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Hosted customer relationship management (CRM) software has now come of age and there can be no escaping that fact. Five years on from the failure of the application service provider (ASP) boom, on-demand, web based CRM software has continued to win customers. However, in-house packaged CRM software still has substantial support right across all company sizes.
The lower total cost of ownership (TCO) has been one of the key drivers for the growth of hosted solutions. Analyst Forrester says many medium-sized businesses continue to seek an on-premise deployment rather than on-demand applications because many organisations of this size will only have one major office and will also have some IT administration capability. In its assessment of the available software options, Forrester identified only a handful of the mid-market CRM products as being a reasonable fit for in-house deployments.
But not even the most dyed in the wool traditionalist can deny that hosted CRM software is catching up rapidly. A study from AMR Research in late 2005 found that sales of hosted CRM software grew 105 % in 2004 and that the hosted model has now become the prime delivery model for CRM applications.
The lower total cost of ownership (TCO) has been one of the key drivers for the growth of hosted solutions. Its subscription-based model virtually eliminates the capital expenditure barrier for medium-sized companies. Research has shown that packaged CRM software will only start to pay for itself after three years, so companies choosing that route need to be prepared to make their investment up front. There is also greater acceptance of applications hosting as companies warm to outsourcing and many of the barriers to hosted software have come down. For example, in the past companies were not always able to integrate hosted CRM applications with the rest of their infrastructure but the wider use of web standards such as XML makes it much easier.
Cheap broadband connections for business also overcomes many of the service quality issues that affected the early ASPs. In addition, in-house applications often require the involvement of a systems integrator and rolling out a product can take anything between two and four months. This is in contrast to hosted CRM solutions where companies can be up and running immediately.
Until recently, software designed for in-house deployment could be customised more than hosted services and offered wider functionality, but with the advent of products such as iportinstant where you can totally customise the environment to suit that difference is rapidly eroding. Furthermore, smaller companies often find the functionality of fully featured in-house solutions to be much more than they need. Companies also need to have internal IT resources to be able to support the products on their existing infrastructure.
Like outsourcing, there will always be a core group of companies who will continue to deploy in-house solutions. They like to maintain complete control over all their applications and have substantial internal IT functions and assets. But for the remainder of medium-sized organisations, a hosted offering will fulfil the majority of their CRM requirements.
Chic McSherry
CEO
iport4business
sources: Forrester, Silicon.com
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