Hosted CRM is Next Big Thing

HOSTED applications represent the fastest growing segment of the customer relationship management market, and this trend will accelerate with the recent release of an on-demand application by German enterprise software maker SAP.

In 2005, analyst Frost and Sullivan says, revenue from hosted CRM applications in Australia totalled $13.2 million, or 13 per cent of total CRM revenue.

Frost and Sullivan predicts that will increase at a compound annual growth rate of 40.5 per cent, to reach $51.2 million by 2009, and account for 35 per cent of CRM sales.

Whereas rivals Salesforce.com and NetSuite initially targeted small and mid-sized businesses, SAP Australia-New Zealand CRM head John Goldrick says his company’s software is aimed at large enterprises that traditionally purchase on-premises software.

Goldrick denies the new product would cannibalise revenue from SAP’s existing business. The on-demand product was developed from customer calls as a means of rapidly providing CRM, but with the capability to move to a traditional on-premise version at a future time, he says.

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Hosted CRM: Signing the Contract

So, you’ve decided to make the move to a hosted CRM solution. If you’re like most companies, you’ve spent the bulk of your evaluation on features and benefits, and rightly so. But as important as those are, I strongly suggest you carefully review the agreement you’ll need to sign, and look for a few missing elements that can greatly impact your ability to access your own company data, secure reimbursement in the event of a service interruption, and ensure adequate data back-up.

To assist in getting the best service after the sale, here are four critical questions you should ask your prospective hosted providers about before signing a long-term contract.

1) Does the provider offer month-to-month options?
Many hosted CRM providers entice customers with a "free trial" and then look to move them as quickly as possible to a long-term contract. With a company now locked into a long-term agreement, many requiring full payment to be made up-front, what motivation does the vendor have to take care of you compared to closing the next deal?

What you should look for: CRM vendors that are willing to earn your business every month have the ultimate incentive to offer outstanding service at a reasonable price. Long-term contracts still may be a great idea because of the mutual commitment they show and the discounts a customer may receive, but this should be your choice.

2) Does the vendor explicitly offer service-level standards in writing for all customers?
When you choose a hosted option, you are also choosing to hand over your most valuable asset- your customer data. But the service-level standards offered by each vendor vary dramatically, and some of the largest vendors don’t offer any Service Level Standards at all. They’re asking you to trust them with your data, so you deserve to see their responsibilities to you- in writing.

Most hosted providers protect themselves from legal liability and indemnity from damage claims resulting from interruptions – that’s fair. No one can control a blackout or a natural disaster.

What you should look for: Hosted CRM companies with written service-level standard that covers all customers-at no extra charge. A service-level standard with a guarantee of a minimum of 99.5 percent "uptime" and refunds, rebates, or other financial consideration if that standard is not met.

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CRM On-Demand Is In Demand

Over the past year, there has been another dramatic shift in the CRM Marketplace. On-Demand CRM solutions have gained significant market share in the SMB and Enterprise space led by Salesforce.com.

There are many factors involved in this significant shift from the traditional software purchase and implementation to the On-Demand offerings from companies like Salesforce.com, Microsoft, and Siebel. For the larger enterprise user, there may be implementation fatigue, from the long, drawn-out and expensive projects from the late 1990’s and early 2000’s. For the small and mid-market business, the elimination of the traditional software purchase and the need for less internal resources and infrastructure is very attractive. The increased bandwidth and dependability of the “pipe” and increased speed have also contributed to the acceptance of the On-Demand CRM Solutions.

Advantages of On-Demand CRM
The initial hesitancy for On-Demand Solutions when they were introduced in the marketplace has been replaced with a general acceptance and understanding of the advantages of this type of solution. The advantages included:

Replacement of large Software Purchase with a monthly subscription charge – The On-Demand model is based on a monthly subscription charge per user. This allows a company to extend the software component cost of a CRM implementation over a period of time and eliminates the yearly support & maintenance fees of a traditional software product.

Flexible Pricing, Licensing, and Scalability – Some of the On-Demand vendors provide flexible pricing, allowing you to choose and pay for the functionality and services you need. You pay for the number of licenses you need with the flexibility of added users when necessary. The leading On-Demand CRM vendors have invested in significant infrastructure and have the ability to provide services to enterprise organizations.

Decrease in Hardware Requirements and Support – With a traditional CRM software implementation, you need to make sure you have the appropriate servers, workstations, operating systems, database, and network infrastructure to properly run and support your system. With an On-Demand solution, the costs and support are significantly reduced. As long as you have Internet access, you are able to use your CRM service.

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Benefits Of The Software-as-a-Service Model

When the Internet burst upon the scene in the early 1990’s, the concept of software as a service (SAAS) seemed an idea whose time had come.

It got hyped along with everything else about the internet and reached a massive peak of inflated expectations in early 2000 as venture capitalists funded dozens of nearly identical companies that provided various SAAS solutions.

As venture funding dried up in mid 2000, the cracks in the SAAS model began to appear. The business plans assumed zero customer attrition, an uncompetitive landscape and IPO’s in the absence of revenue. Disillusionment set in and 99 percent of those companies are no longer around. However, the strong did survive, and now, due to the success of companies like Salesforce.com and Rightnow.com, SAAS is back.

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Are Development Communities the Next New Thing for Hosted CRM?

Salesnet is the latest hosted provider to develop a formal platform for developers and customers to exchange information, ideas and prebuilt extensions to further integrate or customize the original offering.

For Salesnet, it was an essential step, given the specific orientation of its application — that is, sales force and related CRM functionality — and the inevitable desire of customers to link it to other applications or databases, said Forrester Research analyst Liz Herbert.

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