Allied Office Products lost $8 million worth of business when the World Trade Center, where many of its customers worked, was destroyed. In the aftermath of the tragedy, the $300 million office products company was forced to lay off employees and reevaluate its entire business and sales strategy. Executives came up with a plan to generate new accounts and reactivate those that had lapsed. They also decided they needed a sales-force automation (SFA) system that would improve customer service and enhance sales employees’ productivity. They eventually zeroed in on an ASP that promised reasonable costs and a quick turnaround.

However, ASPs held a number of negative connotations for Allied executives, who remembered the ASP meltdown in 2000, when scores of hosted software companies went out of business after the dotcom collapse. COO Mike Palmer, who was CIO at the time his company was searching for an SFA product, worried that the ASP he had settled on?SalesForce.com?might go out of business in the chilly economic climate for IT spending. He was also concerned that a hosted solution couldn’t be customized or easily integrated with his company’s back-end systems. And he obsessed about whether the ASP could provide adequate protection for his company’s crown jewels?its customer data.

But in spite of those reservations, he made the leap of faith because of SalesForce’s cheap price tag and promise of fast implementation. Allied began rolling out the SalesForce.com product to its 220 sales and sales-support employees in April 2002.

Two months later, 165 salespeople were using the hosted software, and Palmer was in for a big surprise. The concerns he had had about the vendor’s financial stability, security and service levels turned out not to be major issues. And while not trivial, the obstacles his company ran into integrating SalesForce.com’s team edition with its legacy systems were surmountable. The biggest problems Palmer confronted with the hosted solution had to do with the age-old bugaboo of convincing salespeople to adopt new processes and tools?the same change management issues that bedevil any technology implementation, whether done in-house or hosted.

If Allied’s experience with SalesForce.com is any indicator, it may be time for CIOs to get over their (not unfounded) aversion to ASPs. Those who witnessed the collapse of the ASP market (when revenue growth declined by 86 percent from 2000 to 2002) might still have a lingering bad taste in their mouths. But in the CRM space at least, ASPs are increasingly being seen as a viable solution, particularly for small and medium-size companies. The surviving vendors have matured and largely rectified the security and service problems that dogged them in the past. CIOs, of course, still have to be on their guard against overblown promises that ASPs?or any vendor for that matter?make about instantaneous ROIs and quick deployments. While ASP deployments are quicker than packaged implementations, they still take longer than the vendors say they will, and the ROI always takes longer to achieve.