That's all the fuss about on-demand CRM solutions? Depending on the needs of your customer organization, the option to "rent" rather than buy the software that powers your advanced relationships could be of momentous importance -- or entirely peripheral to the problem at hand.
On-demand applications are gaining traction because they tend to offer a shallower learning curve and, in many cases, more preprogrammed workflow templates than conventional software. "On-demand applications today are very intuitive," says Rebecca Wettemann, vice president of research at Nucleus Research. The recent wave of success has been driven by such applications as Salesforce.com, NetSuite, and RightNow Technologies, which offer a range of sales, marketing, and service strategy support. These vendors staunchly maintain that companies do not need to make any sacrifices in the depth and breadth of the customer strategies they are hoping to support through CRM technology by choosing an on-demand deployment.
That doesn't mean companies don't still have good reasons to stay away from employing on-demand solutions. It simply means that the reasons may have little to do with capabilities. "The reasons are sociological, rather than technological," says Denis Pombriant, principal analyst at Beagle Research Group. Indeed, recent surveys indicate that companies that stay away from on-demand solutions seem to be just as worried about business matters like the pricing of these services as they are about the inner workings of the application.
"It's not that one solution is good for a certain set of business needs. People are making a mistake of assuming that the deployment option equates to functionality," says Ken Rudin, vice president and general manager of Siebel CRM OnDemand. "If you've got some CRM business processes that you want to put on a CRM solution, you can do that with a hosted product, or on-premise."
Sophistication in a Flash
Yet in studies, analyst firm Nucleus Research has found that the organizations realizing the greatest benefits from on-demand solutions tend to be those that are making a quantum leap in the sophistication of their customer relationship management processes. IMLogic, a developer of instant messaging security systems, is a perfect example. The company adopted Salesforce.com's customer support products over two years ago to quickly expand the sophistication of its customer care organization. "We were on Excel-type applications, and really didn't have a system. We wanted integration between customer support and our sales operation, and Salesforce.com provided that," says Jim Kelliher, IMLogic's CFO.
In addition to the rapid marriage of the company's sales and service data, IMLogic was able to quickly deploy Web-based customer support portals to provide self-service information to clients. This resulted in faster answers to common inquiries. The portal view of the customer also helps IMLogic's agents understand the clients' complete situation and case history when they call in with a complicated problem. Kelliher credits the enhanced customer service with contributing to the company's 90 percent renewal rate on its maintenance contracts.
According to Wettemann, such experiences are common among on-demand adopters. "Are customers getting ROI [from on-demand solutions]?" she asks. "Yes, absolutely, but it's because they are moving from primitive contact management solutions." Siebel's Rudin acknowledges that on-demand applications often attract companies that have a less mature customer strategy. "It's a question of CRM maturity level and evolutionary scale," he says. "For people just getting involved, they see that on-demand is easy and a more cost-effective way to buy [CRM applications]. But in most cases [companies] can meet their needs with either option."
But from a capability standpoint, Wettemann says, on-demand services do not always offer a clear advantage over conventional on-premise software. Because on-demand capabilities have grown from small-business needs, large and more complex customer organizations have historically opted for entrenched on-premise providers, who have had more time to build out their feature sets.
That may be changing, as on-demand providers work to expand the range of different customer information systems they can cleanly and easily interact with. According to Forrester Research analyst Liz Herbert, on-demand vendors are "closing that gap" to where there shouldn't be a reason to have to choose between using on-premise versus on-demand software based on capabilities needed to support more sophisticated customer strategies. On-demand systems can already integrate with many of the call handling and data management applications found in conventional contact centers, and their ability to be adapted to highly customized business processes is growing.
Helping to drive the adoption of on-demand CRM technologies are the myriad new point solutions also available through that model, and their relative ease of integration with each other. Nsite, for example, which provides on-demand services to automate and accelerate deal management processes like approval of exception discounts or contract terms, closely integrates with such on-demand CRM suites as Salesforce.com and Siebel OnDemand. Customers simply pay a one-time charge to link the two. "The value of the integration with on-demand CRM is that users can get up and running right now," says Paul Tabet, Nsite founder and chief product officer.
Clearly, on-demand solutions become more relevant and stay more relevant to companies building advanced customer strategies when they can touch as many components of the customer life cycle as possible, and that is why integration is so important. "We had been using Salesforce.com for a number of years but we were still prone to dropping things through the cracks," says Paul Obsitnik, vice president of marketing for TeleCommunications Systems, a wireless data integrator. The company linked its previously disparate use of Salesforce.com and Nsite, and saw faster and more reliable follow-through on business opportunities. At the same time, customers see their special requests handled more promptly and accurately.
A Single View of the Customer
According to Bonnie Crater, vice president and general manager of Salesforce.com's Supportforce line, the typical user of an on-demand customer service system is a company that has an ad hoc approach to customer support—a disconnected collection of spreadsheets, custom database applications, and manual processes that do not easily add up to a complete customer picture. "Those kinds of folks are looking for a way to implement a single view into the data," she says, "one that's easily managed and presented professionally to a customer service or support agent."
But not all companies are comfortable hosting their valuable customer data off site. "Some customers still have to get comfortable with the fact that if you're going to host your entire environment, the people doing the hosting can maintain the same level of security and privacy for their data," says Roger Sumner, CTO for call center solutions developer Concerto Software.
Computer graphics hardware manufacturer ATI got over its resistance and switched to an on-demand solution from Parature to power its call center operations after an evaluation of its previous CRM system revealed that it had reached an evolutionary wall. "We had customized the [previous] tool quite extensively, so the upgrade path was not very friendly for us," says Ahmad Rahman, Internet development lead at ATI. The company had also converted its support operations to better track user concerns by using a registration system, but registration data was handled in a separate piece of software. Emails were dealt with in yet another way. "CSRs ended up using three or four different tools and were flipping between multiple windows per interaction quite often," Rahman says, making support difficult for both employees and customers than it needed to be.
"There was no marketing life cycle for the customers, no 360-degree view of a customer, so we had to get everything into one system," he says. In moving to the Parature solution, ATI got a fresh start with a fully integrated suite to handle telephone and online support tickets through the same interface, and took a lot of responsibility off of its internal IT organization, which had been challenged to keep up with the changing needs of the contact center. "Whenever we needed customizations, we had to go to the IT department, which would get the vendor to come in, and the turnaround times were quite extensive. Now we don't have to burden the IT department for changes to a system they did not design." More important, the end-to-end solution is helping ATI resolve more entry-level questions through online communication, freeing up phone time for more serious inquiries and ensuring that customers with the biggest issues are dealt with more promptly.
Lowering the Cost to Serve
Some organizations are selecting the on-demand option to keep their costs to serve customers lower. For some firms, large up-front investments are infeasible or unpalatable -- even though the recurring costs for on-demand CRM can, over time, add up to be greater. "We were a startup company, and didn't have and still don't have a big IT organization, so we decided to go hosted to keep the up-front costs and, in the end, the long-term costs low," IMLogic's Kelliher says.
In addition to the ongoing service fees, however, on-demand services can create hidden costs through the need to keep customizations and integrations constantly updated with the pace of the core software, or risk losing functionality and compromising the customer strategy the software supports. In many on-demand environments, upgrades are not merely part of the service but are compulsory. Most of the hosted vendors claim that they do everything possible to ensure that customers experience minimal inconvenience when software versions change.
For example, Siebel announces its intention to upgrade the OnDemand service weeks in advance and provides testing servers for customers, allowing them to replicate their environments and ensure that all of their functionality will still be available in the new version. "They [have] six weeks to ensure nothing is broken," Rudin says.
Supporting Spikes in Sales and Service
Another way companies are hedging their bets is through so-called "hybrid" deployments -- environments where the same customer support strategy and tools can be deployed either on-demand or as packaged software. "The on-premise market is not going to go away. Some companies don't want to have to put Siebel 7 on every desktop and train people how to use it," Wettemann says. And those companies are ideal candidates for hybrid deployments. This approach combines on-premise software for more complex or highly customized functionality to executives or employees who have fixed, predictable roles with on-demand services to support a more flexible workforce that may include temporary or part-time contributors to a component of the customer lifecycle, or external partners who need access and insight to customer activity. High Wire Networks is one such company. High Wire transformed its entire field force into as-needed, part-time call center staffers by deploying on-demand call center technology.
Microsoft's hosting model, which relies entirely on services created by its third-party resellers, is another form of hybrid application. MS CRM adopters can choose to run the Exchange server with CRM capabilities in-house, or turn to a reseller for hosting. But the Outlook-based access to MS CRM remains an installed piece of software on the user desktop. "We think the choices play to the benefit of the customer," says Brad Wilson, general manager of MS CRM.
Another hybrid model comes from SageCRM, which offers a "rent-to-own" pricing model -- refunding a portion of the first year's hosting costs if a company opts to buy the software and deploy it internally.
CRM solutions, regardless of how they are delivered and paid for, will only become more powerful and more indispensable to businesses that see customer strategy as core to their long-term success. That's why, in the end, the focus is not on the delivery method, but is first and foremost on the business problems the solutions can address, regardless of who manages the application server. "Our primary objective wasn't 'hosted versus internal,'" ATI's Rahman says. "Our objective was to get a solution that works, period."