

742,900

32,300

23

2008 Q2

Jun-07

800,000

35,300

23

2008 Q3

Sep-07

952,500

38,100

25

2008 Q4

Dec-07

1,100,000

41,000

27

2009 Q1

Mar-08

1,177,200

43,600

27

2009 Q2

Jun-08

1,287,900

47,700

27

2009 Q3

Sep-08

1,398,600

51,800

27

2009 Q4

Dec-08

1,500,000

55,400

27

2010 Q1

Mar-09

1,660,400

59,300

28

2010 Q2

Jun-09

1,769,600

63,200

28

2010 Q3

Sep-09

2,000,000

67,900

29

2010 Q4

Dec-09

2,102,500

72,500

29

2011 Q1

Mar-10

2,319,000

77,300

30

2011 Q2

Jun-10

2,554,400

82,400

31

2011 Q3

Sep-10

2,790,400

87,200

32

2011 Q4

Dec-10

3,000,000

92,300

33

2012 Q1

Mar-11

3,321,800

97,700

34

2012 Q2

Jun-11

3,640,000

104,000

35

Here are the Dynamics CRM numbers:

Month

Subscribers

Customers

Average Company Size

Mar-06

150000

6000

25

Jul-06

200000

7000

29

Oct-06

250000

8000

31

May-07

400000

10000

40

Mar-08

500000

11000

45

Jul-09

1000000

20833

48

Apr-10

1100000

22000

50

Jul-10

1400000

23000

61

Apr-11

1700000

27000

63

Jul-11

2000000

30000

67

Numbers in red are my best guess, based on the known numbers. Essentially I have estimated the customer size and then used this to generate the subscriber size. I thought it was important to include my large tables of numbers, rather than just show the pretty graphs so others can see how I generated them and also slice and dice them as they see fit.

As can be seen, Dynamics CRM’s average customer is now almost double the size of the salesforce average customer. Graphing the company sizes, we see my previous thoughts that the sizes were tapering was unfounded, both are increasing and it appears Microsoft’s are growing a little faster as the ratio has now gone from 1.5 to 2.0.

imageimage

Market Maturity

Here is the apples to apples combined data.

Month

SFDC Subscribers

SFDC Customers

MSFT Subscribers

MSFT Customers

Subscriber Ratio

Customer Ratio

Difference in Subscribers

Total Subscribers

Customer Size Ratio

Mar-06

267,000

15,500

150000

6000

1.78

2.58

117,000

417,000

1.5

Jul-06

315000

17500

200000

7000

1.58

2.50

115,000

515,000

1.6

Oct-06

366700

19300

250000

8000

1.47

2.41

116,700

616,700

1.6

May-07

482000

24100

400000

10000

1.21

2.41

82,000

882,000

2.0

Mar-08

742,900

32,300

500000

11000

1.49

2.94

242,900

1,242,900

2.0

Jul-09

1324809

49067

1000000

20833

1.32

2.36

324,809

2,324,809

1.8

Apr-10

1696800

60600

1100000

22000

1.54

2.75

596,800

2,796,800

1.8

Jul-10

1878243

64767

1400000

23000

1.34

2.82

478,243

3,278,243

2.1

Apr-11

2449000

79000

1700000

27000

1.44

2.93

749,000

4,149,000

2.0

Jul-11

3819600

106100

2000000

30000

1.91

3.54

1,819,600

5,819,600

1.9

***STOP PRESS*** 2011-11-18 Leon says: There is an error in this table and the catch up graphs below. I’ve fixed this up here.

In this case I have extrapolated the salesforce data to match the month the Dynamics CRM numbers were announced. So if the Dynamics CRM number was announced one month after a salesforce quarter announcement, I guess the SFDC customer number and then use the guessed average customer size to generate a subscriber number.

Total subscribers across both products know no bounds and both products continue to bring on subscribers.

imageimageimage

It is fair to say this market is still far from maturing with no signs of populations tapering.

In terms of my previous predictions, the trending of Excel came through with the goods. Salesforce made three million subscribers somewhere between September 2010 and December 2010 (I predicted October 2010). Dynamics CRM made 1.5 million subscribers somewhere between July 2010 and April 2011 ). I predicted December 2010.

For my next set of predictions, I believe salesforce will make four million subscribers before the end of the year but after the Q3 results. Dynamics CRM will make 2.5 million subscribers before the end of the year and probably before November.

Is Dynamics CRM Catching Up?

***STOP PRESS*** 2011-11-18 Leon says: There is an error in the market maturity table and the catch up graphs below. I’ve fixed this up here.

So the big question is if Dynamics CRM is catching up on salesforce. The answer, unfortunately for those of us on the Microsoft side of the fence, is no. The boost in numbers from the international rollout has either not happened or has been insufficient. Here is the evidence.

***Begin erroneous speculation due to my inability to combine numbers into one table correctly***

imageimage

The subscriber ratio (SFDC subscribers/MSFT subscribers) was dropping or, at least, was stable at just under 1.5 until the last quarter where salesforce has jumped away. The subscriber difference tells the same story. While there was a possible turning point in mid-2010, this appears to be an aberration with salesforce running away.

So what has happened? Has salesforce become really good and left Dynamics CRM in the dust? Is something else at play?

It is true that salesforce has been making a lot of acquisitions but, functionally, the differences in the Sales Cloud and Service Cloud products are more on the edges than at the core and equal on both sides. Salesforce has Chatter, Dynamics CRM is soon to have a Chatter equivalent but has SharePoint and Lync instead. Dynamics CRM has better Outlook integration but its browser client is limited to Internet Explorer (until early next year) and so on. This idea of equivalency is also confirmed by the Gartner and Forrester reports which rate both products very highly.

My speculation is the reason the salesforce numbers have leaped is because of the mix of products that make up the totals. The salesforce numbers cover all their products, not just the Sales Cloud and Service Cloud products. They include Chatter, Jigsaw, Heroku, Radian6 and so on. I imagine it only includes paying Chatter clients but it is not clear. Unfortunately, with salesforce announcing they will not be regularly releasing customer figures any more, it is difficult to know.

***END ERRONEOUS SPECULATION***

As for popularity, Google Trends suggest Dynamics CRM is still catching up with salesforce in terms of search results.

image

This is a graph of the search popularity of “dynamics crm” and “salesforce.com”. As can be seen, the gap is narrowing.

Any Financial Insights?

I talked last week about my concerns for any company selling ten dollar bills for nine dollars. Combining the finances with the subscription numbers we see something else of interest. Back in May I noticed that subscribers are becoming increasingly less profitable for salesforce. Here is the graph.

image

Here I have taken the salesforce subscription numbers above and the financial numbers from the detailed summary I used in last week’s blog. ‘PUPM’ stands for ‘per user per month’. So, in the case of ‘Revenue PUPM’, this is the revenue received by the average subscriber each month. In this case the number has tapered to around $50 and has been stable for the last 12 months. Revenue Cost is a figure salesforce use claiming it is the expenses directly related to the revenue, ignoring those inconvenient operating costs of sales and marketing and research and development. The revenue cost per subscriber per month is at around $10 and has been there for almost three years. Those pesky, expensive operating costs (sales and marketing, research and development and general and administrative costs) have hovered at around $40 per subscriber per month for about two years.

Doing the maths, the profit of a subscriber is $50 (revenue) – $10 (revenue cost) – $40 (operating cost) = $0 (profit). The variable for profitability appears to be the operating costs per subscriber. While it is hovering around $40 per subscriber per month, if this could be reduced, this would bring salesforce into profitability.

Conclusions

Both products are growing without obvious bounds and the market still appears to be growing for the two products. In terms of customer size, Microsoft CRM is penetrating the enterprise more effectively than salesforce products with the average Dynamics CRM customer size now being double the size of a salesforce customer.

In terms of catching up, it seems as if the range of salesforce products is getting away from Dynamics CRM, but that is ok. Without a clearer understanding of how the salesforce customer and subscription numbers are broken down, the comparison has only limited value. As for ‘front of mind’, Google Trends suggests Dynamics CRM is catching up on salesforce.

Finally, the financials for salesforce mean that they are not making money from their subscribers and the financials seem to be settling at around breakeven. Without reducing their operating costs, it is not clear how this situation will change.

4 comments:

1fd8eef2-de33-11e0-b93f-000bcdca4d7a said...

http://www.google.com/trends?q=Dynamics+crm,+Salesforce+,+Salesforce.com&ctab=0&geo=all&date=all&sort=0

huh? you may want to re-do one part of your post

Leon Tribe said...

The word 'salesforce' is too generic as it has context outside of a specific software product. It would be like using 'CRM' and pretending all hits refer to Microsoft.

If you do a google search on 'salesforce -"salesforce.com"', you will see what I mean.

You may also want to check out this one, http://www.google.com/trends?q=%22dynamics+crm%22%2C+%22salesforce.com%22%2C+%22microsoft+crm%22&ctab=0&geo=all&date=all&sort=0 . Combined, "Dynamics CRM" and "Microsoft CRM" have consistently outranked "salesforce.com"

Leon Tribe said...

Going through my old files, I found a presentation from the Business Action World Tour for Microsoft quoting 750k users and 15,500 customers in Feb 2009.

Leon Tribe said...

There is an error in the market maturity numbers. The salesforce numbers are in error, except for the last value, which was correct. It was therefore my mistake which caused the graph jump and nothing salesforce did. I'll fix this up in my next blog (November 2011)