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SaaSy CRM

The sales guys certainly can make it appealing, but how do you know if renting a CRM package rather than buying it makes sense for you? Software as a Service (Saas) is gaining momentum within CRM and more and more companies I visit are asking if it makes sense for them. It might have been easier to answer this question in the past – smaller companies who did not want to make the investment in a sophisticated package could ease into CRM with a hosted solution without a lot of fuss. But the separation of whether or not it makes sense is getting narrower.

There are some factors to consider if you are looking into this form of CRM for your business:

I believe one of the strongest arguments for going hosted is if you plain and simply don’t have the bandwidth to manage the complexity of a CRM platform internally. Here it is obvious that smaller organizations are likely going to fit here. You may not want to invest in the CRM competency because you want to keep your investments more focused on the core of your business. That is logical.

However, small divisions and functions within large organizations can fit this mold as well. This is most true with those groups who have a different business model and customers than the rest of the enterprise. These folks have been dragged along by corporate IT to conform to the chosen standards, but CRM for everybody else does not fit for them. This is the perfect situation for a hosted solution, which the industry has now labeled hybrid CRM – some folks get on premise and some get a hosted package. This leads to a lot of happy customers for big IT functions.

Another fairly obvious consideration is the length of time a company expects to utilize a hosted CRM system. There has been some conventional wisdom accepted in the past that SaaS is particularly useful for an organization that wants to have a CRM system for the short term, prior to moving to a different system in the long term. There can be many reasons for this need, such as an impending business change or a preference for minimal expenditure. Under these circumstances, a large outlay of investment for a CRM system that will be changed does not make sense. The thinking has been that if you plan to keep the system for less than three years, hosted is the way to go. On the other hand, the cost of renting the software starts to add up after a while and it eventually will make sense to own rather than lease if you want a lower cost of usership. Again, this seems to be around the 3 year mark.

I find this 3-year price break perfectly logical. However, I have seen too many companies that first try out CRM and then change it radically, that they would have been better off renting for a while prior to jumping in the CRM deep end. If you really are uncertain what you want, but you know you want to have CRM quickly, I believe it is much more affordable to rent for a bit and then buy when you really know what you want.

A third factor that is gaining some ground is the notion of integration. Are you attempting to plug your CRM system into many data sources to have the best picture of your customer? If so, you may want to invest the needed integration effort in an on premise solution as the limitations of what you can do with a hosted package may impede your integration requirements. The vendor sales folks will surely argue the point, but we wary on this factor.

There is a fourth factor that seems to have resurfaced as a critical consideration and that is the notion of data security. I have had many clients who plain and simply were unwilling to store there confidential client data in a data condo complex side by side with others. This factor has some interesting dynamics going on in the market place at the moment. On the one hand the one leading vendor maintains their multi-tenant approach is completely secure. On the other hand, the other leading vendor has offered a single-tenant service to quell the concerns and now offer a more secure solution. Is this service being offered just to satisfy the perception of a potential security breach or is there a potential for a security breach? It is not entirely clear to me, but I raise it for your consideration.

The final factor that I raise for consideration is whether you are looking for a full suite of features to satisfy a broad range of requirements across the enterprise or whether you need a simple solution for a few set of common requirements. Certainly the hosted solutions started out simple, but they have evolved and are becoming quite sophisticated. The differences are narrowing in this case and you might not want to rule out SaaS just because you feel that you have a sophisticated set of demands. However, the one area that remains unsatisfied is a broad set of industry tailored solutions across the different vendors. Many of my clients have ultimately ruled out hosted CRM because they would spend more money than they preferred customizing packages to fit the look and feel of their business processes. The on premise options do hold an edge in this regard.

So, do your homework and don’t get overly influenced by a flashy demo touting the bells and whistles that you may or may not require. Determine the criteria that you need to satisfy and carefully compare the options before you buy (or rent).

Eye of Goat

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