Debunking the Hype

In an effort to compete with the large CRM vendors, ASPs do sometimes make heady promises about their quick and easy deployments, speedy ROIs and bargain basement prices. Beware these sells. Only one company that CIO spoke to, Electronics for Imaging, managed to roll out an ASP CRM application to 100 out of its 125 users in four weeks. Part of the reason the deployment went so quickly was because Electronics for Imaging did not try to integrate the product with its SAP back-end systems. If your company needs to do customization or integration, you can count on a longer deployment time. On average, the companies CIO interviewed took five months to roll out their ASP applications.

Cost savings can also be a red herring. While CRM ASPs are considerably less expensive than client/server-based applications (ASP customers don’t have to worry about capital expenses associated with infrastructure), the cost does catch up after about four years because you’re paying a monthly fee for the ASP service for as long as you run it, says Bob Chatham, principal analyst with Forrester Research. "In the long run, the hosted applications only have a 25 percent cost advantage over licensed software," he says.

While ASP deployments may be easier from a technical viewpoint, their customers still have to deal with recalcitrant users who don’t want to use these new tools and processes. And ASPs don’t provide much?if any?help in the area of change management. Allied’s Palmer says his company had to come up with its own incentives to get salespeople to use the product. Allied, for instance, created a tele-prospecting group that does all the time-consuming legwork associated with lining up sales calls, freeing up salespeople to make more calls and thus, increase their commissions. But since only sales employees who actively use SalesForce-.com are given access to the tele-prospecting group, even the most stodgy salespeople at Allied have begun using the hosted software just so they can have someone else make all the tedious cold calls.

Perhaps because of the creative way Allied got its employees to use SalesForce.com, the company is seeing a substantial return on its investment. Of the $180,000 in new sales his company generated in January 2003, Palmer attributes 25 percent, or $45,000, to SalesForce.com.

The vast majority of companies deploying hosted solutions today are small and medium-size businesses that don’t have an IT staff or don’t want to burden their small IT staffs with CRM implementations. But Forrester’s Chatham expects ASPs will soon be a popular choice among Fortune 500 companies. "Over time, there’s no reason why a [hosted] model won’t scale to thousands of users," he says.