September 2nd, 2009 by Denis Pombriant, founder and managing principal, Beagle Research Group

By Denis Pombriant, founder and managing principal, Beagle Research Group

Salesforce.com announced a contact management solution today specifically targeting the smallest businesses, nearly a decade after that product might have been a logical initial offering. Instead, the company started as a bare-bones sales force automation (SFA) provider at the turn of the century, a time when premises-based, standalone SFA had become not only commonplace but, in some cases, a high-end alternative to contact management products such as Act! and Goldmine.

Today’s announcement covers a base that Salesforce.com intentionally left open while building itself up from an SFA-only application to a full CRM suite and, eventually, a cloud-computing platform provider. Today’s announcement says, in part, that Salesforce.com’s Contact Manager Edition is for single- or two-user situations where full CRM — or even just full SFA — would be overkill. You can expect many entrepreneurs and small-business people to take advantage of the new offering as an alternative to the still-available contact management applications as well as the more-general-purpose tools such as Microsoft Outlook.

A contact manager tracks names and demographic data as well as deal information. For a long time, many businesspeople who had not made use of contact managers per se made do with electronic Rolodexes built into the operating or email systems of their PCs or Macintoshes. But in an increasingly mobile world in which people expect to carry and access increasing amounts of data and functionality on portable devices, purely PC-based applications are filling a diminishing percentage of the market’s needs.

With Salesforce Contact Manager Edition, users no longer have to choose between PC functionality/portability and the constant need to synchronize devices. Because the Contact Manager Edition is a cloud-computing application, it’s accessible via most Internet browsers — including the mobile browsers designed for small-screen smartphones.

Finally, at a single-digit dollar fee per seat per month — $9 to be exact — Salesforce.com has broken through a price barrier that had kept the contact management software niche relatively secure. Now, Salesforce Contact Manager Edition is easily competitive with other contact managers.

In the end, this announcement is more of a product-line extension than a technological breakthrough. Selling Salesforce.com’s applications at a lower price point has always been possible, obviously. [Editors’ Note: In fact, Salesforce.com had been testing a “Group Edition” for “1, 3, or 5 users” at the $9/user/month price point for some time; that offer expired on Aug. 31.]

Salesforce.com Editions, as of Aug. 31, 2009 — note the "Group" edition at the far left.

The company has simply developed the necessary packaging and policies, and the imposed limit of two seats conservatively guards against cannibalizing the existing Salesforce.com customer base.

Salesforce.com will make money even at this price point because the incremental cost of adding a seat is nugatory. But Salesforce Contact Manager Edition will not likely alter the company’s balance sheet even if the number of subscriptions reaches the level attained by über-contact-manager–supplier Sage, which has nearly three million copies of Act! under service contract. Salesforce.com is too big — and the Contact Manager Edition’s fees are so small — that the company’s overall numbers will hardly budge.

However, the Contact Manager Edition, which Salesforce.com says is due to be available in October, is the company’s way of covering a base and at the same time protecting its flank from companies such as Sage, whose Act! Contact Manager has evolved to support large workgroups in the last few years. [Editors’ Note: Sage released its Act! 2010 edition on Tuesday, Sept. 1.]

From what I’m told, this was the first in a series of Salesforce.com revelations slated for the balance of the year. Additional announcements will appear over the coming weeks, followed by an expected flurry during the company’s annual Dreamforce event in November.

Denis Pombriant, a CRM magazine columnist, is the founder and managing principal of Beagle Research Group, a CRM market research firm and consultancy. He often guest-blogs with us at destinationCRMblog.com, but his own blog can be found here. He can be reached at denis@beagleresearch.com, or on Twitter (@denispombriant).

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