Hosted or On Premise CRM? (Part I)

Traditional CRM comes with hardware, software and, oftentimes, the headaches associated with protracted installations and integration snafus. Hosted CRM offers an alternative: buy access to software on a subscription basis and log on to the apps via the Internet. Sounds simpler, right? But the hosted model presents its own separate set of challenges, not the least of which is wrapping your head around a different approach to getting software. 
"It’s a newer model, and it requires people to think outside the box," says Denis Pombriant, vice president and managing director of CRM at Boston-based Aberdeen Group.

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4 Steps to Prevent CRM Failure

A Butler Group report found that 70 percent of CRM implementations fail. A Gartner study found that approximately 55 percent of all CRM projects failed to meet software customers’ expectations. In a Bain & Company survey of 451 senior executives last year, CRM ranked in the bottom three categories among 25 popular tools evaluated for customer satisfaction.

You get the picture. Many people believe that these "failures" are the result of the tools themselves–which is usually not the case. Another complication is that many of the reports define success based on management’s impressions, rather than evidence of ROI.

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The ROI of CRM

With C-level executives, CFOs in particular, taking a greater interest in their organizations’ investments, pressure for return on investment (ROI) numbers hits the usual functions — production, sales, human resources and information technology — and marketing, which is being held to greater accountability for its spending.

Because of this executive involvement in decision making and a lingering distrust of CRM (thanks to the the well-publicized failures of early implementations), CRM solutions need to show a measurable, if not quick, ROI.

"It is an issue we’re seeing more in the industry, particularly for an organization that’s been struggling to prove its CRM business case," says Kim Collins, a Gartner  research director.

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Siebel in the Crystal Ball

Among the many announcements recently made by Siebel is the fact that Siebel 8.0 will be available in 2006, replete with a new user interface and improved business-process tools.

But the company still has challenges to address, said Yankee Group’s Sheryl Kingstone. According to her analysis of the information presented at Siebel’s annual user week, these challenges include countering increasing competition and spreading resources among myriad initiatives aimed at different target audiences.

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AMR Research Predicts CRM Budgets Will Increase 8 percent This Year

AMR Research estimates that 40 percent of companies are using hosted Customer Relationship Management (CRM) applications. The hosted model differs from traditional licensed software because applications are served over the web from an off-premises provider. Software companies such as and more recently Siebel, with its On-Demand product, have popularized this model for CRM.

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No one knows hype better than Marc Benioff, the ebullient CEO of (CRM:NYSE). Benioff is so self-confident he once tried to use the Dalai Lama as part of a marketing campaign.

The idea fell through, but not before it generated more publicity than the campaign itself would have produced. Some months earlier, he enlisted Arnold Schwarzenegger, then running for governor of California, to premiere his newest Terminator film at a Salesforce product launch.

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Making a big deal out of hosted CRM

If’s recent announcement that Merrill Lynch signed a 5,000-seat deal wasn’t enough to bolster the argument for hosted CRM in the enterprise, a report from Boston-based AMR Research Inc. should be.

Hosted CRM has gained a firm foothold in the market and, according to AMR, that goes for larger businesses as well as small. In a survey of roughly 200 companies across the services and manufacturing industries, AMR found that 40% are using hosted CRM applications. Not only that, but 49% of companies will use a hosted sales or e-commerce application within the next 12 months, including 47% of companies with 5,000 or more employees.

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New Rules for Better Customer Relationships

The bloodletting in call centers, CRM and Web-based customer self-service has shown that a CTO can’t simply install a piece of software and expect it to start improving things; Web applications and call center automation will grow smart enough to improve a business’ value proposition only when they work in concert.

Customer self-service  Web applications built without regard for other contact channels have placed many companies in the position of showing customers internal inconsistencies and inefficiencies. One service channel often doesn’t synch with the other, and neither takes full advantage of data in back-room systems.
Companies trying to improve customer relationships through Web-based self-service and other channels should consider business rules management technology as a means to resolving their technical issues. Newer technology such as Web services can help integrate numerous applications to give business managers control of customer- facing information technology (I.T.).

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Measuring ROI of CRM Systems

Assessing ROI for CRM initiatives can be a daunting task and attempts to offer a framework for helping a business manager measure ROI of CRM systems is difficult to do.

Part I – Challenges, notes that there are many reasons why CRM systems defy easy ROI calculation, most of them stemming from just how vast and far-reaching the benefits of CRM are; and goes on to discuss six key reasons why assessing ROI is so challenging

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