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Customer Service Software a Hot Commodity, But a Challenge to Sell

By Susan J. Campbell, TMCnet Contributing Editor

There is much to be said for customer service software. Companies can rely on such solutions to streamline the sales process, capture value customer information and develop products and services that will appeal to the base and the prospective customer. 

As captured in this recent blog, salesforce.com, a cloud-based, customer service software solution provider, actually launched before the first dot-com crash and actually managed to survive. Now, the company continues to thrive much like other startups: revenues are strong but profits continue to be elusive. Of course, things are much better than they sound. 

Salesforce.com (News - Alert) has a market cap of $15 billion, a $10 CRM stock price for every dollar of sales the company is able to secure. In addition, the p/e ration of over 200 is roughly eight times the rate of revenue growth meaning this customer service software provider is doing more than just thriving. 

Co-founder and CEO, Mark Benioff, quickly grew into a billionaire as a result of his 10 percent stake and excitedly talks about revenue growth. He noted that the company is delighted to raise its full fiscal year 2011 revenue guidance. For this hosted customer service software provider, revenue is up 25 percent and the projection of about $1.6 billion in revenue is an exciting new milestone for the company. 

The bottom line for the second quarter was a little less exciting as the company was down 11 cents a share from 17 cents one year earlier. And, the full-year projection for this hosted customer service software provider – 43 to 45 cents- was also down from 63 cents for the year ended January 31.

When customer service software is cloud based and CRM functions allow you to share sales leads and a full range of intelligence across your organization, it sounds like an easy sell. After all, the platform is cheaper than installed software, shared information is shown to boost productivity and hosted solutions ease management tasks. 

The problem is that it turns out to be really expensive, if not difficult to market. Here’s why: this hosted customer service software provider has a sales and marketing expense of roughly 50 percent of sales. So, the company has spent $534 million in telemarketing and pounding the pavement in fiscal 2009, which produced sales of $1.08 billion. The sales team become more productive the following year and consumed just 46 percent to reach its goal. 

While things seem to be improving for salesforce.com as it tries to secure as many customers as possible with its hosted customer service software, it is also going up against power players like Microsoft, Oracle (News - Alert), SAP and more. The game can get dirty, yet the rewards many.

Susan J. Campbell is a contributing editor for TMCnet and has also written for eastbiz.com. To read more of Susan’s articles, please visit her columnist page.

Edited by Juliana Kenny