Pharma are Early SaaS Adopters
Posted by Bob Warfield on November 18, 2007
I read with interest a recent post by Troy Wing about Life Sciences CRM. Troy sees the adoption of new Life Sciences CRM apps on the Force platform as signalling the relative safety of SaaS. After all, if you’re willing to use it in a health-related area, it must be pretty solid, right?
Believe it or not, Pharma is ahead of many other verticals for SaaS. I learned this at my last employer Callidus Software, which sells incentive compensation software: a market closely related to CRM. Why is Pharma an early adopter? The reason lies in how Pharma sales work. To date, it is nearly impossible to tell which salesperson should get credit when you fill your prescription at the pharmacy. The Pharma Salespeople are calling on doctors, but their patients might go anywhere, perhaps even fairly far from the doctor. I used to commute over an hour to Callidus, and had a couple of doctors close to work but far from where my prescriptions were being filled, for example. Moreover, the doctors are not so interested in having their every prescription tracked.
The industry compensated by having 3rd parties canvas the pharma sales by drug and provide data feeds back to the Pfizers of the world. This made it possible to track where the drugs were being sold, and salespeople are compensated on these territories. It is an imperfect system, to be sure, because a salesperson may earn commissions for drugs prescribed by doctors they never made a sales call on. But, by and large it works well enough.
This inability to connect sales and marketing efforts with particular sales events is surprisingly widespread. Microsoft, Cisco, Sun, and many others who use indirect sales channels (i.e. dealers) have a terrible time connecting the dots. Many of the channels will intentionally seek to hold back the information until well after a sale is made lest they risk competing with the vendor’s own salespeople.
What’s interesting about all of this in the context of SaaS is it means important business processes exist that must already connect to data sources outside the firewall. Once that is the case, why not move the application outside the firewall and go SaaS? Supply chain applications seem like obvious strong SaaS candidates for the same reasons.