The Truth About On-Demand CRM

Hosted, on-demand CRM is sometimes cheaper and easier to roll out than the software that lives on your own machines. But if you think on-demand means that all you have to do is flip a switch, youre dead wrong.

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Quinn looked at several CRM systems including Siebel, Saleslogix and Goldmine, but ultimately chose Microsoft CRM so that he could more easily integrate it with the Great Plains ERP package Qosina had put in place the year before.

Dialing Into the Back Office

The level of integration required between a front-office CRM system and back-office systems is another factor to consider when choosing between hosted and on-premise CRM. On-demand CRM vendors are offering ever-more robust integration tools. But, says AMR’s Bois, "integration is always going to be an issue with software-as-a-service because you don’t own the application or have access to the source code." And more sophisticated real-time integration with back-office transactional systems isn’t possible with on-demand CRM software—at least today. "There’s movement in that direction, but they can only import flat files asynchronously in batches," says Bois. "Companies that need to do that kind of [real-time] integration are more likely to stick with licensed software."

"It’s not that on-demand software can’t integrate," says Greenberg of The 56 Group. "It’s just that the integration tools in traditional on-premise software are better. The more complex the integration requirements, the better off you’ll be with onsite software."

ResortCom’s Marxer says the integration of the RightNow on-demand software with his back-office system is satisfactory, but not what he would call ideal. "RightNow delivered on all the integration points we needed and the performance was reasonable," he says. But to open up a customer incident report, which an employee does only when an incident cannot be resolved on the first contact, takes 10 seconds because of the back and forth on the back end. That’s just fine for ResortCom’s needs at the moment, but "there’s some room for improvement," he says.

Mike Davis, CIO of Stewart Information Services, agrees. Like Slusar at SunGard, Davis had to think about the needs of the far-flung sales and customer-service organization supporting the $2.2 billion title-insurance company he works for. With a requirement that the software eventually support at least 4,000 and as many as 8,000 users, Davis had the option of becoming one of Salesforce.com’s largest customers to date (in fact, small pockets of people within the company had already started using Salesforce.com on their own). But unlike Slusar, Davis ultimately purchased a license for Onyx’s on-premise CRM product.

Davis wanted to tie the CRM to all of Stewart’s "day-in and day-out" systems. "We needed the most flexibility we could get in integrating it," says Davis. "And [Onyx] seemed to have much easier ways [than Salesforce] to integrate our system with theirs and theirs with ours—three different levels of embedding and exposing the information. There were modules of code available to use within our systems to make it easier."

Salesforce.com also has ways to get data in and out of Stewart’s applications, in an import-export fashion, Davis says. But it would have required users to manually initiate the imports and exports in a less-seamless fashion than he would have liked. "We might have been able to make it work," says Davis. "But it wouldn’t be very efficient. And it wouldn’t have made for a very good user experience."

Easy for You, Difficult for Me

One of the major selling points for on-demand CRM is its relative ease of implementation, particularly in contrast to the expensive and lengthy rollouts that have plagued the traditional CRM customer.

Indeed, at Qosina, the Microsoft on-premise implementation took more than a year. And the biggest cost was consulting fees, which, at $280,000, made up half of the implementation expenses. Davis of Stewart Information Services is just finishing his Onyx pilot (for six sales-force units), which also required the added expense of two full-time and two part-time consultants. It took seven months longer than expected because midway through the process, Davis discovered some additional functionality that would be needed for the regional sales offices.

"It’s taken longer than I thought," he acknowledges. "The biggest hold-up just has to do with change in general," including getting users to adopt the systems and change the way they work. The integration that drove the decision to go with an on-premise product won’t even happen until the next phase of the rollout. "It’s a long road," Davis adds.

For companies that can adjust to an on-demand CRM system out of the box, implementation takes less time. But it would be a mistake to assume that all hosted CRM implementations are quick and easy. In fact, most take time to roll out enterprisewide and many require bringing in consultants to help out. "Some customers have the expectation that you flip a switch and you’re done," says Bois. "But there are setup costs and training costs and ramp-up costs. There’s getting the system customized to match the business context and then getting people to use the system. CRM implementations are still complex, even if they’re delivered in an on-demand fashion."

At SunGard, a smaller and more narrowly defined rollout of Salesforce.com took a full year. "We had to do a fair amount of work lining up what we wanted to accomplish with what [Salesforce.com] could provide," Slusar explains. SunGard also had to bring in consultants to assist with the rollout and accompanying change-management issues. Some of that effort was devoted to standardizing data definitions in order to preserve data integrity. Because the company had so customized the software’s template to meet the needs of its global sales force, there was no way Salesforce.com’s online training would work. Slusar rolled out the system in phases until 90 percent of her user base was on it by the spring of 2004. "We still could do more to drive standardized behavior and usage that we haven’t," Slusar says.

Looking forward, Slusar has created a team to oversee the Salesforce.com product over the long term. They will work to increase user adoption and also keep track of new offerings from the vendor as well as from "the mushrooming number of partners that have popped up all over claiming they have something that works well with Salesforce.com," says Slusar. (Applications offered by companies partnering with Salesforce range from Web-based HR recruiting and screening tools to call-center scripting and software that helps doctors take notes on wireless handhelds.)

"The good news is there are a lot of things you can do with this system," Slusar says. "The bad news is you need people to do it. And I already have a full-time job."

Different Delivery Model, Same Risks

Marxer is sticking with the hosted solution, even though RightNow had a clause in its contract that ResortCom could buy a license and take the software onsite if Marxer wasn’t pleased with the results. Although he’s had to hold off on upgrades to date, he’s hoping they won’t pose a problem when RightNow adapts a true Web-services integration platform.

In the meantime, the on-demand system has yielded some solid ROI. The self-service function has reduced customer e-mails by 40 percent, and workflow has improved between back-office and front-office functions, resulting in a 40 percent improvement in productivity. And ResortCom has been able to introduce some automated marketing functionality that Marxer predicts will boost its bottom line this year.

Marxer credits the progress he’s made with his on-demand CRM solution not to the technology itself, but to the two years he spent preparing the organization for the changes that would be required—preparation that would have been the same regardless of which delivery model he chose. "Back then, we didn’t have the money or maturity to do a full-blown implementation. [As a result], I was able to do all the prep work necessary on a cultural level way before we even put out the RFP," Marxer says.

It remains to be seen whether more complex on-demand CRM implementations ultimately succeed or suffer the same fate as many large-scale on-premise CRM projects have. "Because most of these are monthly investments and in the past were smaller deployments, we haven’t heard about the big disasters yet," says Bois. "The larger implementations will be the ones to watch," he says.

"On-demand CRM may be a less-expensive risk, but it’s just as big a risk," says Greenberg from The 56 Group. "If you haven’t planned everything out, customers will get lost. People will get fired. You will fail."

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Copyright © 2006 IDG Communications, Inc.

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