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I am looking for an outsourcing partner. Should I consider an offshore option?
Two companies share their experiences in choosing ASPs.
For the rest of the September 2000 issue of CRM magazine please click here
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In April of this year, Ed Shull was given an ultimatum that could send even the best of managers running scared. As the director of customer service for Achieva College Prep Services--a $10 million firm that specializes in college admissions counseling--he was told to select and implement a CRM solution. In itself, that wasn't a problem, but there was a condition attached: The solution had to be implemented within one week.

Given the tight timeframe, Shull felt sure of two things. First, he'd have to select a vendor with an established reputation. Second, the only way he could adhere to the one-week requirement was to go with a hosted solution.

eConvergent Pulls a One-Week Miracle
As Shull began researching his options, a client suggested that he consider eConvergent. He initially shunned the idea because he knew that the application service provider integrated multiple CRM-related applications. Even in a hosted environment, he reasoned, there wouldn't be a way to implement that many solutions in a week's time. Still, he decided to at least talk to eConvergent since it couldn't hurt to explore as many options as possible.

"I went to an eConvergent demo," recalls Shull, "and I was sold immediately. Bringing all those applications together under one interface was amazing. For someone in my role, it was like the Holy Grail of ASP--to have everything rolled into one." Indeed, eConvergent could give his company access to Kana for e-mail, Octane for a primary client database, Cisco/Webline for Web collaboration, Interactive Intelligence for telephony and E.piphany for marketing analytics, to name a few. For a company of Achieva's size, that was a lot of bang for the buck.

Then came the critical question: How long would it take to implement? Sixty days was the answer. "Could the Kana piece alone be done within a week?" asked Shull. "No," he was told. He thanked eConvergent's salespeople for their honesty and prepared to continue his search. Later that day, however, eConvergent called back to inform him that they could implement Kana within a week.

For Shull, things looked to be falling into place, but then his IT director passed a critical piece of information his way: Achieva had no network. "We had no servers, no firewalls, no routers, no hubs, nothing," he notes. "Turns out we'd been running everything off a Pentium II hooked to an ISDN line! I called eConvergent immediately and informed them of the situation."

Rather than backing off, eConvergent came through with another offer--to host everything, network and all, from its Pleasanton, Calif., office. Shull graciously accepted. "The offer to host our network was a wonderful one," he says. "It convinced me that eConvergent really wanted to work with us, and they've been fantastic ever since."

Within a week, eConvergent had rerouted Achieva's mail to its server and forwarded Achieva's 800 number to the Pleasanton office. Shull agreed to work from eConvergent's office until his company had an IT infrastructure in place, and he gives the ASP accolades for its assistance in doing so.

Flash forward a couple of months: The Kana and Octane pieces are going strong, and Achieva will soon pull Webline into the mix, with plans to add telephony later. Shull is extremely pleased with eConvergent's efforts and is sold on the ASP model for his company.

Enterworks Views ASPs as a
Means of sticking to Core Competencies

Time wasn't such a critical issue for Enterworks, a B2B Internet software vendor that also made the leap to hosted CRM this year. According to Carolyn Parent, vice president of commercial sales, her company went the hosted route to avoid being distracted from its core competencies. From her perspective, managing a huge CRM initiative meant diverting a lot of IT resources or having to hire more staff--neither of which she considered a viable option.

"Our philosophy is that you should take your money, your resources, your time, your developers and your energy and do what you do best," declares Parent. "For each new application you bring in, you've got to get another server, hook up to the network, support various updates and so on. Not only does that take time away from your IT staff, but it adds a lot of costs, as well."

For Enterworks, the ASP outsourcing model represented a better route from both a financial and a support perspective. According to Parent, it also helped ensure that her company didn't send out mixed messages. If small to midsize Internet companies don't follow the ASP model, she explains, they're flying in the face of the very thing they represent. "Fast-growth Internet-based companies should be eating their own dog food. After all, if they don't have faith in the virtual company, why should their own clients have faith in them?"

Earlier this year, Enterworks evaluated seven CRM vendors, only two of which offered hosted versions of their solutions. The other five had hosting initiatives underway, but they were quickly ruled out since they couldn't deliver immediately. In June, Enterworks selected Firstwave as its CRM vendor and opted to have the solution hosted by an ASP that already hosted many of Enterworks' other critical applications. "We're very excited about our decision," asserts Parent. "It's giving us a lot of capabilities that we previously lacked."

"Like Being Held By the Throat"
Though Enterworks and Achieva are both pleased with their move to hosted CRM, the decision didn't come lightly for either company. Ed Shull points out, quite accurately, that putting your critical applications in the hands of an ASP is akin to letting a company hold you by the throat. "You've got to be really careful in terms of who has the hold on you and where their hands are," he notes.

To that end, both companies did their due diligence. For Shull with his limited timeframe, that was a matter of going with a reputable ASP and also talking to the right people. Although his decision was a quick one, he spoke with one company that had spent months considering eConvergent. The company had researched the ASP's solution partners as well as its ability to integrate multiple products, and, armed with that information, Shull felt far more confident about his decision.

Parent says that her company's CIO ranked and selected their ASP based on numerous criteria. She warns that just because an ASP may have an established market presence, that's not sufficient to assume it will be a good match. One ASP they evaluated had grown so quickly that it couldn't keep up with its customers from a service perspective--a definite red flag.

The Hurdles of Going Hosted
What about the downside of hosted CRM? Though the model worked well for Achieva and Enterworks, analysts are quick to point out pitfalls that will hinder, if not prevent, many companies from adopting it. Among these are the following:

Inability to customize the application. CRM applications are some of the most customized that a company has in its technology portfolio, but most hosted CRM solutions allow for little to no customization. Was this a problem for Enterworks or Achieva?

"Not for us," asserts Parent. "Our motto going into this was "No customization!" Every nightmare story we'd run into regarding hosted apps involved users asking for customization, so we looked at everything plain vanilla." Parent felt that, as is, Firstwave was the best fit for her company's corporate culture and could best support her disconnected users.

Shull paints a different picture. He notes that eConvergent has done a substantial amount of customization for his company and that all has gone well to date. "eConvergent told us, ‘Explain what you want and we'll do it,'" he notes. "So far, they have done what we asked, with much of the customization revolving around Octane."

Likelihood that the ASP won't survive. GartnerGroup estimates that by year-end 2001, 60 percent of today's ASPs will no longer exist--certainly a very sobering statistic. For Shull, the possibility of his ASP not surviving was one of his biggest concerns, and with good reason. In the months since he first began looking at eConvergent, he has seen the ASP's partners essentially eat each other. "Epiphany and Octane merged. Cisco bought Webline, and then Kana bought Silknet," he says. "I couldn't help but wonder how long it would be before Kana and eConvergent became one and the same."

In such a turbulent environment, Shull worried not only that eConvergent might not keep its partners, but also that it might add partners he wasn't interested in. "I still worry that so much of our business is wrapped into an ASP," he admits. "But for a small company to have affordable access to such a broad range of technology, the risk is worth it." eConvergent assured him that they'd never tie in a product to the point that nothing else would work without it. Additionally, eConvergent's strategy of integrating a host of products and then providing value-added service sits well with the analysts, who point to this model as the one most likely to ensure long-term survival.

Since Enterworks markets and sells to many ASPs, the company was largely familiar with its options and felt confident that its chosen ASP was a safe bet. "We have faith in our ASP's long-term stability," says Parent. "Because we sell to many ASPs, we've already seen under the covers and know what to watch for. As far as we're concerned, the ASP we selected was a very safe choice."

Fears about storing critical information outside the company. Another GartnerGroup statistic: Through 2003, 30 percent of ASP customers will experience a security incident that results in the compromise of sensitive data.

While certainly food for thought, security issues didn't scare Shull away. He believes today's encryption technology is more than adequate and adds that eConvergent surpasses his own company in terms of security.

Likewise, Parent has no qualms about having her company's information hosted. "If we had any qualms regarding security," she asserts, "we wouldn't have gone this route because it's such a core component of our support infrastructure. We work intimately with a number of ASPs and are convinced that they are stable and secure."

The threat of downtime. As managers at most companies are aware, downtime can be enormously expensive and can be especially exasperating when it's out of their control to fix. "Not a problem here," says Shull. In fact, the only problem he has had so far is that there was once an e-mail delay of five minutes. eConvergent proactively called to inform him of the delay. It didn't create problems, and eConvergent fixed the problem quickly.

Advice from the Trenches
Based on their experiences so far, do Shull and Parent have any suggestions for those contemplating hosted CRM? Absolutely! Fresh from the school of hard knocks, they offer the following recommendations:

1. Involve IT early in the decision process. Both Shull and Parent note that they didn't bring their IT people into the loop early enough. For Parent, failure to do so may have added as much as three or four weeks to the process. Why? Because the issue of going with an outside ASP wasn't brought up until almost the end of the evaluation. While Firstwave was open to working with the ASP, the paperwork and other necessities involved in establishing a formal relationship took time. Parent feels that involving her CIO or IT personnel at the beginning would have expedited the entire situation.

Shull adds a different slant. "In selecting an ASP, I overstepped my bounds from customer service into IT," he explains. "We have a wonderful IT consultant, and there were some areas where he had issues with my decision. It's hard to push your IT views on someone who does this for a living. While it all worked out, I would have done better to involve him from the outset."

2. Approach ASPs with a diagram of your technology infrastructure in hand. Shull suggests doing this because it helps potential ASPs quickly assess their ability to work with you. Not only will they be able to determine if their partners can support what you have, but, for Shull, he'd have been crystal clear from the get-go that his company lacked a network.

3. Contractually, be sure you can retrieve your data from the ASP. Achieva was working with one ASP and reached a point when it needed direct access to its data. The ASP offered to provide reports--in lieu of the actual data--which was unacceptable from Achieva's standpoint. Shull says that his company eventually retrieved the data, but doing so wasn't easy.

4. Build a relationship with your ASP. "It was important that we build a strong relationship not only with the CRM vendor, but also with the ASP," says Parent. "That way, if complications arose, we could go directly to our ASP and not rely solely on the CRM vendor." Parent also suggests going onsite to view the ASP's facility. "It's a buyer-beware situation," she asserts, "so I strongly recommend having your IT people evaluate the facility where your application will be hosted."

5. Know your long-term needs. Shull and Parent both underscore the importance of thinking several years out. Will you eventually want to buy the application outright? If so, negotiate this option into your contract. Can the ASP scale its offerings to meet your long-term needs? Questions such as these will help determine the ASP's ability to grow with you.

"A Great Deal!"
It's up to individual companies to determine if hosted CRM will work for them, but Shull and Parent are both enthusiastic regarding their decisions. "For what these applications would have cost on their own," says Shull, "we're getting a tremendous value. For small upstarts, having access to such a range of best-of-breed technologies is really astounding."

Parent estimates that for Enterworks, opting for hosted CRM will be 30 to 50 percent cheaper over the next three to five years than would going with a purchased CRM solution. Her company based this estimate on a cost comparison that factored in variables such as the cost of hiring and employing additional IT personnel and the cost of deployment.

Recently promoted to director of operations at Achieva, Shull believes that hosted CRM will play an increasingly important role for his company, and for many others, as well. "The whole ASP model is coming fast," he concludes, "and I think it will have a huge impact on the future of the business world."

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