Salesforce Service Cloud Offers Potential, but to a Very Cost Sensitive Segment

Salesforce pioneered the SaaS model for delivering software.  The new offering for the Service Cloud could also be a game changer.  Social networking holds the promise of lower cost and in some cases better support.  This will surely be an attractive offering for the smallest and largest companies.  However, there are many small and mid-sized companies that will find open source based alternatives that, with a small up front investment, hold the potential to be far less expensive. 

Potential for smaller software providers? The Service Cloud2 offering appears to present a very professional and robust look to the customers of a small software company.  While these costs are small compared to other packaged software, the monthly fees can grow rapidly and need to be carefully assessed before heading down this path.

Barriers to entry (or alternative solutions I presume)?  A small software company can access very robust capabilities within the open source world.  The primary question would be whether this is an acceptable use of precious programmer time on a non-core task.  Other non-software small and mid-sized companies are unlikely to have the sophistication to even consider this option.

Factors determining success?  For those software companies employing this capability, there are a few things that are critical.  As with any service function, responsiveness must be clearly defined with customers.  Also, while community forum-based support models are promising, it requires a rather passionate user base that is inclined to spend time on the internet reading and posting about the product.  This will not work with all types of software products.  These forums are really hard to start from scratch.  Anyone considering this should be thoughtful about a startup strategy for this kind of support (e.g how you attract customers to it, additional steps to provide expert feedback as the community grows, etc).

Trends and future outlook?  The Service Cloud2 model is very promising but far from assured.  Salesforce will need to continually innovate and provide rock solid infrastructure to keep ahead of open source and alternative hosting solutions.  Small software companies are probably the only small companies that might reasonably consider open source alternatives.

This author consults with leading institutions through GLG