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.

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.

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***

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.

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.

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.