Hosted and on-demand marketing tools will be found in two-thirds of companies by 2008, with smaller businesses seeing the fastest uptake.
Posted Oct 25, 2005
More than 65 percent of companies will host at least one component of their marketing resource management (MRM) solution through 2008, due to benefits the on-demand delivery model holds for marketing beyond its general CRM utility, according to research firm Gartner. Highlighting this, "Eight Reasons to Consider Hosted or On-Demand MRM Applications," a study released Monday by Gartner, points the way from advice to action, and also points out situations for which hosted MRM is not the best idea.
The report, authored by Kimberly Collins, research vice president and agenda manager for marketing strategies and technologies in Gartner's CRM practice, indicates that hosted MRM provides low cost of entry, which is a key factor in getting executive buy-in for any MRM project. "MRM is still relatively immature. Although validation is growing for MRM through successful implementations, many organizations remain skeptical about its value," Collins says. Applications aren't cheap, and their relative youth means that key metrics aren't easily available. Those factors, Collins says, push any implementation farther down on the priority list of executives and CMOs, but hosting takes much of the sting out of any initiative. "By hosting or placing an MRM application on demand, companies receive a lower cost of entry (and no need to tap capital expenditure budgets) to gather the necessary data and insight to build a business case and gain needed executive buy-in before investing lots of money in an on-premise solution."
Another area in which on-demand MRM shows its value is the ramp-up to competency. Going the hosted or on-demand route allows a customer to build marketing skills around new MRM capabilities. "MRM can be process-intensive," Collins says. "Although companies should work to define their marketing processes prior to implementation, some companies may be unable to fully complete their process definitions and likely will need to make many refinements postimplementation." At the same time, it also allows testing of the vendor's applications in a pilot program, in order to ascertain if customer needs will be met. "Sometimes, it is difficult to tell from a vendor's demonstration exactly how its application will fit into your marketing environment," Collins says. "Therefore, testing it for a proof-of-concept or an initial pilot for three to six months via a hosted or on-demand model can have huge benefits for ensuring that you are selecting the best solution for your environment."
The low cost of entry and rapid time to deployment, in addition to the other benefits found in hosted models, make off-premise implementations of MRM more accessible to small and medium businesses, Collins says. "SMBs may not have IT, marketing, or budgetary resources to implement and manage an on-premise application. On-demand applications enable SMBs to also benefit from MRM capabilities, but at lower, subscription-based, per-user pricing." Hosting and on-demand also let customers achieve economies of scale and share costs with partners through the use of portals and on-demand marketing fulfillment, according to Collins. This lowers the costs associated with wide distribution networks and multiple business partners with unique needs.
Collins' report describes situations where the need for IT involvement, data support, or deep functionality makes hosting less advantageous. "SMBs may consider on-demand MRM applications as their only long-term option due to IT resource (budget and people) constraints. However, companies should not consider hosted or on-demand applications for several other reasons." These include cases where integration to other CRM applications is not being hosted, or where other business applications make the integration excessively complex; when the system relies on sensitive data that cannot be shared with third parties; when large-scale data storage is required, beyond what the vendor can supply; and where depth of functionality, flexibility, and configurability are important to the customer. Further, she adds, "Not all on-demand applications offer great flexibility and configurability....those that do tend to cost more."
Whether on-demand marketing tools are a long-term solution or an introductory step remains to be seen, and will depend on the quality of applications delivered, not the means. As to pricing, and the point where TCO of on demand meets that of on premise, there is considerable variation. "This is an interesting question. For complex MRM solutions with lots of functionality," Collins says, "there may not be much difference in year one between it and an on-premise solution except in implementation services costs."
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