Software as a Service: Handling Customers, Hands-Free

Still paying hundreds of thousands of dollars on hardware, labor and maintenance for in-house customer relationship management systems? Hosted CRM is not a new concept, but more and more companies are deploying the software to pump up their sales operations.

Those companies are finding cost savings in reduced maintenance fees and deployment times. They’re also gaining more visibility into their sales and service operations than ever before.

Handling Customers, Hands-Free
A stream of consolidation and new offerings reshaped the on-demand CRM market, pitting high-profile insurgents against some of the world’s largest software makers. See how a major market research firm, a health food maker and an English consulting giant boosted their customer relationship operations with hosted software.

Customer relationship management software covers a spectrum of service issues, from tracking sales leads to fielding customer complaints. Historically, this software was sold as an on-premise system, meaning the customer purchased the program and deployed it out of the box.

The market changed in the late 1990s, with the arrival of firms like SalesNet (1997) and Salesforce.com (1999), which offered customer relationship management in the “software as a service,” or SaaS, model. The fancy phrase is essentially a new name for an application service provider, in which the vendor maintains and supports the software for the customer, which accesses the product via the Internet. The concept reemerged with the popularity of on-demand customer relationship management software.

Proponents of SaaS tout the model’s many attributes, but perhaps none more than the elimination of in-house maintenance. For Dan Chiazza, global sales operations director with Rochester, N.Y., market research firm Harris Interactive, deciding whether or not to pay maintenance fees was a $250,000 question.

In 2003, Harris replaced its in-house Siebel system with an on-demand solution. The Siebel system cost a quarter of a million dollars and suffered from poor user adoption, primarily because sales staffers had to be logged in to the firm’s virtual private network or in the office to enter sales data, Chiazza says.

And Harris didn’t use the system to see how much potential revenue was coming down its sales pipeline. Instead, team leaders and sales proposal writers would have to copy all e-mails about sales proposals to one of two accounting staffers who amassed the firm’s total sales prospects and results. The system was not programmed to do so automatically, and Chiazza says some managers forgot to copy the accountants.

Chiazza looked at Siebel’s on-demand offering but opted for Salesforce.com’s eponymous hosted software, citing its open application programming interface, which helped Harris connect its sales operations to its financial and back-office operations, negating the need to copy accounting on sales e-mails.

Since the software is hosted, Harris no longer needed to pay $250,000 just for maintenance costs (he now pays about $300,000, total). Integrating sales and financial systems was another eye-opener: because so many e-mails weren’t copied to the accountants, Chiazza says Harris, which brought in $216 million in revenue for the fiscal year ended June 30, 2006, had shortchanged its pipeline’s potential revenue by up to $40 million per month.

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