Silver bullet? CRM on demand

Is the software-as-a-service model of delivering CRM just a wave like any other or a Tsunami force your business can’t ignore? CRM expert Trudy Barnett investigates…

On demand software, also known as software as a service (SaaS), or what we used to call application service providers (ASPs) – are a surprisingly simple concept.

Essentially, software is developed and hosted by a commercial organisation and interested organisations pay to use it on a monthly basis.

No expensive hardware, no expensive technical support teams, no expensive software licenses, no annual maintenance charges, just one easy monthly payment that moves up (or down) with the number of registered users, or the amount of use. On demand software has turned the software industry on its head.

The sales and service cycles are shorter. Self service is the norm. A new customer can register online, pay by credit card, configure the software without assistance and start using it immediately. If the system breaks, it breaks for everyone, not just a single department, so maintenance and fault management capabilities are survival issues.

The concept of outsourcing isn’t particularly new – applications such as payroll have been successful in this space for a long time. However, it has taken time for the true on-demand concept to gain acceptance as a mainstream approach requiring some significant shifts in thinking in terms of traditional IT delivery. The challenges to acceptance of on-demand models have enough fear factors to be credible:

• We don’t control our data and it may be stored anywhere in the world. How do we ensure the privacy of our customers and ourselves for that matter?
• What happens if the hosting company goes under – how can we make sure we can keep our business running?
• The software seems to meet our needs at the moment. How do we make sure it grows as we do? At least if we own it ourselves we can change it as our needs change.
• The cost model seems to be attractive – how do we ensure that it stays that way and we do not become a captive audience?

But the pros must outweigh the cons because one thing is clear, SaaS vendors are on a winning streak. The McKinsey Quarterly (May 2007) reports an 18% increase in revenues for these vendors between 2002 and 2005 and there are no indications that this is about to change. The same report registers a dramatic jump in the number of companies considering software-as-a service application during 2007 following a survey of senior IT executives.

CRM On Demand is coming of age

It has taken CRM on-demand a long time to reach out beyond the pocket applications of help desk services and sales force automation. This is because CRM as an outsourced application has had to face some particular challenges.

The reality is that your business needs to be built around the customer to reap the benefits of CRM.

This screams integration – indeed the holy grail of CRM projects is a “single view of the customer”. Several key benefits of CRM are tied to linking insight and action together – this screams analytics. CRM also means high usage for front line staff and fast performance is essential if users are not to give up in disgust. These three requirements have been the Achilles heel of successful CRM on-demand. The first two have been solved (to varying degrees) by the vendors themselves and the third is in the hands of the telecommunications industry as the evolution of broadband services continues.

The RightNow.com website touts five key benefits of a hosted solution and they have hit the nail on the head with this list:

1. Faster “time to benefit”. The lead times associated with CRM implementation reduce dramatically. Self-service configuration options means that change cycles to improve the effectiveness of the CRM model also reduce dramatically.
2. Create scale and reliability. Industrial strength data centres are needed to provision a serious on-demand operation and the knock-on benefit to customers is an increase in the level of insurance for ongoing business continuity.
3. Lower cost of ownership. Capital investment is swapped for a monthly expense. Hardware and software upgrades are amortised over a large customer base and barely impact the end user.
4. Effortless global distribution. The web based delivery model drives an anywhere anytime level of availability without any associated staffing costs.
5. Reduced project risk. This one is too easy to take at face value. Maybe it should read “reduced technical risk”. A real risk remains that we undo the good work done to move responsibility for CRM success into the boardroom, and instead revert to relying on the solution to deliver success. There is no short cut here – without attention to the people and process aspects of CRM implementations, these projects will continue to fail regardless of the type of solution in play.

Is SaaS right for everyone?

There is no doubt that an easy CRM solution is only a web click away, and at a price point that will work for all budgets. Integration and the need for analytics are likely to be the only showstoppers but give some thought to the following points:

1. On-Demand CRM will give you a chance to try before you buy. Without breaking the bank. Sign up to multiple offerings and trial these to get the best fit. Compare contracts, service levels, and data guarantees along with functionality and range of configuration options.
2. CRM may need to support mobile teams. Unchaining your mobile teams from the office by web enabling your CRM solution may be the best move you ever make. Or not. Think this through carefully. If you are reliant on web connectivity, do your teams operate within broadband coverage zones? Do you need a solution that offers “off line” use of data?
3. CRM will need to be integrated into your transactional systems but your core systems may need to support certain interoperability standards for this to be possible. If you already offer web services to customers, then integration is unlikely to be a problem. Determine what data and functionality is needed from core systems to support CRM and investigate integration options before you buy.
4. CRM and the channel mix. Many organisations have multiple interaction points with their customers: a storefront, telephony, web, email, postal, SMS text to name a few. How will the on-demand solution integrate with each of these channels in a seamless manner?
5. On-Demand CRM costs still need to be contained. The on demand model is likely to be cheaper but be aware of the impact on network costs.
6. On-Demand CRM must support future growth. An organisation is likely to outgrow a simple on-demand solution and will look for more functionality, tighter integration or more sophisticated analytics. Factor this into your evaluation criteria. Buying an on-demand version of a full enterprise product suite will future proof your CRM solution as you will have a migration path that protects your initial investment. Alternatively seek a solution that can be brought in-house and hosted internally if your integration needs outgrow the standard model.

The on-demand industry has had to understand how to win customers and how to keep them. But remember, CRM as a toolset in your organisation must constantly earn its keep and measuring return on investment is an ongoing exercise. In an on-demand world, when you have outgrown your CRM product set, switching has never been easier.

This article was originally featured on iStart. To see the original version, click here.