KEDGE BUSINESS SCHOOL

PROGRAMME GRANDE ECOLE

2017/18

Research dissertation

Disruption strategy in the SaaS industry

Dang-Anh NGUYEN KHOA

Under the direction of M.Pierpaolo ANDRIANI

 Acknowledgments

First, I want to thank M.Andriani who accepted to oversee my research

dissertation and had successfully oriented my work.

Then, I also want to thank my family and close friends for supporting me in the
realisation of my research dissertation.

1
I. Introduction to the dissertation
3
A.​Context of the topic
3
1.​The advent of SaaS cloud computing models and the downfall of on-premise
models in the ICT market in 2018
3
2. Creation and development of SaaS: from 1960 to present days
7
3. SaaS industry requirements in 2018?
11
B. Theoretical Framework
14
C. Literature Review Methodology 16

II. Literature Review

16
A. The theory of disruptive innovation in the SaaS industry
16
1. Established but stagnant leaders and threatening new entrants in the SaaS
industry
17
2. What are the possible responses for incumbents and entrants to disruption in the
SaaS industry?
19
3. Limits of the theory of disruptive innovation in the SaaS industry
22
B. From disruptive innovation to big bang disruption in the SaaS industry
27
1.​The origins of big bang disruption in the Software industry
27
2. The concept of Big Bang Disruption in the Software industry
30
3. The innovation life cycle in Big Bang Disruption
35
C. Adoption behaviors in the SaaS industry in present days
38
1.​The SaaS adoption theories in organizations, the
Technology-Organization-Environment(TOE) framework and Innovation Diffusion
Theory (DOI)
38
2. The critical factors for Software-As-Service adoption in organizations
41

2
 3. Software-as-a-service maturity levels and adoption 46

III. CASE STUDY: Disruption in the SaaS CRM market in 2018?

50
A. Introduction & Research Methodology
50
1.​Introduction
50
2.​Theoretical and methodological framework
52
B​. SAAS CRM vendors incumbent and entrants business models analysis
54
1.​Customer value creation
54
2. Earnings Logic
56
3. Value Network
58
4. Resources and capabilities
60
5. Strategic Decisions
61
6. Overview of the differences between Salesforce (incumbent) and Freshsales
(entrant) business models
62
C​. The disruptive potential of Freshsales in the SaaS CRM market
63
1.​Price mapping of Freshsales and Salesforce
63
2. Features mapping of Freshsales and Salesforce
65
3. Key features comparisons between Salesforce and Freshsales
67
4. Freshsales and SaaS adoption Factors
71
D​. Conclusion: is Freshsales a disruptive competitor for Salesforce?
76

IV. CONCLUSION
81

V. APPENDICES
83

VI. REFERENCES 90

3
I. Introduction to the dissertation

A. Context of the topic

1. The advent of SaaS cloud computing models and the downfall of

on-premise models in the ICT market in 2018

In nowadays economy cloud computing is becoming more and more central in

the ICT market, indeed it reaches every component of any modern IT systems
and services, from the infrastructure to the software. This ubiquity can easily be
demonstrated when we look at the latest Gartner forecasts, indeed, worldwide
cloud computing revenue has drastically increased from $153.5 billion in 2017 to
$186.4 billion in 2018 (+17,65% raise) and the SaaS segment is still the largest
one in the cloud computing market with 39,21% of the revenue and an expected
growth of 22% by the end of 20181. In technological terms, we can also
demonstrate the advent of cloud computing and SaaS solutions by taking into
account the growth of global data centers and cloud-based traffic IP, indeed
according to the latest Cisco cloud report, by 2021, 94% of workloads and
compute instances will be processed by cloud data centers, only 6% will be
processed by traditional data centers. In addition, we can also see that the annual
global cloud IP traffic will reach 19.5 ZB by the end of 2021 which will represent
a projected 26% rise from 2016 to 20212. Therefore, by looking at these economic
and technological metrics, we can say that the advent of SaaS is a global
phenomenon and is bound to market domination in a very near future, putting an
end to the on-premise solutions old era.

1
​“Worldwide Public Cloud Service Revenue Forecast 2018”, text, 2018,
https://www.gartner.com/newsroom/id/3871416
2
“Cisco Global Cloud Index: Forecast and Methodology, 2016–2021”, text, 2018,
https://www.cisco.com/c/en/us/solutions/collateral/service-provider/global-cloud-index-gci/white-paper-c11-738085.pdf

4
Talking about the on-premise solutions, both business and private consumers are
more and more reluctant to use them because of a clear lack of interoperability,
modularity, and inter-compatibility. The shift from on-premise to off-premise and
traditional IT to cloud IT is demonstrated by the latest IDC consulting report
forecasting a 46.06% traditional on-premise deployment against a 53.94%
private/public cloud deployment by 20213. (By knowing that the traditional
deployment had the upper hand in 2017 representing 58.66% of the deployments)
To be more precise, this downward trend can be explained by the actual cons of
having an on-premise solution, indeed, the setup needs various resources and
considerable efforts (time, personnel, equipment, and additional hardware and
software could be required). Once it is set, the organization will be responsible
for the maintenance, so it will represent a certain cost to avoid malfunctions and
solve potential disasters. Plus the economic model is based on expensive licenses
to pay per user and per computer, so it’s less flexible than the subscription model
with SaaS solutions and new versions and upgrade could require extra-fees4.

In addition, we can say that SaaS solutions are keeping up with the latest
technological trends by featuring functionalities such as machine learning, big
data management, and artificial intelligence. For instance, we can talk about one
of the biggest SaaS company Zendesk, that has integrated machine learning to
their mail autoresponder functionality, indeed it will not only automatically
respond to users like other bot-based solutions but it will learn at each interaction
from reading the mail through analyzing it and evaluating and predicting the
users satisfaction5. Thus we can say that in addition to integrate new disruptive
technologies, SaaS companies are also continuously optimizing their solutions to
current technologies such as interactive marketing, mobile functionality and app

3
​“Worldwide cloud IT infrastructure market forecast by deployment type 2015-2021”, graph, 2017,
https://www.idc.com/getdoc.jsp?containerId=prUS42831117
4
“5 considerations when choosing between a SaaS or on-premises”, text, 2014,
https://www.ibm.com/blogs/cloud-computing/2014/04/03/5-considerations-choosing-saas-premises/

5
​“Zendesk’s “Automatic Answers” taps machine learning, AI to generate bot-style email responses”, text, 2016,
https://techcrunch.com/2016/07/13/zendesks-automatic-answers-taps-machine-learning-ai-to-generate-bot-style-email-respo
nses/

5
customizations6. A relevant example could be the SaaS CRM BPM’online and
Hubspot CRM that have advanced customer data and marketing management
whereas a user, we can integrate and analyze social media data and create/manage
multi-channel marketing campaigns with audience segmentation, budget
planning, track response, and ROI estimations7. Moreover, with “infinite”
functionalities and precise customizations that are allowed by integration of
third-party applications and open-API access, we can say that SaaS models put an
end to the horizontal or vertical integration dilemma, by adopting a SaaS solution,
an organization will be able to create real synergies and connect the different
departments to each other. For instance, a company that adopts Hubspot CRM
will be able to link its sales, marketing and communication departments by
integrating either third-party applications or create its own applications thanks to
an open-API access. In other words, SaaS model, because of its nature allows
technological flexibility and evolution that on-premise solutions are lacking, this
could also be considered as one on the reason for its success.

To finish this overview regarding the ubiquity of SaaS, we can talk about the
impact of the external environment surrounding the market, especially the
different technological mutations that change users habits and ultimately
influence the SaaS market. According to the latest GSMA intelligence report,
smartphones represent 57% of the total mobile connection in 2017 and is
expected to reach 77% by 2025 in the world and IoT connections are expected to
grow from 2017 to 2025 by 2.5 multipliers for simple consumers and 4.7
multipliers for industrials8. These figures demonstrate the worldwide and mass
democratization of smart devices within our economy, and therefore the
correlated global usage of SaaS solutions. One of the important phenomenon that
is amplifying the domination of SaaS in the ICT market is the “Bring Your Own

6
“2018 SaaS Industry Market Report: Key Global Trends & Growth Forecasts”, text, 2018,
https://financesonline.com/2018-saas-industry-market-report-key-global-trends-growth-forecasts/
7
Source : https://financesonline.com/ and https://www.g2crowd.com/
8
“The Mobile Economy 2018”, text and graphs, 2018,
https://www.gsmaintelligence.com/

6
Device” movement that allow employees to use their personal smart devices to
professional purposes, indeed, according to a Tech Pro Research 2016 study
based on various professionals in the world, 60% of them work in an organization
that allows BYOD policy and 13% of them work in an organization that has the
plan to implement that policy within the 12 next months9. Moreover, another
study based on upper-management individuals (CEO’s, CFO’s and CIO’s) in the
US shows that 87% of companies rely on their employees using personal devices
to access business-related apps10. Thus, professionals are more and more
confident and accustomed to using their own smart devices at their workplaces
and by knowing that the vast majority of the applications on those devices are
SaaS, we can say clearly that BOYD contributes to the advent of SaaS solutions
on a global scale, and we can also add that this contribution will be even greater
when IoT will be democratized.

Thus this overview demonstrates how dominant is the SaaS solutions in the ICT
market, since powerhouses like Salesforce, Zendesk and Slack have disrupted the
entire software market by creating flexible, fully-customizable, responsive and
interoperable solutions that took over the different on-premise solutions. In the
last part we also showed that the latest technological mutations are going to
amplify the already all-mighty SaaS market, therefore the next part will be
dedicated to explain and understand how SaaS solutions have technically evolved
along all these years, to become the go-to solution for every type of companies
from small-mid cap companies to big groups.

9
“BYOD, IoT, and wearables thriving in the enterprise”, text and graphs, 2016,
http://www.techproresearch.com/article/byod-iot-and-wearables-thriving-in-the-enterprise/

10
“BYOD Usage in the Enterprise”, text and graphs, 2016
https://syntonic.com/wp-content/uploads/2016/09/Syntonic-2016-BYOD-Usage-in-the-Enterprise.pdf

7
 2. Creation and development of SaaS: from 1960 to present days

In 2001, the Software and Information Industry Association (SIIA) defined the
now-popular acronym SAAS (software-as-a-service) as a deployed application or
service from a centralized data center via a network that could be either Internet,
Lan, VPN or Intranet providing access and use to consumers in exchange of a
recurring fee11. When we take a closer look to this definition, we can say that this
delivery model isn’t new, indeed in the 1960s, IBM was the first company to
develop mainframe computers (IBM 360 Model 67) and lease their computing
power and data storage capacity to big companies and governments. This leasing
model was created because, at the time, cost of hardware (storage, memory…),
software, training, and support were beyond the reach of the vast majority of
organizations, companies. Indeed, IBM computers in that period cost around $9
million a unit, required a staff of 60 people to keep it running and a large
air-conditioned space12. This leasing model called “time-sharing” remained
popular for the next two decades in the ‘70s and ‘80s until the first personal
computers were introduced to the market. Personal computers were affordable
(1581$ for the first IBM PC) and organizations, businesses started their first
digital transformation plan to equip each of their employees with a personal
computer with their own storage capacity and on-premise solutions.

With the advent of PCs, the first business solutions were created, we can talk
about the creation of the first CRM called ACT! or the first ERP called Great
Plains (later acquired by Microsoft that turned it into the now popular Microsoft
Dynamics). In the ‘90s with the dot-com boom and birth of the world wide
web(first browser), the complexity of software increased drastically, faster than
the hardware capacity to handle them, especially when it comes to data storage
that remained quite expensive at the time. Therefore with thousands of personal
computers and solutions to manage, businesses needed to find a way to optimize

11
“Software as a Service: Strategic Backgrounder”, text, 2001,
http://www.siia.net/estore/pubs/SSB-01.pdf
12
“The birth of IBM pc”, text
https://www-03.ibm.com/ibm/history/exhibits/pc25/pc25_birth.html

8
the use of software by every employee without hardware restrictions, so they
thought about asking for other businesses to host their data and applications,
pretty much like the time-sharing of the ’60s. That’s how the precursors of SaaS
were born, they were called Application Service Providers (ASP) and were pretty
similar to present-day SaaS principle, users pay for a subscription fee in order to
access an application through the internet. However most of the ASP companies
failed because of their inefficiency and random costs, indeed, ASP companies
only focus to host third-party solutions, they were not developing their own
software, it means that they were always behind the latest solutions updates or
even worse. We can add that the ASP technical requirements were not flexible,
indeed ASP vendors had to set up software, login, and environment manually for
each user on each computers13. Moreover during the 90’s and early 2000’s the
internet wasn’t fast enough to support the workload of ASP’s with only few
people who had access to DSL or cable modem at the time (6.6% of DSL
connections type and 12.9% for the cable modem in 2001 in the US), it means
that even with a flexible and working architecture, ASP was too ahead of its time
for the mainstream market14.

When the DSL type internet connection took over the market in the mid-2000s,
companies such as NetSuite (ERP) and Salesforce (CRM) developed a different
approach that allows them to totally disrupt the software market and become the
present powerhouses. Indeed, their vision was to deliver solutions purely over the
internet via a web browser, without taking into consideration any physical
products or ASP architectures. To be more precise SaaS solutions are designed
from the ground up for the web with a multi-tenant architecture allowing shared
resources and infrastructures that ultimately lead to economies of scale and
operational costs reductions for the vendors. On the other hand, ASPs had a
single-tenant architecture and were not built for the web, it means that for each

13
“SaaS VS ASP – Understanding the Difference”, text, 2014
https://dzone.com/articles/saas-vs-asp-%E2%80%93-understanding
14
“The Pre-History of Software as a Service”, text and graphs, 2014
https://smartbear.com/blog/test-and-monitor/the-pre-history-of-software-as-a-service/

9
client, ASP vendors had to build a specific solution with complex customizations
and no flexibility when it comes to updates, maintenance, and hardware15. With
the aggressive and effective Salesforce marketing campaign “NO SOFTWARE”
and growth explosion in 2003, the other tech giants like Sage and Oracle
followed their SaaS vision and SaaS became the most viable option for small-mid
cap companies that now have the possibility to equip their employees with high
performing and flexible software without having to deal with random or
important costs.

Over the last decade with the development of high-speed internet, social media,
cloud architectures, and smart devices, SaaS have been thriving in the ICT market
(both in the professional and the personal market) as we’ve explained in the SaaS
ubiquity part. In fact, according to an IDG report in 2016 on 925 respondents
(ICT professionals), 70% of the surveyed organizations are using at least one
SaaS application in their business activities and 16% of them have planned to use
SaaS within the next 12 months16. Although SaaS use is common nowadays, there
are still some remaining concerns and imperfections to deal with. To be more
accurate, security issues regarding the privacy and sensitive information of a
SaaS system is a drag for businesses to adopt SaaS solutions. Moreover, the
concern for the lack of control, because the entire software, hardware, and data
are residing at a third party, is sometimes seen as a major drawback, where clients
are feeling insecure about their data/information and are “forced” to use the same
version of the software application like anyone else. (in certain case, using a
different version of an application could be more efficient)

One other concern is about the connectivity requirement, indeed in order to

operate SaaS, you need to have a constantly working internet connection because,
in case of internet service failure, you lost access to the software and its data.

15
“Single-tenant vs Multi-tenants”, text, 2015
https://blog.wescale.fr/2015/08/24/single-tenant-vs-multi-tenant/
16
“2016 IDG Cloud Computing Survey”, text and graphs, 2016
https://www.idg.com/tools-for-marketers/2016-idg-enterprise-cloud-computing-survey/

10
We can also talk about the limited range of available application in the SaaS
market, indeed some applications are too complex and resources intensive to
work on a SaaS platform, even with nowadays technologies, applications like 3D
rendering, high definition video editing, super calculation tools etc. Finally,
software integration could also be a major issue, indeed, if an organization is
using different SaaS for its different department or a mixture of SaaS solutions
and on-premise solutions, it could be a real challenge to integrate and optimize
the use of every single applications17.

Thus, we’ve seen how the SaaS architecture and model was born and has
evolved, from the “time-sharing” model of the ’60s through the first ASP’s in the
late 90’s/early 2000’s to the first modern SaaS entirely built for the web
“Salesforce”, these steps demonstrated that this technology was created firstly for
an economic reason, to avoid capital expenditure through numerous expensive
hardware and software acquisitions. This reason is still relevant today where
organizations that choose SaaS solutions are avoiding paying hardware to host
applications and data, the related maintenance and any other related internal
resources. In fact, we are witnessing a shift from capex strategies to opex
strategies (operational expenditures) that allow companies to lease hardware and
software owned by other companies and reduce their capex. Moreover, by
subscribing to a SaaS solution, an organization will be able to control and predict
costs allowing precise IT budgeting. Another reason for SaaS development all
these years is technological adoption, indeed in order to take full advantage of the
different technological changes in IT, organizations had to find solutions that are
integrating the latest technological shifts that will ultimately increase their
productivity and efficiency. For that matter, SaaS solutions allow organizations to
use efficiently the latest technologies with high adoption rates, minimum proof of
concept/discovery phase and maximum scalability, all of that by taking full
advantage of the technological environment18.

17
“Cloud-based SaaS Software: Pros and Cons”, text, 2017
https://www.findmyshift.com/blog/cloud-based-saas-software-pros-and-cons
18
“Why SaaS? 7 Benefits of Cloud vs. On-Premise Software”, text, 2014
https://www.handshake.com/blog/why-saas-cloud-benefits-vs-on-premise-software/

11
 3. SaaS industry requirements in 2018?

We’ve seen previously how SaaS has become important in today’s ICT industry,
now we’re going to talk about the minimum requirements for a SaaS product to
succeed in present-time. It is important to say that in this part, we’re only going to
do an overall approach of the requirements by knowing that SaaS requirements
vary by many precise criteria like industry type, application type, and targeted
audience. However, we can always take into account some common requirements
that are considered to be crucial for every modern SaaS.

The first one regards the security aspect of a SaaS, indeed as the application
content and data are not hosted internally, SaaS customers are really concern
about any potential cybersecurity breach that could compromise their IT system.
That's why SaaS vendors have to offer world-class security and data privacy to
their customers including processes and policies that would secure the following
fields: data-level, physical access, network, applications as well as full-backup
and disaster recovery systems. We can add that vendors should be compliant and
refer to the security-oriented legislation and auditing programs like ISO 2700119
and SAS70 Type II20. The final goal would be to offer top security for its
customers without any additional cost, protecting them from any internal or
external threats.

The second requirement is availability, indeed uptime guarantee is crucial for

both SaaS vendors and for their customers, in 2017 according to a Disaster
Recovery report from CloudEncure based on the responses of 270 IT
professionals around the world, 43% of enterprises estimate that downtime costs
their organization over $1 million per day. In the same report we can also see that

19
​“ISO/IEC 27000 family - Information security management systems”, text, 2018
https://www.iso.org/isoiec-27001-information-security.html
20
“SAS 70 Type II Audits”, text, 2009
https://www.intralinks.com/sites/default/files/file_attach/wp-sas70ii.pdf

12
service availability goals are rising, indeed in 2017, 73% of the surveyed
companies expect a service availability of 99.9% or better. (among which, 28%
are expecting the highest level of service availability of 99.999% “five nines” or
above)21 Therefore every reliable SaaS vendor have to commit to a guaranteed
availability rate in their SLA (Service Level Agreement) in order to prevent their
clients from downtime disasters, some of the vendors like Salesforce have even
put a real-time platform indicating their uptime statistics and service status22. In
case of a disaster it is critical for the vendors to have a working disaster recovery
plan that maintains the full access to SaaS systems under any circumstances, even
catastrophic one like bankruptcy or major cyber attack, in this kind of scenario
vendors can collaborate with specialized firms in data recovery, records
management like Iron Mountain23.

The third requirement is about the performance of a SaaS solution, in addition of

the needed constant availability, SaaS applications have to be performant, it
means that vendors have to optimize the development and delivery of their
products to their customers. Thus, the vendors have to pick the appropriate
development environment and programming language to maximize the
performance of their products. To be more precise, if the vendors want to develop
an application for a specific mobile platform, the best choice would be to do a
native development that will connect directly the application to the operating
system and hardware of the mobile device. (XCode for iOS, Java for Android and
Visual Studio and C# for Windows) By doing so, the application will run faster
natively but will be restricted to the targeted platform (compatibility and
distribution). If the vendors want to develop an application for cross-platform,
they will have to use a common language that can be recognized by every
platform. This programming language is HTML5 that is mostly run in every web

21
“2017 Disaster recovery survey report”, text and graphs, 2017
https://info.cloudendure.com/2017-Disaster-Recovery-Survey.html?itm_source=blog_5-things-they-never-told-about-downti
me&itm_asset=2017-DR-Survey-Results&itm_CTA=inline

22
​“Salesforce trust”, text and graphs, 2018
https://trust.salesforce.com/fr/
23
“DISASTER RECOVERY SERVICES”, text, 2018
http://www.ironmountain.com/digital-transformation/iron-cloud-data-management/disaster-recovery

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browsers no matter what the operating system is. With HTML5, vendors are able
to create complex applications especially when they’re combining HTML with
CSS and JAVASCRIPT. On the opposite of a native solution, an HTML5
solution requires no computing power or important hardware to run because a
simple browser is enough but it shows limitations when it comes to 3D rendering,
highly interactive and graphical representations, and intensive computation.
Finally, the vendors could also develop an application by doing a hybrid
development, mixing HTML5 and native development. It means that the core
application would be coded in HTML, CSS, and JAVASCRIPT but in addition to
that, the developer could also integrate additional functionalities related to mobile
platforms such as notifications, cameras or accelerometer24.

Therefore, in the introduction we have established a concise presentation of the

SaaS market in 2018, we know that SaaS is ubiquitous and have almost made
on-premise solutions obsolete but its success could be seen as a double-edged
sword because SaaS customers have now high expectations and standards when it
comes to picking a SaaS solution especially in terms of performance, security and
availability like we have seen in the last part. Thus, by knowing that the SaaS
market has become over the years a highly competitive market, the most
important question for vendors is how do they going to differentiate themselves
from the competition? That’s the main purpose of this dissertation and we’re
going to analyze through our literature review and case study, how a SaaS vendor
could implement disruptive strategy when it comes to differentiation and
ultimately innovation.

24
“Should You Design Your Mobile SaaS Application as Native, HTML5 or Hybrid?”, text, 2014
http://sandhill.com/article/should-you-design-your-mobile-saas-application-as-native-html5-or-hybrid/

14
 B. Theoretical Framework

In this part, we are going to define and introduce the main authors that have
theorized disruptive innovation and related phenomenon, they are going to
constitute the core of the literature review.

Clayton Christensen differentiates 3 types of innovation, the most common one in

the economy is the sustaining innovation or incremental innovation, this type of
innovation allows the companies to improve existing products with small
enhancements to differentiate from the competition. However, the differentiation
factor is limited because the competition can easily catch up with incremental
innovation because, in a hyper-competitive market, all the companies have fairly
the same market knowledge and have access to the same technologies. The
second type is efficiency innovation, it focuses on reducing the cost of
manufacturing and distribution of an existing product or service. With the
reductions, the company using efficiency innovation will be able to implement an
optimal cost structure and sell its product or service cheaper or with a better
margin than the competition. Finally, the last one identified by Christensen is
empowering innovation or disruptive innovation, it’s the least common form of
innovation because it generally involves important investments and creativity.
Indeed empowering innovation is all about taking a complex and expensive
product and making it simpler, cheaper for consumers. It’s the only innovation
strategy that could drive growth for companies, indeed it enlarges the existing
market and could also create new markets because it answers new consumes
needs25. The creation of new markets in a disruption context is conceptualized
and explained by W.Chan Kim & Renée Mauborgne in their Red Ocean / Blue
Ocean Strategy book. The red ocean analogy indicates an existing market space
with intense competition, especially in cost and price. In a red ocean, companies

25
​C. CHRISTENSEN, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, 2016 (reprint)

15
in order to thrive, are forced to beat the competition and exploit the existing
demand. Whereas in the blue ocean analogy, the companies are actually creating
a new market space where’s there’s no competition, the goal for blue
ocean-focused companies are to make competitors obsolete, capture new demand,
break cost-value trade-offs and pursue disruption26.

Capturing new demand and making the competition obsolete is only possible if
the market is ready to use the product or service. It is a vital requirement
especially in the ICT industry where technology is constantly mutating and
deeply changes the face of the market. Speaking of the technological race, it is
strongly linked to the demand readiness level to use new technologies. Everett
Rogers have theorized the diffusion and adoption of the innovation cycle,
diffusion is described as a spread of a new product from its source to the
consumers and adoption is a stage where an individual consumer decide to accept
or reject the product. In his theory there are 5 different stages of adoption, going
from the innovators through the early adopters, then the early majority and late
majority and finally the laggards. Each stage designates a different type of
consumer with different sensitivity regarding new innovation and technology27.
By knowing that technologies are evolving at an exponential rate according to
Moore’s law and Raymond Kurzweil, we are going to study the new disruptive
innovation theory called Big Bang Disruption, theorized by Paul Nunes and Larry
Downes28. The authors take into account the declining cost of creation,
information, and experimentation to describe what disruptive innovation could be
nowadays and do a parallel with the digital disruption phenomenon.

After studying the different disruptive innovation theories and their limits, we are
going to focus on the behavior of organizations towards the adoption of SaaS
solutions. In that particular part of the literature review, two models are

26
W. CHAN KIM, R. MAUBORGNE, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the
Competition Irrelevant, 2015

27
E.ROGERS, Diffusion of Innovations, 1962
28
Paul NUNES, Larry DOWNES “Big Bang Disruption: Strategy in the Age of Devastating Innovation”, 2015

16
dominants to explain new technologies adoption by organizations, the first one is
the TOE (technology-organization-environment) framework created by
Tornatzky & Fleischer and the second is the diffusion of innovation theory by
Everett Rogers.

C. Literature Review Methodology

The first part of the literature review will first focus on the origins and definition
of the concept of disruptive innovation of Clayton Christensen and how accurate
it is when it is applied to the SaaS industry.

The second part of the literature review will be dedicated to explaining the Big
Bang disruption theory by Paul Nunes and Larry Downes and how is it relevant
to the software and SaaS industry.

The third and last part will be dedicated to studying the adoption behaviors in
organizations towards adopting a SaaS solution.

For the practical part, I will be using the following platforms to gather
information and reports regarding the topic of disruptive innovation and the SaaS
industry: Google Books, SSRN, Research Gate, Sciencedirect.

II. Literature Review

A. The theory of disruptive innovation in the SaaS industry

1. Established but stagnant leaders and threatening new entrants in the

SaaS industry

17
According to Christensen, Anthony and Roth29, there are two ways for companies
to deal with innovation, as precise in the theoretical framework, it’s either by
implementing a sustainable strategy or a disruptive strategy. Sustaining
innovation is about the logical and continuous improvement of one or few
features of an existing product such as a longer battery for laptops or bigger
storage capacity for smart devices. Disruptive innovation, on the contrary, is
about creating and introducing a new value proposition in either reshaping
existing markets or create new ones. To be more precise, disruptive innovation
can appear in two different types, new market and low-end. In the case of
low-end disruptive innovation, it’s about offering less valuable and less
feature-rich products with a cheaper price for customers who are willing to accept
lower quality. In the cloud computing industry, Zoho office suite proposition30 is
an example of low-end disruptive innovation when this company has launched
globally their office solution, they did not create a new market but they’ve
attracted the low-end of an existing market by creating an affordable office suite
for small and medium sized companies in emerging countries such as India. New
market disruptive innovation is about creating innovative products with exclusive
features that attract new customers that were not interested in acquiring similar
products. A product that we’ve mentioned in the introduction that could be
considered as new market disruption is the first IBM personal computers that
allow mainstream consumers to acquire and use computers on a daily basis either
for professional and personal tasks without having to deal with price or
complexity issues. In the SaaS industry, we can talk about the first SaaS CRM
solution offered by Salesforce that allows consumers to fully access and use a
CRM solution via the internet with no price or complexity disadvantages
compared to the ASP solutions. Furthermore, as explained by Sultan31, disruptive

29
Christensen, C. M., Anthony, S. D., & Roth, E. A. (2004). “Seeing what’s next: Using
theories of innovation to predict industry change”, Boston, MA: Harvard Business
School Press.

30
“Zoho's latest pitch: Run your entire business for $1 a day per user”, text, 2017
https://www.computerworld.com/article/3210811/software-productivity/zohos-latest-pitch-run-your-entire-business-for-1-a-
day-per-user.html
31
N.Sultan (2013), “Knowledge management in the age of cloud computing and Web 2.0:
Experiencing the power of disruptive innovations”, International Journal of Information Management 33 (2013) 160–165

18
innovation can also be a hybrid between low-end and new market, when a
product is initially targeting a low-end segment of the market and later pull other
segments of consumers. We can talk here about hybrid disruption, a good
example of that phenomenon in the SaaS market could be the Zoho CRM solution
that was initially conceived for SME in emerging countries but with the
enhancement of the features and modernization of the solution, it attracted many
big firms, high-end users such as Morgan Stanley, Amazon, and Jive. Through
these examples in the SaaS industry we can see that disruptive innovation have an
important impact to the point of deeply transforming existing markets or create
new ones, therefore it also has the power to change the balance of power and
cause great and well-established firms to fail.

Talking of failures, Christensen32 also explained that leading firms tend to excel
in sustaining innovation but tend to fail when it comes to apprehending disruptive
innovation, indeed in his analysis of the hard disk industry, he demonstrated how
a leading firm like IBM had been held hostage by their customers and neglected
the technological change and innovation in the market, by heavily investing on
sustaining innovation like the 14-inch drives letting an open door for all the
entrants that saw the opportunity and forthcoming technology of 5.25-inch disk
drives. By knowing that IBM had the required resources to develop and
commercialize the 5.25-inch disk, the management just didn’t want to invest in a
product that wasn’t fitting their market segment needs. Moreover, Christensen
also says that by fully exploiting existing technologies, big firms use the very
same resources, values, and processes over time and it ultimately contributes to
creating a routine that proves to be inefficient when facing disruptive
technologies that require changes. We can do a parallel with the SaaS industry
that is based on an existing business concept of “timesharing” as we’ve explained
in our introduction, Campbell-Kelly refers to this concept as “timesharing 2.0”,
that concept was reborn after death in the ’80s because of the advent of personal

32
C.Christensen (1997), “ The Innovator’s Dilemma: When new technologies cause great firms to fail”, Harvard Business
School Press, 21-34

19
computers, now with the increasing complexity of the computer infrastructures,
expensive related maintenance costs, security and upgrade issues, remote
computing and online software have been able to make an important comeback33.
In addition to exploiting a pre-existing business concept, cloud computing and
SaaS also relies on existing technologies such as the Web, virtualization and grid
computing. So the parallel with the Christensen disk drive analysis could not be
clearer when established leaders such as Oracle and SAP have been
underestimating the potential of cloud computing and SaaS that was described by
the top-management as “fashion-driven” or “complete gibberish” to use Larry
Ellison exact words and decided not to focus on utilizing and commercializing
optimally cloud-related technologies, they basically just let new entrants like
Salesforce and SugarCRM in the market that did them considerable damages in a
very short time. For example, we can talk about IBM giving up Oracle’s CRM
solution (Siebel) to switch to SugarCRM solution in 201234. Thus, established
companies are suffering from their inability or unwillingness to adapt their
business model to market realities and technological change. The question that
we could ask is how leading companies know when disruptive innovation is
about to erode their competitive advantages and take over their market in the long
term.

2. What are the possible responses for incumbents and entrants to

disruption in the SaaS industry?

C. Christensen and M. Raynor distinguish two different situations, the first one is
regarding incumbents (or established firms) facing new entrants and the second
one is the reverse, new entrants facing incumbents. In the “innovator’s solution”,
the authors say that in the case where incumbents want to benefit from
technological innovation, they should first convince the upper management to see
the disruptive technology as a threat to their current businesses. By doing so, the

33
M.Campbell-Kelly (2009), “The Rise, Fall, and Resurrection of Software as a Service”, Communications of the ACM 52,
no.5, 28–30
34
“IBM’s Siebel defection signifies CRM changes beyond Oracle”, text, 2012
https://www.mycustomer.com/selling/crm/ibms-siebel-defection-signifies-crm-changes-beyond-oracle

20
management will be able to dedicate the required resources to anticipate and
control the forthcoming disruptive innovation. The second step would be to create
an autonomous unit to develop and commercialize the innovation preventing any
old processes, ideas and value to handicap the new development. The third step
would be to keep the development of the product internal and proprietary until it
becomes commoditized and finally Christensen and Raynor also recommend to
the firms to organize their business units by functions that the customers want to
solve. Indeed it is crucial to pay attention to the customers’ problems and
contexts rather than the customers themselves, it will enable the firms to have a
clear understanding of the current and future customer’s needs and answer them.
The third and fourth steps are also suggested for new entrants companies35. A
good case of an incumbent who successfully tackled disruptive innovation in the
SaaS industry would be Microsoft, in late 2012 the firm endured significant loss
due to the advent of smartphones and tablets, its acquisition strategy of
aQuantive, bad performance of its search engine Bing and its criticized operating
system Windows 8 were threatening the future of the tech giant. In response,
Microsoft appointed a new CEO in order to revamp its businesses, Satya Nadella
(February 2014) embodied the new face of the company by implementing a
cloud-centric strategy with the Azure platform to compete against Amazon Web
Services and the 365 office suite and Onedrive solutions to compete against
Google apps for work. The SaaS shift allowed Microsoft to keep their customers
in their ecosystem and prevent them from using the competition solutions, in late
2017, there are approximately 30 million 365 office subscribers and Microsoft
has evaluated its cloud business to $20 billion. The company is now continuously
investing and improving its cloud products by embracing the advent of smart
devices, taking into account their compatibility/integration within competitors OS
such as Linux, MacOs, and Android while focusing on their customers current
and future needs. Nadella has perfectly summarized this whole strategic shift in
his book “A leader must see the external opportunities and the internal capability
and culture—and all of the connections among them—and respond to them

35
​Christensen, C. M., & Raynor, M. E. (2003). The Innovator’s Solution. Boston, MA: Harvard Business School
Press.

21
before they become obvious parts of the conventional wisdom.” We can
obviously relate this thought to the Christensen/Raynor recommendations for
incumbents firms previously described36.

Regarding new entrants companies, they have to focus on markets that have been
ignored or underestimated by incumbents. This strategic recommendation has
been developed further by W.Chan Kim and R. Mauborgne by conceptualizing
the “Blue Ocean strategy”. In their latest book37, they developed further their
concept to make the blue ocean shift or how an organization can move from
market competition to market creation. Along with the Christensen theory of
disruption and Schumpeter creative destruction fundamental theory, market
creation is the consequence of either a superior technology destroying the old one
(Schumpeter) or an inferior technology taking over established ones through
times (Christensen). However, this view is incomplete because nondisruptive
creation could also be the source of new markets creation. To illustrate the
phenomenon of nondisruptive creation (creating new market space without
disrupting existing market) they took the microfinance industry as an example,
indeed, in 1983, Grameen Bank started their offer of micro loans without
collateral allowing people with little resources to start businesses. This particular
move has created the market of microfinance without displacing any other
existing markets because the traditional financial institutions have just ignored
the poor and unsuitable borrowers. Therefore in order to fully apprehend the blue
ocean shift, W.Chan Kim and R.Mauborgne have established a holistic model of
market-creating strategy by taking into account disruptive and non-disruptive
creations. Their research revealed three ways to achieve market creation. The first
one is about offering a breakthrough solution for an existing problem. The second
one is to redefine an industry’s existing problem and solve it. The third one is to
identify and solve a brand-new problem or seize a brand-new opportunity. To do
a direct parallel with our SaaS topic, the authors of Blue Ocean Shift have

36
Nadella, S. with Shaw G. & Nichols J.T. (2017) “Hit refresh: The quest to rediscover Microsoft’s Soul and Imagine a
Better Future for Everyone”, Harper Business

37
Chan Kim, W. & Mauborgne, R. (2017) “Blue Ocean Shift: Beyond Competing”, Hachette books

22
described how Salesforce took over the CRM market38. The CRM industry was
dominated by established firms such as SAP, Oracle, and Microsoft, they all have
important resources to develop new products and technologies but despite their
means, their CRM offerings were similars with the traditional software business
model of perpetual licenses. Once a customer needed a CRM solution, it had to
be installed, configured on-site and integrate to the customer IT systems requiring
important expertise and time from both the vendor and customer. Moreover,
incumbents only focused to sell their CRM solutions to important size businesses
because of the complexity and not-so-affordable criteria. As briefly mentioned
before, Salesforce entered the market in 1999 and its plan was not to beat the
competition by acquiring all of the big incumbents’ accounts, its plan was to
remove all the pain points of the CRM industry to make the competitors’
solutions obsolete and irrelevant. By creating a user-friendly CRM accessible
from the web in exchange of a monthly subscription (that can be canceled at any
time), Salesforce lowered the deployment, integration risks and development
costs (salesforce was offering only one version of CRM). With this business
model and with the right blue ocean shift, Salesforce managed to earn $1.3 billion
in annual revenues in 10 years essentially by pulling noncustomers (small and
medium businesses) into the market.

3. Limits of the theory of disruptive innovation in the SaaS industry

Andrew King and Baljir Baatartogkh have re-studied the 77 innovation cases
introduced as disruption by Christensen in “the inventor's dilemma” and have
come to the conclusion that only 7 of the 77 cases were meeting the four key
elements of the theory of disruptive innovation39. To be more precise, after
surveyed and interviewed experts on the 77 cases, they concluded that
Christensen’s theory of disruption was not accurate for every industry. It is
important to determine the limits of the theory in the SaaS industry. King and

38
​Chan Kim, W. & Mauborgne, R. (2017) “Blue Ocean Shift: Beyond Competing”, “From Red Noses to Blue Oceans in the
B2B Space”, Hachette books

39
Andrew A. King & Baljir Baatartogtokh​, “How Useful Is the Theory of Disruptive Innovation?”, MIT Sloan
Management Review (2015)

23
Baatartogkh summarized Christensen’s theory in four elements.

Figure 1 ​: C. Christensen’s Disruptive innovation theory

According to King and Baatartogkh and our previous explanations, the

Christensen’s theory fits the Salesforce disruption case but if we have a closer
look, these four elements could be quite imprecise and do not fit every disruption
cases in the SaaS industry. For instance, it doesn’t really explain how an
incumbent such as Microsoft has been able to tackle the SaaS disruption with its
office suite as previously explained. Therefore we can say that the Christensen
framework isn’t complete to fully apprehend disruptive innovation in the SaaS
industry.

To complete the theoretical framework of disruptive innovation we can talk about

the work of A.Keller and S.Hüsig that have studied disruptive innovation in the
software industry with the case of Microsoft’s and Google’s office applications40.
The authors completed the Christensen framework that consists of three phases
(“foothold market entry : the innovation grows successfully in a market niche,
main market entry: the innovation enters the mainstream market and failure of the
incumbents: incumbents fail, because they cannot successfully implement the
innovation themselves”) with the inclusion of the network effects. The network

40
​Andreas Keller & Stefan Hüsig, “Ex-ante identification of disruptive innovations in the software industry applied to web
applications: The case of Microsoft's vs. Google's office applications”, Technological Forecasting & Social Change 76
(2009)

24
effect depicts the situation when the value of a good increases with the number of
users, a good example could be the advent of the internet, at the very beginning
the internet was only valuable to specific individuals such as scientifics or
military personals but with the improvement and commoditization of the
technology, the internet became valuable to every mainstream users. Therefore
Keller and Hüsig have included this effect to measure disruption in the software
industry. To be more precise, the two authors have set indicators to prove whether
network effects is promoting disruption or the contrary. One of the indicators is
regarding the switching costs that includes data, training and, infrastructures.
Another indicator is the coordination costs that could favor the old technologies
compare to the new ones with the already existing and interacting user base. They
also considered the user’s expectation of the future network size of a product and
compatibility with the old network as indicators. According to the authors, if
these indicators are fulfilled, a disruption is more likely to occur.

In addition to the network effects, Keller and Hüsig also included trajectory maps
as the second part to measure the potential of disruptive innovation in the
software market. A trajectory map allows the tracking and measurement of the
performance of the existing technology, the new one and, market demand based
on selected attributes. According to them, the performance trajectory of the
disruptive innovation should intersect the lower market demand, and the
trajectory of the established technology should overshoots market demand. Along
with the disruptive innovation theory, it means that disruption occurs if the new
technology is capable of answering the demanded performance in the mass
market. They also added to their model, the price trajectories based on the work
of Adner41, the price trajectory of the new technology should intersect the
trajectory of the established one from above or always remains below. It means
that the potential of disruptiveness from new technology is increasing if the price
remains lower than the incumbents’ prices.

​R. Adner, “When are technologies disruptive? A demand-based view of the emergence of competition”, Strategy &
41

Management Journal. 23 (8) (2002) 667–688

25
Keller and Hüsig came to the conclusion in their case study that Microsoft office
applications wasn’t threat by Google web applications because of the existing
strong network effects that give to the incumbent enough time to tackle the
incoming cloud computing innovation, and as previously explained Microsoft has
successfully seen the upcoming advent of SaaS and has invested and developed a
SaaS offering for their customers with office 365. However, the Keller and Hüsig
approach were only applied to big players in the market and that is a deviation
from the original disruptive innovation theory by knowing that Christensen only
suggests analyzing start-ups. To this point, we can ask our self if the Keller and
Hüsig approach is relevant to identify potentially disruptive innovation in the
software industry? In a 2013 research paper, Kaltencker, Hess, Huesig and
Downling have studied this question and applied the Keller and Hüsig approach
to the CRM market42 with some adjustments. They have validated the Keller and
Hüsig approach by analyzing the office applications market from an ex-post
perspective, with a time span of four years. They’ve concluded that the web
applications threat was indeed minor with Microsoft holding to its market share
(90%) in the business-productivity software industry in 2012. However, the
disruptive potential regarding other criteria such as product performance,
consumers willing to pay for advanced functionalities is still significant.
Therefore, the authors have modified the Keller and Hüsig approach by dropping
the coordination costs in the incumbents’ criteria sheet and including the
“non-consuming” criteria that target the consumers who don’t need every
product’s features and non-consumers. It is an important improvement over the
last model because the non-consumers were not taken into account in the Keller
and Hüsig model so an important part of Christensen’s new-market disruption
was put aside. The results of the Kaltencker, Hess, Huesig and Downling on the
CRM market (SAP and Salesforce) showed that SaaS solutions have high
disruptive potential but it also revealed that the SAP’s strategies to limit the SaaS
threat were effective enough to avoid failure. Indeed SAP saw that the market
data indicated SaaS as a high threat to on-premise solutions so they started to buy

42
N.Kaltencker, S.Huesig, T.Hess & M.Downling “THE DISRUPTIVE POTENTIAL OF SOFTWARE AS A SERVICE:
VALIDATION AND APPLICATION OF AN EX-ANTE METHODOLOGY”, Thirty-Fourth International Conference on
Information Systems, 2013

26
firms that already possess the SaaS technologies to integrate them in their offers.
That’s how SAP CRM OnDemand was created to counter the entrants such as
Salesforce. However, even with this response strategy, SAP main targeted
customers are still big and medium-sized companies with a requirement of at
least 100 users to subscribe to their On-Demand solution. With this minimum
requirement in mind, we can say that the SAP response strategy has for the main
objectives to prevent their current customers to switch to other SaaS competitors
and have a foothold in the SaaS market. We can say that according to the
Christensen theory, SAP is not decreasing the potential of disruption of their
competitors. Therefore, the future scenario predicted by the study showed that the
CRM market will be dominated by SaaS as a technological substitute where less
prepared and resourceful incumbents will still be disrupted.
We can summarize the Keller & Hüsig approach and Kaltencker, Huesig, Hess &
Downling enhanced model in the following table :

Phase Entrant Incumbent

❏ Products perform worse based on ❏ Some customers are

established attributes over-satisfied

❏ Products are cheaper, simpler, ❏ Main customer segment does

more comfortable not appreciate entrants
Foothold Market Entry products
❏ Product address current
non-consumers ❏ Market for products based on
disruptive innovation
❏ Profitable business model appears small and irrelevant
targeting over-satisfied
customers

❏ Investors allow experimentation

❏ Products are based on standard ❏ Established performance

components attributes are shifting

❏ Strategic resources are accessible ❏ Customers are unwilling to

pay for further
Main Market Entry ❏ Network for disruptive improvements along
innovation is expected to be established attributes
large
❏ Switching costs are low
❏ Disruptive innovation is
compatible with existing network ❏ Coordination costs are low

❏ Business model is significantly ❏ Products matching entrant’s

27
 different offer are not added

❏ Processes are significantly ❏ Incumbent is fleeing to

Failure of Incumbent different premium customer segments

❏ Value network has a low overlap ❏ Disruptive innovation is not

implemented in separate
organization

Figure 2: Keller, Hüsig, Kaltencker, Huesig, Hess & Downling model to evaluate
potential disruption in the SaaS industry

Thus in the first part of the literature review, we have studied the application of
Christensen disruptive innovation theory in the SaaS industry where incumbents
that rely traditionally on on-premise solutions are threatened by entrants moving
up the market with groundbreaking on-demand solutions. We saw that the
Christensen’s work is appropriate to depict the overall situation in this particular
industry but is insufficient to analyze certain cases. That’s why we’ve added the
work of more contemporary authors such as Keller & Hüsig to complete the
Christensen’s theory by taking into account important criteria to explain
disruption in the software industry such as the network effects and switching
costs. We previously saw that incumbents benefit from time and resources to
tackle incoming innovations, however, with nowadays software industry
standards and adoption criteria we can question the time variable, Microsoft had 4
years to tackle SaaS back in early 2010 but what about now for the upcoming
technologies? Therefore the second part of the literature review will focus on a
new form of disruptive innovation, that is called big bang disruption.

B. From disruptive innovation to big bang disruption in the SaaS industry

1. The origins of big bang disruption in the Software industry

In order to understand the concept of big bang disruption, we have to focus on its
origins, what is actually causing the transformation and especially in the SaaS
industry. One of the key drivers for big bang disruptions is regarding the

28
continuously growing and evolving information technology. Indeed, Gordon E.
Moore (Intel co-founder) has predicted in 1965 the evolution of the processing
power and complexity of the hardware, according to him, the processing power of
a semiconductor will continue to get twice as fast every twelve to twenty-four
months with a constant price. His prediction was actually right, the
semiconductor density has indeed doubled every 1.96 years between 1975 and
2004. It means that over time, customers have access to increasingly more
powerful processors for less and less money. We can establish the same parallel
for the whole IT industry that includes data storage, internet bandwidth, memory
and so on. In order to have a broader view of these evolutions, we can talk about
the work of Ray Kurzweil and its law of accelerating returns43. He stated that
through the course of history, technological changes have been exponentials. In
his thesis, Kurzweil uses the example of automatic speech recognition software to
demonstrate the software price-performance exponential improvement. Indeed
according to his figures in 1985, customers had to pay 5000$ for a poorly
accurate and performant software (with a limited vocabulary size of 1000 words,
no continuous speech recognition ability and 180 minutes training requirement to
know how to use the software) wherein 2000, customers had only to pay 50$ for
an accurate and highly performant solution (with respectively a vocabulary size
of 100 000 words, continuous speech functionality and 5 minutes training
requirement). This example demonstrates how exponential the software industry
is growing and evolving, we can obviously do a parallel with our study on the
evolution of SaaS solutions that we did earlier in the introduction. Kurzweil’s law
of accelerating returns also indicates that whenever technology is reaching a
barrier, new technology will then be invented and take over in order to cross the
barrier and pursue its exponential evolution. This paradigm shift can be verified
when we look at the evolution of the processors from mechanical ones in 1900
through the invention of transistors in the late 60s to the nowadays integrated
circuits.

43
Ray Kurzweil “Law of Accelerating Returns”, http://www.kurzweilai.net/the-law-of-accelerating-returns 2001

29
Figure 3 :​ Updated Moore’s Law from 1900 to 2020

Paul Nunes and Larry Downes, the originators of the concept of Big Bang
disruption concluded that exponential technologies are allowing the creation of
better and cheaper goods and services. They took many examples in the IT
industry to illustrate this trends such as cell phones that costed over $4000 in
1984, requiring 450 hours of work with only one functionality (calling) to today’s
low-end mobile phone that is exponentially better, smaller and cheaper (the
equivalent can be purchased at $20). Indeed, computers were originally used for
specific tasks such as back office, accounting and payroll processing due to their
costs and complexity, but now with the exponential technologies and by extent
the IT revolution, computers are at each new generation better and cheaper and
therefore have become ubiquitous in every business, for every category of tasks.
Therefore the exponentiality of technologies is deeply affecting every type of
organizations and it also exposes them to the threat or opportunity of Big Bang
Disruption, even more, when it’s the case of companies in the software industry
by knowing that IT has become an integrated tool in basic research, product
design, sourcing, manufacturing, sales, marketing, logistics and service for any

30
modern organizations. Moreover, Nunes and Downes are also saying that
customers are now accustomed to the effect of exponential technologies, of
having better and cheaper products, it means in order to keep up with the market
and various disruptions, the incumbents have the obligation to continuously
innovate by maintaining competitive prices, if not they would be doomed to
failure, losing their customers to Big Bang disruptors44.

2. The concept of Big Bang Disruption in the Software industry

According to Larry Downes and Paul Nunes, Big Bang Disruption is defined by
three characteristics. The first one is an undisciplined strategy, it means that
thanks to the exponential technologies, Big Bang disruptors are entering into the
market with cheaper and better products and sometimes even more customizable
than the products of the incumbents. We can say that it goes against the classical
academic thinking on strategic planning that requires only one market discipline.
In fact, classical academics such as Michael Porter and Micheal Tracy are
recommending to firms to only focus on one and only strategic goals such as low
cost, premium product or customized offerings. As we previously explained,
cheaper and better products are possible because of the exponential technologies,
in the case of the software industry, Nunes and Downes explained that software
can be developed in majority with existing code and then thanks to the
enhancements in communication technology, especially the internet speed,
software can be easily manufactured, delivered and updated on a global scale.
The software could also be easily installed on a numerous and various range of
devices, ranging from traditional desktop computers to the latest smart and
connected devices such as tablets and smartphones, especially for SaaS products
that only require an internet connection and a web browser to work. Thus by
lowering the research and development, production, manufacturing and
distribution costs, disruptive technologies are allowing the software vendors to
sell new product and services more cheaply than ever without having the need to

44
​Larry Downes, Paul Nunes “Big Bang Disruption: strategy in the age of devastating innovation”, Portfolio, 2015, chapter
1: What is Big Bang Disruption ?

31
do any trade-offs between price and quality. To illustrate the undisciplined
strategy aspects, the authors use the example of the portable navigation tools that
were dominated by incumbents such as Garmin and TomTom but all failed to
prevent Big Bang disruptors such as Google and Apple. Indeed, navigations apps
created by the tech giants such as Google maps offers all the features if not more
of high-end GPS devices and cost nothing to the users (they are just an add-on
available for free in the operating system manufacturer). Moreover, these
navigation apps are continuously updated and enhanced with the various
integration possibilities (with other applications, contact lists, e-mails and so on).
We can also add that thanks to the cloud computing technologies, the users don’t
have to buy any extra devices or software to have access to the GPS apps unlike
before. Therefore, this case clearly demonstrates how Big Bang Disruptors
became the undisputed leaders (in cost, product quality, and customization) of the
GPS device industry.

The second characteristic of Big Bang Disruption is unconstrained growth, before

talking about this characteristic it is important to know the Everett Roger's
diffusion of innovation theory. According to Rogers, innovation (material or
immaterial innovation) is perceived as new by an individual or a group of
adoption and it is measured by the lapse of time since its first use or discovery.
Diffusion is described as the general spread of innovation, in other words, it
described the process by which an innovation is communicated and spread over
time among different type of social groups. The author also depicted the
innovation-decision process in five actions, the first one is the knowledge phase
where the innovation is exposed to the individual so he can understand how it is
functioning. The second action is the persuasion phase that indicates whether the
individual is adopting a favorable or unfavorable attitude toward the innovation.
Then the third act is the decision phase, it indicates if the individual is going to
decide if he’s going to adopt or reject the innovation. The fourth action is the
phase of implementation, it occurs only if the individual is deciding to adopt the
innovation, he then put the innovation into use. The fifth and last process is the
confirmation phase where the individual is looking to reinforce its adoption of the

32
innovation, the individual can go back into the process if he is exposed to a
conflictual message about the innovation. In addition to the definition of an
innovation-decision process, Rogers also divided the adopters into five distinct
categories. The first category of adopters is the innovators, they are defined as the
first individuals to comply with the innovation and are represented as individuals
who are willing to take risks, open and receptive to new ideas/innovations. This
category has theoretically more resources than the others and is playing a crucial
role in the diffusion of innovations. The second category of adopters is known as
the early adopters, according to Rogers, they are more intelligent, educated and
sociable than the other subsequent groups. The third category is the early
majority, it gathered the thoughtful individuals who need to know the first
feedbacks and observations about the innovation before making an adoption
decision. The fourth category is known as the late majority, it represents the
individuals that are waiting for the innovation to be used by a great part of the
population, they want performance guarantees and are very influenceable by the
opinion of the other adopters. Then the fifth and last group is the laggards, they
are the last part of the population to accept innovation, they will make the
decision of adopting the innovation only after it becomes mainstream. We can say
that this group is obviously the most conservative and rational one with a lot of
suspicions towards innovations45. We can also talk about the work of Geoffrey
Moore that went further in the analysis of Rogers’s theory by including a chasm
that indicates the strategic transition of an innovation from the early adopters to
the early majority, it also indicates the transition of an innovation from a niche
market to a mass market, Moore considered an innovation as a failure if it doesn’t
reach the critical threshold of the innovators and early adopters.

The Everett Rogers's theory and Geoffrey Moore’s work can be summarized in
this figure :

45
​Everett ROGERS, Diffusion of Innovations, 1962
33
Figure 4 :​ Everett Roger’s diffusion of innovation theory and Moore’s Chasm

Now if we go back to the Big Bang disruption concept of Nunes and Downes and
its unconstrained growth, with the declining cost of information due to advances
in internet and network technologies, important mass of information are available
to the customers, it means that information about the quality and availability of
products and services are easy to access for everyone. Therefore with the
phenomenon of near-perfect market information, customers can easily discover
and experiment the different innovations and adapt them almost instantaneously.
Firms no longer have to worry about early adopters to create new markets. Thus
to Nunes and Downes, there are now only two different groups of adopters, the
trial users who participate in the development and first reviews of the innovation
and the mainstream customers (the vast majority) who are perfectly informed and
influenced by the first group. With the right mix of technologies and business
model, the mainstream customers are moving together towards the successful
innovation. Big Bang Disruption is changing the product lifecycle theorized by
Everett Rogers and also deviate from Geoffrey Moore’s chasm by knowing that
innovation can be now marketed to every segment of adopters simultaneously and
massively from the very beginning46.

46
​Larry Downes, Paul Nunes “Big Bang Disruption: strategy in the age of devastating innovation”, Portfolio, 2015, chapter
2: The economics of Big Bang Disruption

34
The Nunes and Downes’s unconstrained growth can be conceptualized in the
following figure :

Figure 5 :​ Big-Bang market segmentation vs Roger’s market segmentation

The third and last characteristic of Big Bang Disruption is unencumbered

development, it means that Big Bang disruption isn’t requiring expensive
research and development, indeed innovators are using existing components and
software to develop their products and services. It means that the creation and
experimentation cost are remaining low. The authors used the Twitter example to
illustrate the unencumbered development aspect, indeed Twitter was born at a
hackathon and required no new technology to perfectly function. Now it has 200
million active users with half a billion tweets per day, the outcome of the advent
of Twitter was the total disruption and destabilization of the news and
information industry. Therefore we can say that Twitter was born rapidly, with
low-cost experiments on ubiquitous and existing technology platforms and
infrastructures.
The authors also did the parallel with other popular internet services firms such
as Netflix and Skype that are using existing home internet connections and
non-proprietary audio and video compression protocols to broadcast on-demand
video content for one and allowing users to do video and audio calls for the other,

35
disrupting entire traditional market such as the video rental market and the phone
companies. Moreover, with the declining cost of technology, innovators are able
to experiment with new applications with low risk for investors and abandon the
failing projects or prototypes quickly. Downes and Nunes also specify that the
declining cost of experimentation is well reflected in the software industry by
knowing that software is built from reusable code, open standards, and
non-proprietary interfaces.

3. The innovation life cycle in Big Bang Disruption

In order to fully capture the concept of Big Bang Disruption, Nunes and Downes
have also conceptualized the market entry and exit of disruptors. Following the
previous part, we saw that the work of Everett Rogers and Moore were irrelevant
to describe Big Bang Disruption. Thus a new model was needed to describe the
life cycle of innovations offered by Big Bang disruptors, a model that would
capture the shift from strategic business change driven by incremental technology
improvements to Big Bang disruptors driven by exponential technologies and
thus to take into account the effects of declining cost of innovation, information
and experimentation in the life cycle of an innovation. The authors of Big Bang
disruption have established a model called the “shark fin” that is represented by
four different stages. The first stage is the singularity, it translates into a stage
where incumbents have to reach a point of maturity in their respective industries
and are threatened by new entrants that could offer disruptive products or
services. At this stage, the disruptors are not often seen as direct threats because
of their failed experiments or because they may come from outside the industry
but as random as it appears to be, they embody the signal of the change to come.
The second stage is called The Big Bang, it is the stage where after
experimenting, the innovators have found the right combination between
technology and business model to create new markets characterized by rapid or
instant adoption by every segment of customers. In that phase, the customers tend
to abandon their old and obsolete products or services causing massive
disruptions in the existing industries. The third stage is called The Big Crunch,

36
this stage represents the reversed expansion of the disruptors, indeed disruptors
will reach market saturation far more quickly and will logically enter into their
own mature state, where innovation will take incremental forms and grow slower.
The fourth and last stage is called Entropy, it represents the last stage of Big Bang
disruption where the disruptors are dying and trying to create new singularities
with their remaining assets. Nunes and Downes noted that the remaining assets of
the disruptors that became incumbents may find new uses in other ecosystems or
constitute the base for other incarnation of the business47. We can illustrate the
Nunes and Downes’s shark fin in this figure :

Figure 6: ​Innovation life cycle in Big Bang disruption Theory

When we look at the Sharkfin we can establish a direct correlation with the
digital disruption that includes companies shifting from on-premise solutions to
SaaS solution. Thus, we are going to have a closer look at the different stages of
digital disruption to see how much it relates to the innovation life cycle in the Big
Bang disruption theory. Daniel A. Skog, Henrik Wimelius and Johan Sandberg
defined digital disruption as “The rapidly unfolding processes through which
digital innovation comes to fundamentally alter historically sustainable logics for
value creation and capture by unbundling and recombining linkages among
resources or generating new ones.”, to the authors, there are three main
characteristics of digital disruption. The first one is digital innovation, that is

47
​Larry Downes, Paul Nunes “Big Bang Disruption: strategy in the age of devastating innovation”, Portfolio, 2015, chapter
3: The Shark Fin

37
described as the creation of market offerings, business processes or models
originated from the use of digital technology. Furthermore, digital innovation is
also embedded in specific social and technical environments that enable their
diffusion, operation, and use. The authors insisted on the codependency of digital
innovation and its environment that creates opportunities for even more
innovations. To depict this particular relationship, the authors also conceptualized
the concept of digital ecosystems that constitute the second aspect of digital
disruption. They defined the digital ecosystem as the social and technological
“networks of interdependent technologies and associated actors that are related
based on a specific context of use”. The third and last aspect of digital disruption
is valued logic that represents the reasons “for designing, bundling and
embedding a digital innovation to fruitfully create and capture value”.

The authors have conceptualized a model to illustrate digital disruption dynamics

with the different stages (discovery, development, diffusion, and impact). The
discovery stage indicates the research phase for materializing ideas into digital
innovations. It’s a process of the invention, selection, and testing with the
combination of internal resources and external technologies. In order to validate
the idea and continue to the next step, it has to incorporate a deviant logic value
that differs from the established dominant ecosystem and it must be feasible
financially and technologically. The phase of development is the phase where the
innovation idea become a useable output, it includes the realization of the
innovation and the introduction of the innovation to the local ecosystem. The
authors noted that at this stage, the innovation should be compatible with the
technological standards and governance structures to be properly exposed to
end-users and available for adoption. Then comes the diffusion stage where the
innovation is adopted and used by a vast majority of the actors, it represents the
shift from the marginal ecosystem position to a central ecosystem position.
Finally, the last stage is the impact stage that focuses on the different outcomes of
digital innovation adoption, It represents the stage where the deviating logic is

38
imposed on a wide scale altering historically sustainable businesses and
operations within industries48.

Figure 7 :​ Skog, Sandberg and Wimelius’s model of digital disruption

C. Adoption behaviors in the SaaS industry in present days

1. The SaaS adoption theories in organizations, the

Technology-Organization-Environment(TOE) framework and
Innovation Diffusion Theory (DOI)

In a 2015 research papers, Thao Phuong Trinh, Cong Hiep Pham and Dieu Tran
have studied the different adoption model for SaaS solutions in small and middle
size companies, they focused their works on two particular models by knowing
that the others are more focused on an individual adoption standpoint
(Technology acceptance model (Davis & al. (1989)), Theory of reasoned action
(Fishbein & Ajzen (2011)), Social Exchange Theory (Emerson (1976)), Theory
of Planned Behaviour (Ajzen (1991)), The Unified Theory of Acceptance and use

48
Daniel A. SKOG, Henrik WIMELIUS, Johan SANDBERG “Digital Disruption”, DOI: 10.1007/s12599-018-0550-4, July
2018

39
of technology (Venkatesh & al. (2003))), the two models are TOE
(technology-Organization-Environment) from Tornatzky & al. (1990) and DOI
(Diffusion of innovation) from Everett Rogers (1995). These two models focus
on an organizational adoption standpoint and therefore are more reliable to
explain SaaS adoption for businesses.

The DOI models include five main factors that influence the adoption behavior of
new technology, the first one is a relative advantage that represents the degree to
which new technology is seen as better than the one it replaces. The second factor
is the compatibility, it’s the factor that shows how the new technology is fitting
with current values, experiences, and needs of the potential adopters. The third
factor is complexity, it indicates the level of difficulty to understand, to
apprehend and to use new technology. The fourth factor is trialability, it indicates
the degree to which the new technology can be tested or experimented before
adoption. The fifth and final factor is observability, it indicates the concrete and
observable results that can provide the adoption and use of the new technology.
Thus the DOI model allows to analyze the characteristics of the new technology
itself but it would be inaccurate to only use this model to explain SaaS adoption
because there are also contextual factors to take into account, that’s why Trinh,
Pham, and Tran also use the TOE model.

Regarding the TOE model, it describes the process of the adoption and
implementation of technological innovation by a firm and how it is influenced by
technological, organizational and environmental context. The technological
context refers to the internal and external technologies that are used by the firm
(equipment and processes). The organizational context refers to the characteristics
and resources of the firm, it includes the size, centralization degree, managerial
structure, human resources, communication processes and formal and informal
linking structures. Finally, the environmental context that refers to the external
environment in which the firm is evolving, it includes the size and structure of the
industry (market structure), the macroeconomic context and regulatory
environment. Therefore the authors have combined these two models by selecting

40
precise criteria that can explain SaaS adoption. That’s why they retained
technological factors including, compatibility, relative advantage, trialability, and
complexity, for the organizational factors they retained top management support,
technological readiness and organizational innovativeness and finally for the
environmental factors they retained cloud provider support, competition intensity
and regulatory issues. In addition to the DOI and TOE models, the authors also
included the security risk concern that may influence the SaaS adoption. By
knowing that SaaS raises security concerns because of the heavy dependence on
vendors for data protection and confidentiality, the authors of the study also
included the protection motivation theory (PMT) to their SaaS adoption model.
The PMT model explains how individuals are motivated to take protective
responses after risk and coping assessments49.

We can summarize the conceptualized SaaS adoption model by Trinh, Pham, and
Tran in the following figure :

Figure 8:​ SaaS adoption model for small and middle enterprises

Therefore, the authors concluded that for technological factors, compatibility,

relative advantage and trialability of SaaS will positively affect SaaS adoption
whereas complexity will affect SaaS adoption negatively. Regarding
organizational factors, technology readiness, top management support, and

49
​Thao Phuong TRINH, Cong Hiep PHAM, Dieu TRAN “An adoption Model of Software as a Service (SaaS) in SMEs”,
Pacific Asia Conference On Information Systems (PACIS), 2015

41
innovativeness will affect positively SaaS adoption. For the environmental
factors, cloud providers competencies, competitive intensity, and maturity of the
regulatory framework will positively affect SaaS adoption. Finally, perceived
SaaS security concern will negatively affect SaaS adoption and coping appraisal
will positively affect SaaS adoption.

2. The critical factors for Software-As-Service adoption in organizations

To have a macroscopic view and understanding of the SaaS adoption we can talk
about the work of Victor Chang, Robert John Walters and Gary B.Wills who
identified 2 main drives for organisations to adopt cloud computing, the first one
is technological, indeed in present days Grid computing and web technologies are
both mature enough to handle complex and high-performance web-interfaced
environment. The second drive is economical, indeed after the major economic
downturn back in 2008 and a relatively unstable economy since then, most
organizations are looking to limit their spendings. Adopting cloud computing is
for organizations a clear opportunity to reduce costs, especially in servers, server
maintenance, and staffing. In order to prove this point, the authors use the
electricity and operational costs saving from the company CA technologies (a
global IT firm) that was able to save $6.5 million in labor costs and $2.4 million
in operational costs by closing 19 server sites. They also highlighted the work of
Kahjeh-Hosseini(2010) to have a deeper understanding of cloud computing
adoption. Kahjeh and Hosseini conducted numerous interviews of stakeholders
who want to adopt cloud computing, they came to the conclusion that the top
factors for adopting cloud computing are different than those who were found by
researchers (availability, agility, scalability, and elasticity as we briefly
mentioned in our introduction ). The stakeholders put the focus on the following
benefits, the first one concerns the improvement of satisfaction of work with the
development of new skills if employees can learn and improve their technical
environments they will have better satisfaction of work. The second one concerns
the opportunity for organizations to offer new products and services and
organizational growth, indeed cloud computing will allow companies to develop

42
and offer brand new products and services and therefore participate in the growth
of the organization with more customers, cost-saving and increased revenues. We
can summarise Khajeh and Hosseini work in the following table :

Benefits Risks

■ Improve satisfaction of work ■ Lack of supporting resources

■ Opportunity to develop new skills ■ Lack of understanding the cloud

■ Opportunity for organizational ■ Departmental downsizing

growth
■ Uncertainty with new technology
■ Opportunity to offer new
products/services ■ Deterioration of customer care and
service quality
■ Opportunity to manage income and
outgoings ■ Increased dependence on third
parties

■ Decrease in satisfying work

Figure 9: ​Khajeh & Hosseini benefits and risks for adopting cloud computing
solutions

Therefore, with the work of Chang, Walters, and Will50 we have determined the
top benefits and risks factors of adopting cloud computing but our object of
interest is more precise because it concerns a specific part of cloud computing
that is SaaS. Our objective is now to determine the adoption factors of SaaS in
modern days.

In 2013, Björn Johansson and Pedro Ruivo determined the factors for adopting
ERP as SaaS by conducting interviews amongst 20 Microsoft qualified
employees. The goal of this study was to identify the different factors for users to
adopt SaaS ERP solutions. If this study only regards ERP solutions we can

50
​Victor CHANG, Robert John WALTERS, Gary WILLS “Delivery and Adoption of Cloud Computing Services in
Contemporary Organizations”, IGI global, 2015

43
assume that those factors are the same for other categories of SaaS solutions. As
we briefly approached in our introduction, nowadays SaaS users expect the
solutions to be performant, secured and available, the Johansson and Ruivo
approach complete our findings with complementary criteria. The results of the
study lead to highlight 10 factors. The first one is the costs concern, indeed the
more the solution is appealing in terms of costs reduction, the more the users are
going to be receptive to the change. An equally important factor according to the
study is security regards, most of the users frequently ask questions of data and
information confidentiality like what could happen if the saas vendor goes out of
business? They also have concerns about the local legislation in certain countries
that prevent specific information to be kept offshore. The third factor is about
systems availability by knowing that SaaS requires a stable and reliable internet
connection. That’s why it is important for the vendors to possess the required
infrastructure and data-center to ensure high system availability and data
availability with minimum downtime. The next factor is usability, it concerns the
differences on user interface and user experience between an on-premise solution
and SaaS solution. Indeed most of the customers are considering adoption if the
SaaS interface is more simple, intuitive and user-friendly because it will result in
a gain in productivity and reduced training costs. Another important factor is
implementation, if a SaaS solution allows quick and simple deployment that
implies low implementation costs, it will ease the customers’ decision to adopt
the on-demand solution. Another factor concern the ubiquity of a solution, indeed
with the BYOD trend and advent of smart devices as work tools, the customers
want to have constant and mobile access to the SaaS solutions. Flexibility is also
an important factor, customers are expecting that SaaS solutions should be
individually adjusted and set without needing any external intervention. The
factor of compatibility is also considered as a SaaS adoption solution, as we’ve
mentioned earlier in our introduction the notion of interoperability, it means that a
SaaS solution should be working with the already installed systems without
having to create specific and complex links as it was with on-premise solutions.
The authors ended their study with 2 other important factors that are specific to
ERP solutions which are the performance of the integrated analytics tools and

44
best practices for business process standardization.

Here is a summary of the top factors for SaaS adoption according to Johansson
and Ruivo ranked by importance51 :

Figure 10:​ Top critical factors for adopting ERP as SaaS

Therefore we can conclude that SaaS adoption will mostly depend on these
factors. To go further in the explanation and understanding of these factors we
can also talk about the work of S.Vijayakumar Bharathi and Tanuja Mandal that
study in 2015 the ranking of critical factors for sustainable cloud ERP adoption in
small and middle-sized businesses. The first analyzed factor is the cost that
includes the implementation cost (IMC) that represents the deal of time and effort
needed to implement the SaaS solution, the maintenance cost (MC) that
represents the cost of maintaining the SaaS solution up to date, the Subscription
cost (SC) that represents the pay as you go model (monthly subscriptions and
contracts renewal) and finally the vendor switching cost (VSC) that represents the
potential cost needed to switch to a vendor that is not compatible with the
organization. The second critical factor is security and standards, it includes the
service level agreement conditions (SLA) it’s a contract covering every aspects of
data security and integrity between the vendor and the customer, the data
confidentiality and security (DCS) that represents the data security standards and

51
​Björn JOHANSSON, Pedro RUIVO “Exploring factors for adopting ERP as SaaS”, CENTERIS 2013 (conference on
enterprise information systems), 2013

45
compliance that the vendors have to respect and finally there is the information
access (DA) that represent the identity check and users rights, administration to
modify, access or delete information in the SaaS solution. The third identified
critical factor are organizational factors, it includes competitive advantage/time to
market (CA) that represents the due diligence of benefits and advantages of a
SaaS solution before the adoption, the goal to this study is to identify competitive
advantages of adopting a solution, it also includes IT resources cost (ITR) that
represents the needed IT resources to maintain the SaaS solution operational and
optimal to the organisation and finally it includes being on pace with the latest
leading-edge technologies (LET) that represents the adoption and integration of
new technologies in an organization’s operations and how it will fit with the other
services and software of the organization. The fourth factor is performance and it
includes customization (CST) that represents the flexibility of a SaaS solution
depending on different customer needs, a flexible solution should be able to adapt
itself to different organization needs and users with customizations choices, it
also includes up-gradation (UPG) that represents the ability of a solution to be
updated quickly and efficiently with the latest features, scalability (SCL) is also
included it represents the expansion ability of a solution to spread within an
organization and efficiently and finally there is the integration with other cloud
services (ICS) that represents the benefits of using a cloud shared infrastructure
by having the possibility to integrate other cloud services to the organization and
have a synergy between the different services. The fifth and last critical factor
according to the authors is functionality and it includes usability (US) that
represents the friendly userness of a solution, mobility(MB) that represents the
ubiquity of a solution and also ability to use the solution on a various range of
devices and finally the business continuity plan and disaster recovery (BCPDR)
that represents the backup, fallback and recovery measures implemented by the
vendors to ensure the highest performance possible of a SaaS solution52.

We can summarise the Bharathi and Mandal work in the following table :

52
S. Vijayakumar Bharathi, Tanuja Mandal “Prioritising and ranking critical factors for
sustainable cloud ERP adoption in SMEs”, Int. J. Automation and Logistics, Vol.1, No.3, 2015

46
 Critical factors Sub-Category

Cost ● Implementation cost (IMC)

● Maintenance cost (MC)
● License cost/subscription fees (SC)
● Vendor switching cost (VSC)

Security and Standards ● Service level agreement conditions (SLA)

● Data confidentiality/security (DCS)
● Data access (DA)

Organizational Factors ● Competitive advantage/time to market (CA)

● IT resource cost (ITR)
● Being on pace with the latest leading-edge
technologies (LET)

Performance ● Customization (CST)

● Up-gradation (UPG)
● Scalability (SCL)
● Integration with other cloud services (ICS)

Functionality ● Usability (US)

● Mobility (MB)
● Business continuity plan and disaster
recovery (BCPDR)

Figure 11:​ Critical factors for adopting ERP as SaaS

3. Software-as-a-service maturity levels and adoption

In addition to the Johansson, Ruivo, Bharathi and Mandal studies, we can also
talk about the Seong Tak and Sungbum Park investigation in 2018 on the market
success of SaaS vendors. Indeed we precedently saw the different customers
expectations for SaaS adoption and now we will see if the SaaS vendors offering

47
are meeting the expectations of the customers. According to Tak and Park, a
mature SaaS solution is defined by simple setup, user-friendly interface and
experience, user guidance and optimal navigation structures. Therefore, we can
say that the more mature a SaaS solution is, the more it will meet the consumer
expectations. Along with our explanation in the introduction regarding the
evolution of SaaS and the Tak and Park study, SaaS maturity could be separated
into three distinct phases of maturity. The first generation of SaaS is aligned with
the ASP model, in that case, it means that the vendors are delivering the solution
through the internet or a dedicated line with a one-time license and setup fee or
periodic subscription. The problem is that the same solution is delivered to all
customers without any considerations for specific business functions and
processes. The second generation of SaaS that delivers the solution through
web-browser distribution and by integrating “one-to-many” application sharing
model, in other words, one instance of the solution is available for multiple
customers, it means that the second generation of SaaS is supporting specific
business functions and processes. The third and latest generation of SaaS is the
web service stage, it uses a multi-tenant business model where solution contents
are distributed individually or in groups. It is based on the latest internet
standards and technologies and it facilitates high performance, fast updates,
security, reliability, and availability. Thus, a mature SaaS allows vendors to
develop tailor-made solutions and improve the degree of differentiation from the
competition. Tak and Park came to the logical conclusion that with all the
benefits of mature SaaS, customers willingness to invest and adopt SaaS solution
will increase, especially with lower transactions costs and product price due to
lower dependency upon IS support resources. The authors also said that many
SaaS companies are marketed as “full SaaS vendors” and they turned out to be
only SaaS company in early stages and therefore the misinterpretation of their
maturity is leading to big failures in SaaS adoption and implementations. It is
crucial to assess the stage of maturity of a SaaS solution before considering the
adoption for customers53.

53
​Oh Seong TAK, Sungbum Park “Investigating SaaS Providers’ market success based on the multivariate LGCM
Approach”, Procedia Computer Science 139 (2018) 227-235

48
Furthermore, we can also talk about the work of Eruani Zainuddin and Paola
Gonzalez that correlated the maturity of a SaaS solution to its configurability, the
more configurable a SaaS solution is, the more mature it is. According to the
authors, there are five configurable features. The first one is the user interface, it’s
the ability to change the look and feel of the software, for instance, it could be
changing the fonts, background colors and icons to reflect the company’s graphic
charter. The second one is the workflow, it’s the ability to integrate, change or
delete the different business processes in the software, to be more precise it
regards the change in activities, user roles, and rules. For instance, customers can
add specific business rules to reflect an organizational workflow. The third
feature is data, it’s the ability to organize and change the data requirements in the
database of the solution. For instance, customers can add and define their own
custom tables with customizable columns and data types. The fourth aspect is
regarding the access control, it’s the capacity to define specific access for
different user accounts, which resources and functions each user are allowed or
not to access. The last configurable feature is mentioned by the authors as
“Miscellaneous configurability options”, it regards the extended options of
configuration that will allow to customizing, even more, the solution, for
instance, the language options.

Zainuddin and Gonzalez also define the maturity of a SaaS with 4 different levels
(based on the Forrester classification (2008)54). The level 1 and the level 2 of
maturity are single tenant-based, it means that each of the tenants will get their
own instance with no sharing of anything (database, code etc.), for each new
customer(tenant) there is a new provisioned hardware and a new instance of the
software. It takes the form of access to the solution from separate websites. The
level 1 maturity implies that the solution is customized for individual customers
and don’t have any configurable feature. The level 2 maturity means that the
solution offers minimalistic configurable options. The level 3 and 4 are based on

54
​Various authors “SaaS Maturity Model according to Forrester”,
https://blogs.msdn.microsoft.com/architectsrule/2008/08/18/saas-maturity-model-according-to-forrester/ (2008)

49
multi-tenancy it means that they are based on an architecture that allows the
product to recognize the different tenants and that support extended configuration
options per tenants. The only difference between level 3 and 4 lies in the level of
scalability, indeed the level 3 requires hardware upgrade to increase the number
of supported tenants where the level 4 implies the participation of a cloud load
balancer that shares work requests evenly between resources hosted on a pool of
virtual or physical servers, it allows high scalability, configurability, and
performance with intelligent resources distribution.

We can summarize the different levels of maturity in the following scheme (from
left to right) :

Figure 12:​ SaaS architectures maturity

According to Zainuddin and Gonzalez, another important element of

configuration to take into account is the dependency to the vendors, indeed the
early SaaS solutions were relying on vendors to set up the software on behalf of
their customers where for the latest and most mature SaaS solutions allow the
customers to configure the solution themselves. The authors here are opposing
the vendor-supported SaaS to the client-enabled SaaS. Moreover, with the
customers feedbacks, the SaaS vendors will have a better understanding of the
client domain meaning they will have a better understanding of the customer’s
workflow, goals, rules, and constraint, therefore the vendors will be more likely
to implement client-enabled configurations in their latest release to meet the exact

50
customer’s expectations. The authors concluded that SaaS solutions are evolving
from having a high degree of vendor-supported configuration to having a high
degree of client-enabled configurations55.

III. CASE STUDY: Disruption in the SaaS CRM market in 2018?

A. Introduction & Research Methodology

1. Introduction

According to Gartner, the CRM market has become the largest software market in
2017, overtaking the data management systems market and reaching $39.5 billion
in revenue. This growth is mainly driven by the growing demand for Software as-
a Service in the deployment of CRM suites and solutions from small to large
businesses. Moreover, the rise of social CRM and mobility have also been driving
the growth of CRM lately setting new customer services and relationship
management dynamics. We can also talk about the forthcoming technologies of
big data analytics that is set to play an important role in CRM usage, indeed with
the ability to predict sales and customers behavior, the modern CRM solutions are
gaining importance in numerous firms. The CRM market is currently dominated
by four incumbents that are Salesforce, SAP, Oracle, and Microsoft, they
represent approximately 37.7% of the market share all together in 2017 according
to IDC, we can also say that the undisputed leader of this market is Salesforce
with 19.6% of the market share in 2017 with a continuous growth where the other
three incumbents are either slowly declining or growing slow like Microsoft
dynamics as we can see on figure 13. Therefore, our case study will be a focus on
the role of promising new entrants such as Freshsales to compete against
incumbents and of course against the powerhouse Salesforce. In other words, the
goal of this study is to determine if new entrants that we can identify as the new

55
​Eruani Zainuddin, Paola Gonzalez “Configurability, Maturity, and Value Co-Creation in SaaS: An exploratory case
study”, Thirty Second International Conference on Information Systems, Shanghai 2011

51
generation SaaS CRM have the potential to disrupt the market and overtake
Salesforce.

Figure 13: ​CRM market shares in 2017

Finance
Freshsales GetApp Capterra G2 Crowd Google play Online Total
Overall ratings
(out of 5) 4.7 4.5 4.7 4.3 5 23.2
Number of
reviews 261 262 442 92 18 1075

Plus, we can see here the global ratings of Freshsales, a solution that only
appeared on the market in 2016 and that has excellent ratings on every major
productivity application reviews website, averaging a mark of 4.64 out of 5
based on 1075 reviews. Therefore, according to the user's ratings, we can think
that Freshsales is quite performant despite its recent creation. To be more precise
before we begin our case study, we can also say that Freshsales have excellent
ratings when it comes to ease of use (4.5/5 on GetApp and Capterra), customer
support (4.5/5 on Getapp and Capterra) and value for money (4.5/5 on Getapp
and Capterra). Therefore if we take online reviews into consideration before
deeply analyzing the solution we can think that Freshsales can compete against
the incumbents based on its overall excellent ratings.

52
 2. Theoretical and methodological framework

The first part of our case study will focus on the business model of the CRM
vendors, the objective will be to describe precisely the business model of an
incumbent Salesforce and an entrant Freshsales. The choice of picking up
Salesforce to represent incumbents is logical by knowing that they are the
undisputed leader of the market and are still growing at a fast pace lately, it
means that it’s the vendor who will most likely last and remains the top
competitor for years to come, for every entrant. The choice of Freshsales to
represent threatening entrants is also clear because of their current high market
presence, customer satisfaction and performance according to user reviews on
G2crowd, Capterra, and Getapp for instance, it presents interesting characteristics
of potential disruptors. The depiction of business model will be based on the
study of Carlos Marques Dasilva, Peter Trkman, Kevin Desouza and Jaka Lindic
who did a study on business models in the cloud computing industry by analyzing
how Amazon, Salesforce, and Siebel(Oracle) have responded to the cloud
computing technology disruption. According to these authors, the main cause for
company failure was not the disruptive technology per se but the failure to adapt
or create a viable business model to incorporate the new technology. As
Christensen explained in his theory of disruptive innovation, a viable business
plan is not only about economics but it should also take into account market
realities, customer expectations, and competitive pressures. Moreover, according
to the authors, technology itself has little value, indeed value creation is mainly
due to the commercialization of the technology in different ways that will yield
interesting results for the firms. Therefore the authors have defined a business
model with five elements to explain how cloud computing disrupted incumbent
companies. The first element is a customer value proposition, it represents the
understanding and creating products and services that fulfill customers needs and
goals. The second element is the earning logic, it represents the design of a

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revenue model that should lead to a sustainable business. The third element is the
value network, it shows the value created by the relationships with partners. The
fourth element is resources and capabilities, it regards the leverage, repurposing
of existing or new resources and ability to create products and services of value.
The fifth and final one is strategic decisions, it indicates the decisions that are
aimed to create a sustainable competitive advantage56.

After defining the different business model of the incumbent and entrants, we will
then continue our case study by analyzing the potential of disruption of the
studied firms by using the Keller, Hüsig, Kaltencker, Huesig, Hess & Downling
enhanced model previously described in the first part of the literature review, it
will also allow us to complete our analysis of the different business models and
highlight the differences that can be the origins of potential disruption. In order to
use this framework, we have to study the pricing and features of the entrant and
the incumbent, to evaluate the performance of the two solutions. We will
complete the performance evaluation by also studying the adoption of on-demand
CRM solutions by deeply analyzing their functionalities. This more practical
analysis will allow us to have a better understanding of user adoption for SaaS
CRM solutions. This part is crucial to estimate how fast a solution can be spread.
To analyze the features of a SaaS solution we will base our analysis on the work
of Bharathi and Mandal previously described in the third part of the literature
review. It will allow us to see if the features of the entrants are competitive and
adapted for mass adoption.

Furthermore, we can say that the data that we will use to analyze the two firms,
are going to be sourced on their official websites, documents and, reports.
(salesforce.com and freshsales.io) For the functional analysis, I have subscribed
to Salesforce CRM (lightning) and Freshsales CRM, in order to apprehend and
analyze each solutions' functionalities (features and operations).

56
​Carlos Marques DaSilva, Peter Trkman, Kevin Desouza and Jaka Lindič “Disruptive technologies: A business model
perspective on cloud computing”, Technology Analysis and Strategic Management Journal, 2013

54
 B. SAAS CRM vendors incumbent and entrants business models analysis

1. Customer value creation

In nowadays CRM market, most of the customers are looking for an easy to use
and friendly service with high performance and minimum costs. At the time,
when Salesforce disrupted the CRM market with its SaaS offer in the 2000s, it
responded to the customers’ expectations by delivering a service that requires
little investment, time and resources. Initially, Salesforce targeted small and
midsize firms with its “Sales cloud” offering that allow the sales team to sell
faster and smarter. However with the evolution of the vendor and the CRM
market, Salesforce have now various and different cloud service offerings such as
“Service cloud” that allow firms to deliver smart, fast and personalized customer
service and support, “Marketing cloud” that allow companies to plan precise
marketing actions across all media, “Commerce cloud” that unify customer
experience across all points of commerce (physical and virtual stores), we can
also talk about the multiple products that are part of the Salesforce platform like
“Trailhead” that is an online interactive learning platform, “Einstein AI” that is an
AI embedded in the platform that automatically discovers insights and predict
future behaviors and automates tasks, “Salesforce Lightning” that allows
customers to create their own apps without any coding knowledge, “Analytics”
that allows customers to apprehend their business data from any device,
“AppExchange” that is a marketplace where Salesforce customers have access to
more than 5000 different applications to extend their Salesforce experience.
Therefore we can say that with its wide range of products, Salesforce is now
offering an XRM approach to its customers. An XRM (extended relationship
management) represents the extension of a CRM that goes far beyond simple
customer relationship management. It expands the functionality of a regular CRM
to manage every groups and individual involved in the business process of an
organization, it means that with the Salesforce solution, a customer is able to
manage their suppliers, employees, partners, assets, knowledge bases and so on.
Phillips is one of the many companies that are using Salesforce as an XRM to

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have a 360 view of their business environment. Indeed thanks to Salesforce
different products such as Service Cloud, Chatter, Marketing Cloud and of course
Sales Cloud, Phillips is able to connect together its different sales, service,
marketing, R&D and supply chain departments to have complete customer views
and answer customer needs almost in real-time. To be more precise, Sales Cloud
allow Phillips sales teams to collaborate all around the world, Service cloud will
be able to connect the numerous call center and field service engineers together to
provide customers with real-time service, with Chatter, every Phillips employees
from every department are able to share information and collaborate easily
wherever and whenever they want and finally with Marketing Cloud, Phillips has
the ability to get to know its customers and engage with them on different social
media platforms57. If this approach is indeed addressing various firms needs, it
also complexifies the apprehension and understanding of the product for
customers. Indeed, not every customer have the need to own an XRM or an
advance CRM with numerous complex functionalities. By becoming taking over
the CRM market and by having the status of incumbent, Salesforce have
complexified its offer originally designed to be simpler and smarter for small and
middle-sized businesses, now as it is stated in their 2018 annual reports, most of
the sales efforts are targeted towards large enterprises and government entities,
that are logically more demanding in terms of configuration, integration services,
and features. It means that Salesforce product with their complexity doesn’t
represent the best value for every customer’s segment anymore58.

Seeing Salesforce focus on premium segments, many tech companies such as

Freshdesk (with Freshsales) or Pipedrive have developed their own SaaS CRM
solutions. Freshdesk has launched in 2016 its CRM that goes by the name of
Freshsales, it’s a modern CRM that has been designed and optimized to maximize
the performance of sales representatives and sales team in high-velocity
environments. Freshsales has embraced a more pragmatic and efficient vision of

57
Salesforce Customer Success Stories: Salesforce Helps Philips stay light years ahead of the competition
https://www.salesforce.com/au/customer-success-stories/philips/
58
SALESFORCE 2018 annual report, Risk factors, p12-32, 2018

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CRM by only including essential functionalities to close customers such as lead,
deal, account management, email, and phone integration, user behavior tracking,
lead scoring, visual sales pipeline and reporting. It differentiates from the other
incumbents with their XRM approach, especially from Salesforce with our
previous explanations. With an easy to use interface, quicker to adapt and
intelligent workflows, Freshsales also comes with a lower price than Salesforce
products. Indeed Freshsales starter kit is free with unlimited users where
Salesforce starter kit is limited to a maximum of 5 users at $25/user/month,
moreover Salesforce starter kit doesn’t include important functionalities such as
Gmail integration, Calendar integration, API access, 24x5 support and training,
these options are paid add-ons on Salesforce. According to a Freshsales case
study, Advertas a marketing and strategy company saved 58% of its CRM cost
after migrating from Salesforce to Freshsales. For years, Advertas was using
Salesforce as their company CRM and it required an important amount of
resources due to the complexity of the solution, it means that their use of
Salesforce was burdened by training, customizations requirements and complex
workflows understanding. Thus their sales and marketing didn’t enjoy using the
tool and overall business productivity suffered. By migrating to Freshsales,
Advertas has made a significant performance, productivity improvement with
optimal marketing automation, emailing, leads acquisition and management and
pipelines analysis. Moreover, according to Advertas practice lead, it only takes 30
minutes to train a new sales representative to the solution59. Therefore, we can say
that by focusing on delivering a user-friendly and performance focused solution,
Freshdesk with its CRM Freshsales has successfully responded to customers that
are looking for an easy to use service with high benefits and low costs, just like
Salesforce in its early days.

2. Earnings Logic

59
J. MUTHUSAMY “Advertas saved 58% of its CRM cost after migrating from Salesforce to Freshsales” September 2018
https://stories.freshsales.io/advertas-saved-58-of-its-crm-cost-after-migrating-from-salesforce-to-freshsales-a38b7c645c2b

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Salesforce was the first SaaS CRM company to disrupt the industry by
implementing a rental model after understanding that some organization cannot
afford software acquisitions because of their expensive costs. Therefore in 2018,
the first source of revenue of Salesforce comes from subscriptions that include
fees from customers accessing the Salesforce cloud computing services and fees
from customers who are paying for premium/additional support that is not
included in the standard subscription. The second source of revenue comes from
related professional services like project management, implementation services,
and process mapping. The third source of revenue comes from training fees
although it is the least import source of revenue by knowing that subscription
and, support revenues account for 93% of the total revenue in 2018. Moreover,
Salesforce was also disruptive at the time because it is allowing the prospective
clients to experiment the product before an eventual commitment. It means that
potential customers to try for 30 days the entire Salesforce suite and user's
support, by the end of the trial, the customer have either the choice of purchasing
the application or walk away free of charge. To be more precise, once the
customer commits himself to Salesforce, the contracts last between 12 to 36
months with exceptional ones that can range to 60 months, the subscription and
support contracts are non-cancelable although the customers have the right to
terminate their contracts if Salesforce fails to perform materially60.

If Salesforce has indeed disrupted the CRM market with its rental model and free
trial system, it’s not the case anymore in 2018 where the vast majority of SaaS
CRM vendors have all adopted these earning logics. In the case of the entrant
Freshsales, that goes even further by including free 24hx5 mail and phone support
with all the different plans. Moreover, in addition to customers having access to
the full product with a 30-day trial, Freshsales also created a “free forever” plan
for small businesses and startups that don’t have many users. In that case, the
customers will have unlimited access to the main CRM functionalities such as
leads, contacts, deals, accounts, email, built-in phone, integration and mobile
apps for free. It clearly presents a financial advantage compared to the other

60
​SALESFORCE 2018 annual report, Sources of Revenues, p43-44, 2018
58
incumbent solutions, we can say the same about Zoho CRM that is also providing
a free CRM plan. In other words, entrants such as Freshsales and Zoho are
allowing the customers to try their solutions free of charge, with a limited 30 days
for the full solutions with advanced functionalities and no time limit for the
starter plan. We can say that entrants are giving the opportunity to the potential
customer to experiment with zero cost and zero time limit. However, the simple
revenue system of Freshsales only guarantees earnings from one and only source,
the subscription one.

3. Value Network

According to the 2018 Salesforce report, expanding and strengthening the partner
ecosystem is part of the Salesforce growth strategy. The Salesforce partner
ecosystem consists of two different kinds of actors, the first one is independent
software vendors and developers that are offering complementary applications to
the Salesforce suite through the AppExchange market. Indeed Salesforce is well
aware of the impossible task to provide to its wide range of customers a complete
back-end customized solution, therefore Salesforce has decided to open its
solution to external developers by making its products compatible with the vast
majority of development environments and tools. By doing so, companies that
could have been seen as competitors became business partners allowing
Salesforce to reach new markets and industries with a wider variety of solutions
and applications and of course answering, even more, needs of their current
customers. For instance, we can talk about the application “LinkedIn Sales
Navigator”, in 2017 LinkedIn has developed an application that allows Salesforce
customers to use LinkedIn data, insights and actions to target more accurately
buyers and companies without having to leave Salesforce CRM. We can also talk
about Conga that is allowing Salesforce customers to generate documents
automatically and directly from the CRM platform, the user just have to select the
needed data from any standard or custom object, then generate the document in
the desired format, then distribute, deliver the documents with the appropriate
way and finally stored the documents wherever the customers want it. Conga is

59
one of the most successful applications on the AppExchange because it allows
Salesforce customers to create tailor-made business documents such as quotes,
proposals, account plans, invoices/receipts, contracts and so on, without having to
leave the Salesforce CRM. We can see here the two different types of
independent software vendors that are working with Salesforce, we have
“standalone” companies such as Linkedin that could be considered as distant
partners because their businesses are not relying on Salesforce and companies
such as Conga that could be considered as close partners because their business is
requiring salesforce to exist. In addition to the software vendors, Salesforce also
has consultants and system integrators in their partner ecosystem, these actors
have the objective to provide expertise, deep technical skills, and guidance for
every organization that is using or planning to use Salesforce. Therefore we can
say that Salesforce has the most complete and vast partner ecosystem of the CRM
market. We can explain the importance of their partner ecosystem because of the
complexity of their solution that requires the intervention of various third parties.

For the case of entrants such as Freshsales that are relatively simpler solutions
because they contain fewer advance functionalities and features, the need for a
complex partner ecosystem is not as important. Indeed, Freshsales also have a
partnership program that comes with Freshworks, that allows third-party
companies to become resellers by offering to current and future customers
Freshworks suite of products, solution partner that could be considered as the
equivalent of the salesforce consultant, the role of a solution partner will be to
design, deliver custom solutions through consultation, implementation, migration
and finally there are the affiliate partners that are in charge of promoting the
Freshworks products and get a part of the deal as commission. Moreover,
Freshsales also have an application marketplace that offers to the Freshsales
customers the ability to integrate various business applications within the
Freshsales CRM. Freshworks marketplace was launched in 2016 with 100
applications, in 2018 the marketplace has reached 450 applications with 150 000
apps installations. Improving the marketplace and its content is part of
Freshworks and Freshsales strategy by extension, for the comparison Salesforce

60
AppExchange platform have 5000 applications, with more than 5 million apps
installations. Freshworks focuses on the collaboration and partnerships with
premium and popular tech companies for the creation of integrated applications
by the like of Asana, Mailchimp, Office 365 or Facebook.

4. Resources and capabilities

The entire Salesforce cloud computing platform is relying on a multi-tenant

technology architecture. It means that it allows Salesforce to operate a single
application instance for multiple organizations and treat all customers as separate
tenants. This approach is allowing Salesforce solutions to be highly scalable,
performant and faster than the traditional software vendors. The optimal use of
resources is also allowing Salesforce to focus an important part of their resources
to build new functionalities. The whole Salesforce operation also relies on
efficient and state-of-the-art data center facilities, for that matter Salesforce is
collaborating with third parties all around the world (US, UK, Germany, France,
Japan and so on). In addition to the data center operators, Salesforce is also
working with IaaS(Infrastructure as a Service) firms to deliver its services, it
using IaaS servers, storage, databases, and networking. The collaboration with
data center operators and IaaS companies allow Salesforce to deliver its services
all around the globe even in new and emerging countries and even in places
where data privacy requirements could be problematic. In addition to their state
of the art and important IT infrastructures, Salesforce is also counting on building
up a highly competent team for its technical and business departments. We can
also talk about the strategic investments that Salesforce is making since 2009 that
gives even more resources to develop and extend the capabilities of the
Salesforce platform and service offerings. According to the 2018 annual report,
Salesforce has invested in over 200 different companies, the primary purpose of
these investments would be to keep up with the rapid pace of innovation. For
instance, Mulesoft, a software that provides a platform that enables organizations
to easily build application networks using APIs was acquired in March 2018 for
$6.5 billion by Salesforce. Now Mulesoft has been transformed by Salesforce into

61
an “integration cloud” where customers will be able to map and manage systems
for a complete view of data, devices, and apps.

Freshsales also relies on a multitenant architecture, the difference that we can

notice is that Freshsales data are only hosted on 2 different places, the US and the
European Economic Area. It means that just like its competitor Salesforce, each
of its customers will be able to access rapidly and efficiently the different services
in an individual and secured session. Therefore the only difference in terms of IT
resources is the locations of the data center facilities that may not cover every
geographic area like Salesforce, it means that some countries because of their
lack of infrastructures or data privacy legislation won’t be able to access or use
Freshsales CRM.

5. Strategic Decisions

When Salesforce initially launched its services, it targeted the SMEs that had
been ignored by the incumbents, we can say that initially, Salesforce was
applying the blue ocean strategy. However by becoming the leader of the CRM
market, Salesforce has changed its strategy, indeed, according to the 2018 annual
report, Salesforce is now focusing on cross-selling and upselling strategies with
the extension of the existing service offerings. Salesforce is now aiming to
upgrade the customer experience with premium editions and functionalities and
wants to become their customers must trust partner in digital transformation
projects. This strategy can be highlighted by the heavy investment on AI
capabilities with the “Einstein” product or predictive customer experiences tools
such as Lightning and Trailhead. In order to extend its offerings, Salesforce is
also counting on the development of its partner ecosystem as previously
explained, system integrators and independent software vendors are helping
Salesforce to reach new market and industries by the development and
implementation of new solutions delivered through the AppExchange
marketplace. Moreover, Salesforce is also aiming international expansion by
increasing and enhancing its IT infrastructures all over the world.

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By knowing that Salesforce is focused on targeting the premium segments and
extends its offerings by adding even more functionalities to its already complex
solutions by nowadays standards, several companies seize the opportunity to
create more flexible, agile, user-friendly SaaS CRM. That’s why in 2016, one of
the customer support software (Freshworks) has launched Freshsales, their
strategy is to create an easy-to-go and friendly solution to reach the SMEs and
startups market neglected by the incumbents. Thus, for customers who are
looking for a powerful CRM with minimum costs and including only popular
third-party software integration, adopting the Freshsales SaaS CRM can be the
solution.

6. Overview of the differences between Salesforce (incumbent) and

Freshsales (entrant) business models

Salesforce Freshsales

Customer Service type Service type

Value
No subscription Period No subscription period

No free plan Free starter plan

Paid support Free support

Medium-high entry cost Low entry cost

Time and money saving

Earning Revenues from subscriptions Revenues from subscriptions

Logic (Billed per user/per month with (Billed per user/per month with
annual plans) annual plans)

Revenues from support

Revenues from training fees

Value Developers as partners Developers as partners

Network

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 Independent software vendors as Consultants and resellers as partners
partners

Consultants as partners

System integrators as partners

Resources International Mature IT Mature IT infrastructures that allow

and infrastructures that allow reliable, reliable, secure, scalable and flexible
capabilities secure, scalable and flexible product delivery (multi-tenant
product delivery (multi-tenant architecture with high performing
architecture with high performing data center facilities)
data center facilities)

Strategic Focus on premium segments (like Focus on SMEs and startups that
decisions important groups, enterprises and cannot or doesn’t want to afford a
governmental entities) with a great complex and advance CRM solution
variety of products

Main Cloud SaaS SaaS

Focus

C. The disruptive potential of Freshsales in the SaaS CRM market

1. Price mapping of Freshsales and Salesforce

As Christensen has described in his theory of Disruption, the price is one of the
crucial variables that could lead to a Disruption situation. Indeed, as we
previously explained in the first part of our literature review, if the price of the
entrant’s offering is remaining below the incumbents one for a similar or even
more performant product, the overserved customers will be attracted to the new
entrant's offerings. In our case, we can clearly see that the price of Freshsales is
much lower than Salesforce, whatever plans the customer may choose, there is
always an important difference between the two solutions. Indeed, if we look at
the starter pack, we can see that Salesforce is not offering any free starter pack
(their offer starts at 25€/user/month) where Freshsales has a free starter pack, it

64
means that for startups and other organizations with limited amount of resources,
the choice between the two solutions will be obvious if they only take the
economic and financial aspects into account. If we have to take a look at the other
plans we can notice that the price gap is growing even bigger, almost at an
exponential rate. The price difference for the Enterprise pack for the two
companies is a good example of how different is the pricing strategy. (The
Salesforce enterprise pack costs 3.80 times the enterprise pack of Freshsales)
Furthermore, the price gap is already significant between the two vendors and by
knowing that one part of the Salesforce strategy relies on developing new
products and features for its most demanding customers, we can logically predict
that the gap will become even larger in the near future, indeed for many
additional features such as “AI-Powered Opportunity Scoring” and “Pardot B2B
marketing automation”, Salesforce is charging extra fees.

Small team Medium team Large team Enterprise

Starter pack pack pack pack pack
Salesforce 25,00 € 25,00 € 75,00 € 150,00 € 300,00 €
Freshsales 0,00 € 12,00 € 25,00 € 49,00 € 79,00 €
Differences 25,00 € 13,00 € 50,00 € 101,00 € 221,00 €

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Therefore, the price of the entrant “Freshsales” is remaining below the price of
the incumbent “Salesforce”, however, this variable is not sufficient to consider
the entrant as a potential disruptor because we also have to take into account and
measure the performance of the product. That is why, we are going to analyze in
the second part, the different performance that Salesforce and Freshsales products
are offering, by analyzing and comparing the different features of the solutions.

2. Features mapping of Freshsales and Salesforce

After studying the business plan of the two vendors in the first part of the case
study, we can say that both of the vendors are confirmed and reputed software
companies that provide reliable and performant solutions, Salesforce being the
powerhouse and uncontested leader of the CRM market and Freshsales that was
created by one of the leading firms in customer service solution (Freshworks).
Therefore, this part of our study will be dedicated to studying in detail the
different features of the two solutions to determine their performances and how
they meet current and potential customers needs. For that matter, we have
mapped the different features of each solution in appendix 1(Freshsales) and
appendix 2(Salesforce). Overall, we can see that Freshsales has 80 different
features, including 10 exclusive one, the free starter pack includes 37,50% of the
features and the enterprise pack is giving to the user the access to 100% of the
features. In the case of Salesforce, it offers a total of 84 features, the paid starter
pack gives access to 40.48% of the features and the enterprise pack is giving
access to 76.19% of the features. Salesforce Sales Cloud CRM also have 46
exclusive features, by knowing that Salesforce is targeting a wider range of
customers and have been enhancing and developing its solution since 2007, it is
obvious that Salesforce offers more features than Freshsales that only begin to
enter the CRM market in 2016. We can also say that in reality, Salesforce offers
way more than 84 features because some of its features are entire solutions and
we did not take into account the 3400 applications available in the AppExchange

66
marketplace. Therefore at this stage of the study, we can say that Salesforce is
outnumbering Freshsales in terms of features. However we can notice that
45,31% of the Salesforce features are implying additional fees, it means that even
by subscribing to the Salesforce top enterprise plan that already cost 3.80 times
more than the Freshsales enterprise plan, customers won’t have access to all
Salesforce features and to do so they will have to pay extra fees, making the
adoption and use of Salesforce even more expensive.

Features Paid features Marketplace Total

Salesforce 55 29 3400 3484
Freshsales 80 0 69 149

Thus, we can see that Salesforce has much more features than Freshsales and if
we established a direct correlation between a number of features and product
performance, in that case, we can say that Salesforce is a much more performant
solution than Freshsales. However, with that many features and a more complex
solution, some of Salesforce customers and potential customers are either
over-satisfied or not willing to pay for further improvements. Therefore, there’s a
risk for losing customers to a more simple and cheaper solution such as
Freshsales. Indeed, as we previously saw with the case of Advertas(Freshsales

67
customer), they had significant productivity and performance raise after
migrating from Salesforce to Freshsales. We can say that the numbers of features
are not the only criteria to measure how a CRM solution is answering the
customer's needs and how it is actually performing. Without going into details we
can say that there are key features that will make a CRM more or less performant
than others, we can logically think about the features that have a direct impact on
the CRM users performance (sales representatives, sales teams etc.) like the
contact and lead management features. We can also talk about the features that
will render the solution more easy to use and therefore will increase the
productivity of the users like the customization, integration and, user
interface/user experience features. Thus, we can say that in the case where the
features of the entrants meet the market demands with lower pricing than the
incumbents, we could say that the entrant has a disruptive potential according to
Christensen theory. That’s why in the third part of the case study we are going to
analyze what criteria are making a CRM performant and will maximize
customers adoption behaviors.

3. Key features comparisons between Salesforce and Freshsales

Lead and Contact Management System

The first major and most important feature we are going to study is lead and
contact management. Most firms are considering the use or using CRM for that
particular feature. Indeed, it is the crucial feature that will allow the CRM users to
capture, track, analyze, qualify and engage leads or/and contact. By knowing that
in nowadays business environment, there are multiple sources of leads/contacts
such as online ads, website, events, and emails, firms need an efficient and
powerful CRM in order to manage the various and numerous leads. A tool that
will allow them to convert leads/contacts into customers and maximize their ROI.
For that matter, Freshsales CRM is giving to its user a 360 customer view, it
means that users will have access to full details about their leads and customers
including the different conversations, deals status, tasks, appointments and of

68
course every relevant and obvious information such as contacts information,
location, customer status etc. It is important to precise that the 360 customer view
in Freshsales is displayed in one screen. Freshsales lead and contact management
feature also have a top lead scoring functionality that allows the users to score
their leads and filter them by their sales-readiness. In addition to an already
efficient lead scoring system, Freshsales also have an AI-powered lead scoring
system that will automatically rank leads using the information from the 360
views, in other words, the more a lead will interact with the CRM user, the higher
score he will get. Another interesting part of the lead/contact management system
is the Auto profile enrichment, Freshsales automatically enriches the leads,
contacts and accounts information by capturing publicly available information on
the internet. Salesforce also has similar abilities when it comes to lead
management, however, most of the advanced functionalities such as the
AI-Powered lead scoring, rules-based lead scoring, AI-powered opportunity
scoring, and other automation are not available in every plan and some of them
may imply additional fees. Moreover, if we look at the number of possible
operations, we can count 20 operations for Salesforce and 29 for Freshsales, it
means that for the lead/contact management feature, Freshsales allow more
possible operations and therefore a more complete experience for the user than
Salesforce. Indeed, Freshsales allow the user to directly communicate by sending
an email or an SMS with the leads/contacts through the Lead/contact
management interface, the user can also add tags for each lead and contact and he
can add sales activity, call log and appointments directly in one and only screen.
(Appendix 3)

Opportunity Management System

The second key feature we are going to analyze is the opportunity management
system, it’s a feature that will allow the CRM user to interact with leads and
contacts, create and establish sales processes, forecast revenue, analyze sales
performance and manage deals. The most important aspect of this feature is the
sales pipeline management, that is a visual representation of the deals in different

69
stages of the sales process, it helps the CRM user to track its sales opportunities
until their closing. For that matter, Freshsales has created a sales pipeline
management feature that will allow the users to create unique and fully
customizable pipelines with a drag-and-drop system to change the status of sales
opportunities. The Freshsales users also have the possibility to call and email
their customers from the pipeline interface and also create tasks and appointments
with them. Salesforce also has this feature with customizable sales process but the
AI-powered opportunity scoring and the built-in dialer are only available with
additional fees. Furthermore, for the opportunity management key feature, we can
count 21 operations for Salesforce and 26 operations for Freshsales, it means that
the user will have a more complete experience with the entrant. Indeed, the user
will be able to interact directly with the opportunity related contacts by sending
him an email and just like in the Lead/contact management system, the user will
be able to directly add task, appointments and call logs in the opportunity
management system. (Appendix 4)

Reporting and Metrics

The third major feature is reporting and metrics, after depicting the two previous
operational features, it is important for a firm to be able to keep tracks of its sales
operations and also deeply analyze them. Thus, the reporting and metrics feature
is important for firms that want to control, anticipate and optimize their sales
activities. Regarding that feature, Freshsales allows its user to do customize
reports on contacts, leads, account, and opportunities with tables, charts and with
the possibility to filter and group data. Freshsales also allow the user to create
reports dashboard, it means that they can regroup every needed report on a single
screen. (up to six reports) Furthermore, users can also create reports for four
operational key activities (emails, calls, tasks, and appointments). Finally, there’s
also a report scheduling functionality that allows users to schedule recurrent
report, Freshsales will then automatically generate the report and deliver via
email at the selected time. Of course, the reports and dashboard can be shared
with other Freshsales users and exported as PDF or CSV. Salesforce, also do

70
customizable reports and dashboards but the advanced reporting features are only
available to the premium users (enterprise and large team pack), although
Salesforce is known for producing high-quality reports with adaptive forecasts
and real-time reports for instance. For the reporting and metrics key feature, we
can count 26 possible operations for Salesforce and 21 for Freshsales, it means
that for this feature, the user will have a more complete experience with the
incumbent. Indeed, Salesforce allows the user to do reports on every single aspect
of the solution like administrative, file and, content reports. Moreover, Salesforce
is also allowing the user to subscribe to reports and create folders to organize its
different reports. (Appendix 5)

Integration

The fourth key feature is integration, it allows to create synergies between

different applications whether they come from the same productivity suite like
Freshsales with Freshdesk and Freshservice or outside like Freshsales with
MailChimp. In terms of integration, as we previously explained, Freshsales
integrate perfectly the whole Freshworks productivity suite and have several
possible other integrations available on the Freshsales Apps marketplace like
Google Apps, Hubspot, Segment, and Xero. However when it comes to advance
integrations and configurations, we can say that Salesforce has the upper hand
and offers much more possibilities, indeed the Salesforce API allows
organizations and firms to develop and run their own applications within the
CRM, in addition of having the biggest CRM apps marketplace.

Thus, after analyzing and comparing the 4 CRM key features, we can say that
both Salesforce and Freshsales can be considered as performant software that
both provides modern and performant solutions to customers. If we only take into
account the key features combine with the low pricing, we can easily conclude
that Freshsales has great disruptive potential, by knowing that it succeeds to
deliver highly performant, intuitive and cheap solutions to customers. To be more
precise, we can see that the key features have a close number of possible

71
operations, it means that a user that will only use the key features of a CRM will
have pretty much the same precision and possibilities with one or the other
solution. However, our analysis is still yet incomplete and inaccurate at this stage
because if we only consider price and feature variables, we’re neglecting other
important aspects of a SaaS solution adoption. Therefore the last part of our case
study will be dedicated to seeing if the entrant solution is meeting the SaaS
adoption criteria.

4. Freshsales and SaaS adoption Factors

The first category of factors we’re going to study is cost factors, for the
implementation cost, we can say that they are either non-existent or very low,
indeed, Freshsales is a SaaS solution, it means that it needs no hardware
acquisitions, it just requires an internet connection and a browser to work. It is
also a user-friendly solution meaning that it requires little resources when it
comes to user training and adoption, unlike other complex solutions like
Salesforce or SAP that need more training to apprehend their use. We can say the
same for the maintenance cost by knowing that the maintenance of the solution is
entirely depending on the vendor, plus, Freshsales has included free 24/5 support
for every single user, even those who are using the free starter pack, therefore
maintenance cost are either non-existent or very low (the customers only have to
guarantee the access to the solution from their office, it means that they have to
keep up with the minimum access requirements, like installing and updating their
web browsers to the latest version) Regarding the license cost, we already
addressed that matter in the previous part regarding the business model earning
logics and the pricing, therefore the license cost will depend on the pack that the
customers will choose but whatever pack it is, we can say that license cost is
cheaper than the incumbent Salesforce. The last cost criteria are regarding the
vendor switching cost, we can say that it is also very low because the vast
majority of incumbents vendors are allowing their users to export their data into
CSV files that can be then imported to the new solution (in our case Freshsales).
It also works the other way, meaning that if a Freshsales user wants to switch to

72
another vendor, he will be able to easily export its data. Therefore, the vendor
switching cost is really low because the migration is an easy task when we are
talking about migration between two SaaS solutions. However, in the case where
a customer wants to migrate from an on-premise solution to a SaaS solution, the
switching cost could be significant in the case where there are no migration, data
exportation functionalities in the on-premise solution.

Cost factors Freshsales

Implementation Cost Non-existent or very low

Maintenance Cost Non-existent or very low

License Cost Depends on the chosen pack (from 0 to 75€/user/month)

Vendor Switching Cost Very low or important depending on the migration type

Regarding the SLA, the user may not be able to access or use the service during
planned downtime (mostly for upgrades and maintenance reasons), of course, he
will be notified in advance, moreover, Freshsales are generally focusing their
planned downtime for weekends and other off-peak hours. The second terms for
not accessing the service is during exceptional circumstances beyond the
vendor’s control such as an act of terror, acts of government, technical failures
beyond the vendor control. Besides these exceptions, the user will have access to
all Freshworks products and services, we can see that for the last 4
months(December to September 2018), Freshsales had an uptime of 100% in the
US, in the last year (2018) it has an uptime of 99.97% in average. Therefore we
can say that Freshsales is a reliable solution with solid uptime figures. Regarding
the data confidentiality, Freshsales has revamped their privacy notice in 2018 in
order to be compliant with GDPR. (“Lawful, fair and transparent data processing,
purpose limitation, data minimization, accurate and up-to-date data processing,
limitation of storage in a form that permits identification, confidential and
secured data, accountability and liability”) Freshsales also have crucial data
privacy international certification like the EU-US Privacy Shield and the

73
Swiss-US privacy Shield framework. Thus, by being compliant with the GDPR
and possessing international data privacy certifications, we can say that
Freshsales is a solution that has strong guarantees when it comes to data privacy
issues. For the data access matter, Freshsales is allowing the customer to manage
and customize the different solution users with role management, by default,
there are four different roles, the basic user that can create, edit and, delete
records, lists views, notes, tasks, appointments and conversations and also import
records. Then there’s the manager role that has the same access as the basic user
in addition to having access to reports. The administrator can do all the basic
user, manager activities and have access to the administrator settings but he
cannot access the account/billing information. Then we have the account
administrator that have complete control over the Freshsales solution including
billing and account information.

Security factors Freshsales

Service Levels Agreement Service may not be available during planned downtime or
(SLA) during exceptional circumstances

99.97% uptime in 2018

Data Confidentiality General Data Protection Regulation(GDPR) compliant

EU-US Privacy Shield certification

Swiss-US privacy Shield Framework

Data Access Role management: user, manager and account

administrator

Adopting a SaaS CRM like Freshsales, allows organizations to focus on their core
competencies, indeed, by using SaaS solutions, organizations are outsourcing
significant parts of their IT, it means that they are no longer in charge of IT
infrastructure, delivery platform, maintenance, new version upgrades, backups
and so on. Thus, the organization will have more resources to dedicate to their
core competencies. Moreover, by adopting SaaS, an organization will have the
ability to predict their future expenses by knowing that SaaS works on a

74
rental/subscription model. It means that the expenses are predictable and will
reduce cost surprises and overruns. Using SaaS solutions also means that
deployment is much faster than on-premise solutions by knowing that there’s no
need of hardware implementation or software installation, therefore with a shorter
learning curve, more successful user adoption, SaaS CRM by the likes of
Freshsales are rapidly operational so their users. In other words, it means that
there’s an accelerated time to market. Finally, there’s also an advantage when it
comes to business agility, indeed, using a SaaS solution will allow organizations
to scale up or down their user's accounts and software needs on-demand.
Regarding the IT resource cost, we can say that using Freshsales will only imply
operational expenditure, because of the rental model and the no-needs for any
type of durable acquisitions and maintenance, it will, therefore, lower the total
cost of ownership (TOC). The last organizational criteria are regarding the
solution being on pace with the latest leading-edge technologies, in the case of
Freshsales, we know that the solution integrates itself seamlessly in a
state-of-the-art work environment with many possible integrations (such as
google apps) and features that allow users to import and use data from other
applications. It means that even if Freshsales has less integration option than
Salesforce, it has many possibilities to fit in the various organization using the
latest and most popular productivity applications.

Organizational factors Freshsales

Competitive advantage/time Focus on core competencies

to market
Predictable expenses

Accelerated time to market

Business Agility

IT resource cost From Capital Expenditure (CAPEX) to Operational

expenditure (OPEX)

Lower Total Cost of Ownership (TOC)

Being on pace with the latest Depends on the customer’s software and information

75
 leading-Edge technologies system

Freshsales is a highly customizable solution, indeed, Freshsales comes with

several default fields and settings but every fields and parameter can be
customized to the liking of the end-user. For instance, the user can add customs
fields to his leads, contact, account or deal fields. He can also customize his sales
pipeline to fit with the organization sales processes. As we previously explained,
the users also have the possibility to do custom reports and metrics. We can also
add that users have the ability to customize the lead scoring systems, the built-in
dialer with custom messages, the email/sales campaigns with templates and every
other key feature of Freshsales. The only thing that users can’t customize is the
user interface. Therefore we can conclude that Freshsales is a highly
customizable solution. Regarding the upgrades, the vendor is regularly adding
new functionalities to the solution and fixing bugs on a monthly basis, of course,
the end-users don’t have to do any actions regarding that matter because updates
are fully handled and automatized by the vendor. We can also say that Freshsales
is a highly scalable solution because it relies on a multi-tenant architecture, as we
previously explained in the business plan part, it means that organizations that use
Freshsales can easily scale up or scale down their users without any consequences
or requirements. By integrating all the key features of a modern CRM in one
interface with smart and customizable workflows. Freshsales has included a
built-in Phone and a built-in Email system so that the users won’t have to use
external solutions for calling and mailing actions. Freshsales is considered a very
usable solution, on the contrary Salesforce is much more complex to get used
because of the complexity of its various and numerous modules. Regarding the
mobility, Freshsales has released a mobile application “Freshsales Mobile CRM”
that allows its users to have full access to the CRM on smart devices (mostly
tablets and phone) either on Android or iOS.

Performance and Freshsales

functionality factors

76
 Customization Every feature are customizable but the UI

Upgradation Automatic upgrades handled by the vendor

Scalability SaaS relying on a multi-tenant architecture, highly

scalable

Integration Application Marketplace (already explained in the

previous part about the key features)

Usability Intuitive UI/UX, all-in-one experience

Built-in Phone

Built-in Mailbox

Mobility Compatible with Androids and iOS with Freshsales

mobile CRM

Thus we can say that Freshsales meets every factor for SaaS adoption, it means
that Freshsales CRM is in line with the CRM market current needs and
requirements for adoption. After our analysis, we can also conclude that
Freshsales is a performant solution even when we do the comparison with the
incumbent Salesforce. Now that we know how Freshsales is performing and
working, we are going to analyze its potential of disruption in the last part of our
case study.

D. Conclusion: is Freshsales a disruptive competitor for Salesforce?

Foothold market

Entrant (Freshsales) YES NO Unknown

Product performs worse based on established attributes X
Products are cheaper, simpler and comfier X
Product address current non-consumers X
Profitable business model targeting over-satisfied customers X
Investors allow experimention X

77
Incumbents (Salesforce) YES NO
Some customers are over-satisfied X
Main customer segment does not appreciate entrants products X
Market for product based on disruptive innovation small/irrelevant X

Regarding the first step of disruption (foothold market), we can say that the
entrant (Freshsales) product perform as well as the incumbent one, at least for the
CRM key features (Lead-Contact management, Opportunity-Deal management,
Integration, and Reporting-Metrics). The only difference in terms of performance
is regarding specific functionalities that Salesforce have through its vast
AppExchange marketplace and additional modules. We can also say that
Freshsales is cheaper, simpler and more comfortable to use, with its all-in-one
CRM approach and interface and cheaper plans (including a free starter pack).
However, Salesforce has developed a modern interface in order to fit the new
customer's expectations in terms of UI/UX, Salesforce users can switch between
the old interface (Salesforce classic) and the new one (Salesforce Lightning) at
any time. However, Salesforce plans are still much more expensive than
Freshsales and offer no free plan. We can also consider that Freshsales is
targeting non-consumers, because of the simplicity and pricing of its products,
Freshsales is an appropriate solution for small businesses and start-ups that have a
CRM need and that were not considering the adoption of such solution because of
the relatively significant high price of incumbents like Salesforce. If Freshsales
appears to be an appropriate solution for SMEs, it can also interest larger
organizations, that’s why the entrant has developed offerings for large companies
and enterprises, including more advanced functionalities like advance CRM
customizations, smart workflows, smart forms for web-to-lead capture and sales
forecasting reports. We can remind that Freshsales large and enterprise pack are
still cheaper than Salesforce medium pack. Furthermore, after analyzing the
business plan of Salesforce, we notice that the incumbent is focusing its attention
on premium segments by developing advanced and state-of-the-art
functionalities, it means that Salesforce is becoming more and more complex for
SMEs and their current SMEs customers may be over-satisfied.

78
Thus, with 5 positive disruption criteria out of 8, we can conclude that the entrant
Freshsales is growing successfully in a market niche that consists of start-ups
with limited resources.

Main Market Entry

Entrant (Freshsales) YES NO

Products are based on standard components X
Strategic resources are accessible X
Network for disruptive innovation is expected to be large X
Disruptive innovation is compatible with existing network X

Incumbent (Salesforce) YES NO Unknown

Established performance attributes are shifting X
Customers are unwilling to pay for further improvements X
Switching costs are low X
Coordination costs are low X

Regarding the second step of disruption, we can say that Freshsales products are
based on standard components, indeed, like Salesforce, the entrant only offer
standardized SaaS products, it means that the software is hosted by a provider and
made available as a service to customers by the internet. It means that Freshsales
has developed and is delivering its solutions in the same or almost technical
environment, requiring the same components and infrastructure. We saw in our
case study that both CRMs are based on a multi-tenant architecture that requires
the same IT infrastructures (data center facilities and IaaS providers) to function.
For the accessibility to strategic resources, the entrant Freshworks has raised in
2018, $100 Million with a Series-G and the participation of 3 big venture capital
funds (Sequoia Capital India, Accel & CapitalG). It means that Freshsales has
access to significant capital to finance its growth, especially with software
development. We can also say that network for disruptive innovation is expected
to be large by knowing that at the age of the digital revolution, many

79
organizations are looking to modernize and optimize their businesses with highly
performant CRM solutions and there are still many businesses that have not
committed themselves to an incumbent solutions, we previously talked about the
startups with limited resources but many small and middle businesses are still
using on-premise solutions or simple spreadsheets software to manage their
customer relationships. Furthermore, we can say that Freshsales products are
compatible with existing networks, indeed, we saw in our case study that
migration from Salesforce to Freshsales is facilitated by the data exportation
functionality, it means that with exportations, the customer can easily switch from
one SaaS solution to the other by simply importing their previous data. Thus, we
can also say that switching cost is low, because of the migration and also because
of the low resources required to switch from Salesforce to Freshsales as they are
both immaterial solutions and also because Freshsales is a simple solution to
apprehend for new users. We can make the same conclusion for coordination
costs that is not favoring the previous solution, except for organizations that
utilize the whole Salesforce suite that implies a general and costly change.

Thus, with 7 positive disruption criteria out of 8, we can say that Freshsales is
successfully entering the main market that consists mostly of SMEs. We can also
add that Freshsales is meeting the different adoption criteria, meaning that the
solution will answer the different requirements, needs of the mainstream
customers.

Failure Of Incumbent

Entrant (Freshsales) YES NO

Business model is significantly different X
Processes are significantly different X
Value network is weak X X

Incumbent (Salesforce) YES NO

Products matching entrant's offer are not added X
Incumbent is fleeing to premium segments X

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Disruptive innovation is not implemented in separate organization X

Regarding the third step of disruption, we can say that Freshsales business model
is similar to the Salesforce one, indeed, in our business model analysis, we saw
that both vendors are using the rental model specific to the SaaS products. We
can say the same about their will to create an ecosystem with a dedicated
marketplace, third-parties partners such as implementation consultants and
resellers. The only differences reside on the fact that Salesforce has paid support
that will make the use of their products more expensive. For the processes, we
can fairly say that they are similar for the two vendors, they are both offering
SaaS solutions that use similar logic and workflows, especially when we look at
the operations that are possible in the key features, however we can say that
Freshsales is more intuitive, user-friendly with its UI/UX and built-in
phone/email. Furthermore, value network is weak, indeed, as we previously said,
there are no incompatibility issues between the two CRMs, except for the use of
exclusive features from one or the other. However, we can also consider value
network as strong because of the vast ecosystem that Salesforce has created, the
more users Salesforce has the more it products are going to perform, indeed
Salesforce really give the opportunity to its community to improve its solutions as
we explained in the first part of our case study, especially with its various types
of partner that can create, integrate new features and share them through the
appExchange marketplace. The reaction of the incumbent Salesforce to the
entrant product was to create a more user-friendly solution (Salesforce Lightning)
but even with this new solution, Salesforce is still not offering a free edition like
Freshsales, we can also see that Salesforce lightning belongs to the same
organization than the classic Salesforce, it means that to the customers, both of
the version share the same image and reputation, customers do not see explicitly
the difference before they concretely try the solution.

Thus, with 3 positive disruption criteria out of 6, we can’t say that the incumbent
Salesforce is failing against the entrant Freshsales, especially by knowing that
Salesforce is still the undisputed leader and powerhouse of the CRM market

81
nowadays. However with an overall score of 16 out of 21 in terms of disruption
criteria, we can say that the entrant Freshsales has an important disruptive
potential, indeed with its aggressive pricing for SMEs, free plan for startups,
state-of-the-art UI/UX, access to significant resources, performant key features
and, belonging to a rising tech firms (Freshworks, that is one of the leaders in the
customer support software market), Freshsales is having a great success with
market niche and mainstream customers. Although, in the highly competitive
market of SaaS CRM, with entrants with similar offerings like Zoho, Pipedrive,
BPM’Online and Copper and resourceful incumbents like Salesforce and
Dynamics, we can’t consider Freshsales as an imminent and singular disruptive
threat to incumbents. Furthermore, according to Gartner, the CRM companies
that will offer highly performant products in predictive and prescriptive
technologies and API integration (especially integration with cost, price and
quote software and sales performance management), will have the upper hand in
the future CRM market61. Thus, we can hypothetically think that if an entrant like
Freshsales keeps its current advantages while outperforming the incumbents in
these two features, then, it will have a real chance to disrupt and overtake them.

IV. CONCLUSION

Disruption in the SaaS industry: The Salesforce singularity

We saw throughout our research dissertation that disruption is a reality, C.

Christensen and many authors have depicted this phenomenon in various
industries, from the hard drive industry to the financial industry. However, when
it comes to the SaaS industry, we can say that the phenomenon is still singular,
indeed because its modern nature and newness, disruptive cases are uncommon.
That’s why the famous Salesforce case can be considered as exceptional along
with the Slack case for internal communication software for instance. Indeed,

61
​Bryan J. “Gartner Hype Cycle for CRM Sales, 2018”, text & graphs, 2018
https://www.gartner.com/smarterwithgartner/explore-gartner-hype-cycle-crm-sales-2018/

82
even tech giants with significant resources such as Google with its on-demand
free office suite has failed to take over Microsoft Office 365 who still have the
upper hand in the productivity suite market. We can say the same for the CRM
market where Freshsales, a company that raised $100 million and developed a
performant and highly appreciated SaaS CRM is struggling against the
powerhouse Salesforce and also with comparable entrants with equivalent or
fewer resources like Zoho or Pipedrive. Therefore, we can say that the intense
competition in the SaaS market or the winner-takes-it-all logic is making
disruption almost impossible to achieve. Indeed, if Microsoft is still dominant in
the market, it is partially explained by its important network effects (with
proprietary files format) and historically large user base, even if competitors by
the like of Google or Open Office are offering free, on-demand, performant and
inter-compatible products, the market remains unchanged. We can say the same
about the CRM market after our case study, Salesforce is still the uncontested
leader even with various entrants that offer highly competitive products and that
meets several disruption criteria. Thus, we can conclude that entrants that meets
requirements for disruption like mass adoption criteria, performance attributes,
sustainable business model that target non-consumers (focus on the blue ocean)
and over satisfied ones, intercompatibility with low coordination and switching
costs are just enough to be competitive and succeed in the SaaS industry but not
to disrupt the entire market and overtake the incumbents like Salesforce did in the
late 2000s. Moreover, if some industries (mostly traditional ones) are indeed
destabilized and disrupted in unprecedented proportions because of the
exponentiality of technological progress (Big Bang disruption theory) and the gap
that it creates between disruptors who fully benefit from their knowledge and
apprehension of new technologies and stagnant incumbent that fail to adapt their
business to new technologies and relies on incremental changes. However, we
can say that in the SaaS, it is different because both entrants and incumbents have
the understanding and the anticipation ability to exponential technological
changes, as we’ve mentioned before, Microsoft, for instance, had foreseen the
advent of SaaS and therefore has developed its on-demand office suite to counter
Google apps. Our case study showed that entrants that compete on three strategic

83
dimensions at once by entering the market with better, cheaper, customized and
scalable solutions, marketed for all customer segments and with low
experimentations cost will not have the same impact in the SaaS industry. Thus
we can conclude that disruption is a singularity, uncommon phenomenon in the
SaaS industry.

V. APPENDICES

APPENDIX 1: Freshsales features mapping

84
APPENDIX 2: Salesforce features mapping

85
86
APPENDIX 3: Lead/Contact Management system (number of operations)

Salesforce Freshsales
List view List views
New lead New lead
Import lead Import lead
Display as Display as
Refresh Refresh
Chart /
Filters Filters
Change status Change status
Change owner Change owner
Add to campaign Add to campaign
Select All Select all
Search Search
Clone Clone
Rename Rename
Sharing Settings Sharing Settings
Show list filters Show list filters

Select field to display Select field to display

Delete Delete
Reset column Reset column
Edit leads Edit leads
/ Send email
/ Remove Tags
/ Add tags
/ Send SMS
/ Merge
/ Add appointments
/ Unsubscribe
/ Add Sales Activity
/ Add call log
/ Forget
Total Total
20 29

87
APPENDIX 4: Opportunity Management system (number of operations)

Salesforce Freshsales
Search Search
List view List view
Display As Display As
Add opportunity Add opportunity
Select All Select all
Select Select
Refresh Refresh
Import Import
Edit Edit
Delete Delete
Change owner Change owner
Drag & Drop (Kanban Display) Drag & Drop (kanban display)
Clone Clone
Rename Rename
Sharing settings Sharing settings
Edit List filters Edit List filters
Select field to display Select field to display
Charts /
Filters Filters
Mark deal as won Mark deal as won
Mark deal as lost Mark deal as lost
/ Send mail
/ Add Task
/ Add appointments
/ Add call log
/ View all related contacts
/ Forget
Total Total
21 26

88
APPENDIX 5: Reporting and Metrics (number of operations)

Salesforce Freshsales
Search Search
New report New report
New folder /
Select fields to display Select fields to display
Reset column /
Run report Run report
Edit Edit
Subscribe /
Clone report Clone report
Share report Share report
Export Export
Delete Delete
Add to Dashboard Add to Dashboard
Favorite /
Move /
Account & contacts Report Account & contacts Report
Opportunities Reports Opportunities Reports
Customer Support Reports /
Leads Reports Leads Reports
Campaigns Reports Campaigns Reports
Activities Reports Activities Reports

Contracts & Orders Report /

Price Books, Products & Assets
Reports /
Administrative Reports /
File & Content Reports /
Quotes Reports /
/ Select
/ Select all
/ Phone calls Reports
/ Task Reports
/ Appointment Reports
/ Schedule

89
 Total Total
26 21

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