When On-Demand Is Worth Considering

Hosted software is nothing new. In the 1990s, hundreds of ASPs sprang up to offer customers enterprise software hosted over the Internet. But when the Internet bubble burst, many ASPs went belly-up, leaving customers in the lurch. But Salesforce.com focused on the niche need for sales-force automation, refined its technology and began racking up sales among small and midsize businesses that needed the functionality they could offer but couldn’t afford the multimillion-dollar price tag that accompanied full-fledged CRM implementations. And as the number of expensive failures in the traditional on-premise CRM space grew, so did interest in expanding the hosted model beyond simple sales-force automation—to a full-fledged system that could give enterprises a holistic view of their customers and allow them to better target their marketing, sales and customer-service efforts.

Traditional enterprise software vendors soon struck back, attacking on-demand on the grounds that it wasn’t scalable to more than 1,000 users. But as it turns out, size is not what really matters in determining whether a hosted CRM implementation will be a success—it’s complexity. And complexity makes it harder to implement a viable CRM package, regardless of whether it’s hosted or on-premise. "It isn’t a scalability issue," says AMR’s Bois. "Typically when you’re talking about an organization that will have more than a thousand CRM users, you’re talking about a broad implementation that will touch more areas of the company and will involve more business processes."

Companies seeking to adopt established, standard practices on a particular function like sales-force automation are more likely to benefit from a hosted solution, while those seeking to implement highly customized customer-management processes would more likely value a flexible onsite option.

Take SunGard Data Systems, for example. For Bettina Slusar, SunGard’s senior VP of global accounts management, opting for an on-demand solution in 2002 was a relatively easy decision to make. Although she had a user base of more than 1,000 to consider, her plans to drive standard processes in the global sales function of her $3.5 billion data-center company led her straight to Salesforce.com. Having grown through more than 100 acquisitions, SunGard’s scattered and independently operating sales force hampered the company’s ability to get an accurate and timely enterprise view of the sales pipeline. In addition, SunGard was looking only for certain aspects of CRM—sales-force automation and some marketing and campaign tracking. So Salesforce.com was a good fit.

But Slusar admits it’s not for everyone. "If you want one big system that’s going to connect all the dots together—from talking to the customer to signing the deals to connecting to the accounting system—[Salesforce] is not the answer," she says.