An analyst recommends taking a close look at IT's needs and capabilities, the contract, overall usefulness to the business, and other factors in making the decision.
Posted Sep 12, 2006
Prospective buyers of on-demand CRM services need to carefully weigh their needs and options before deciding on a vendor or between on-demand and on-premise CRM services, according to Robert Desisto, Gartner research vice president, who today discussed on-demand applications at the Gartner Customer Relationship Management Summit 2006 in Chicago.
"On demand is neither a fad nor a panacea for CRM--beware of ruling it out before assessing it," Desisto says. "But know you still need to focus on business processes and people to succeed. Through 2010, 75 percent of on-demand deployments will fail to meet expectations." The main reason for this failure, Desisto says, is that expectations of on-demand buyers are too high. So, sometimes, is the perception of the demand for on-demand CRM.
Despite the reports of robust growth from on-demand providers, this growth is built on a very small base according to Desisto, who predicts that through 2009, less than 10 percent of CRM users will be using on-demand services. One of the major reasons the percentage will stay small is that there's a relatively large install base of on-premise applications compared to new CRM users, who may opt for the on-demand model because it offers easier implementation and quicker availability, and is less expensive for companies with simpler needs, according to Desisto.
On demand provides a better total cost of operations for moderately complex applications, according to Desisto. But those advantages fade over time and with the increasing complexity of the buyer's CRM needs. Through 2010, CRM on demand will provide as much as a 10 percent to 13 percent savings over on-premise installations through the first three years of use, and 4 percent to 6 percent savings for the first five years.
Despite those figures, which the business side of a company tends to consider first, IT departments often see on-demand systems as a threat because they have less control over these systems than on-demand applications. Yet the business side needs IT in order to make the proper evaluation, Desisto says. "IT can help select the right on-demand solutions and the right providers."
Additionally, IT can be helpful with issues such as integration with other technologies and security, Desisto says. "You have to worry about the people and the technology if you're putting the data in their hands. Are [the people] certified?"
Through 2007 sales organizations will need to use at least five on-demand providers in order to have a complete sales information framework. "Plan to use multiple CRM on-demand service providers to support moderate to complex deployments through 2010," Desisto says. "Know that integration costs will be as expensive as on premise."
Desisto recommends that potential on-demand customers evaluate the vendors' operational practices, security, and system architecture. "Not all are equally adept at protecting your interests."
Desisto also cautions on-demand prospects to read contracts carefully for "free pilot" language, conversion to on-premise costs and other unexpected fees. While some vendors offer free pilots, these programs might automatically convert to paid subscriptions after a specified period unless the customer explicitly cancels the agreement.
Despite these caveats, Desisto predicts on-demand systems will prove valuable for many companies. "Feel confident using CRM on demand for sales force automation and some marketing processes, but beware of using it for many areas of customer service and support before 2010."
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