Logo
BodyBGTop
The Hosts With the Most
Once thought of as a tool for small companies needing sales force automation, hosted CRM solutions have developed into a formidable competitor to packaged CRM applications for mid-market, and even large enterprises.
For the rest of the February 2003 issue of CRM magazine please click here
Page 1



Over the past year a new crop of application service providers (ASPs) has been steadily breathing life back into the once-beleaguered ASP market. These efforts are lead largely by Net-native application service providers solely focusing on CRM. Ironically, they are not only bucking the downward economic trend, some are crediting it for their success. Companies like Salesforce.com Inc., Salesnet Inc., UpShot Corp., and recently NetLedger Inc., argue that the difficult economic climate has forced many organizations to look for cheaper, easier-to-use alternatives to traditional licensed CRM software that shows a quick return on investment, which of course is what these ASPs maintain they offer. "The economic downturn has been a huge boon for hosters," says Erin Kinikin, vice president and research leader for enterprise applications at Giga Information Group. "I talk to companies that say, 'I want to do CRM, but my project was cut and all I'm doing this year is sales force automation.' So these companies that cut their projects look at hosting providers and say, 'I can do this piece and come in under budget.'" One such realization occurred at Sovereign Bancorp Inc., in Philadelphia. When Sovereign won the bid for BancBoston Capital Inc., a former subsidiary of FleetBoston Financial Corp., Bill Patten, director of planning and administration at Sovereign, needed to ensure a smooth transition of assets and data. He began to look for ways to meld the new entity's sales culture and processes. "Licensed applications were not the direction to go. We needed something fairly quickly," Patten says. "We had a lot of experience with Siebel-like products, but as good as they are they take a tremendous amount of time and resources, and the result may not be what you originally wanted." Patten spoke with some consultants and examined a few hosted CRM solutions, then opted to pilot Salesnet's sales force automation solution with 60 employees. After a successful three-month trial, in February 2002 Patten rolled out the Salesnet solution to 325 relationship managers and global cash-management and sales officers. His reason for selecting Salesnet, he says, is simplicity. "It allows us to download prospect information in an automated way. I don't have to go out and look for prospects; [their information] will just be downloaded into our employees' portfolios. Employees can access customized reports, and we can tie information to incentive plans," Patten says. He adds that Salesnet's flexibility and responsiveness were considerations, as was Sovereign's ability to quickly train employees on Salesnet.
Sovereign bank is one of many organizations warming up to the hosted model. At a time when implementing a CRM project under budget seems like a novel idea, ASPs are proving to droves of companies that they can. As a result, more organizations are signing on with hosting providers--so much so that Kinikin says it is "one of the bright spots in a CRM market that is down fifteen to twenty percent from 2001." In fact, she says, interest in sales force automation, email marketing, and a growing interest in Web visitor analytics has bolstered the ASP market to as much as $500 million globally in 2002. The CRM hosting providers will attest to the acceptance levels of their solutions. According to Keith Raffel, chairman and founder of UpShot, the company has grown its revenue threefold every year since its inception, in August 1999. Marc Benioff, chairman and CEO of Salesforce.com, says that in only two years his company has grown from $7 million in revenue in 2000, to $60 million in 2002 and expects to hit $100 million in 2003. Taking the Plunge While implementation time was Sovereign's main impetus for selecting a hosted CRM solution, that is not the only benefit fueling the growth of CRM hosting vendors. Lower up-front cost is also a major consideration. Additionally, that the expenses are based on a predictable monthly subscription model is appealing to CFOs who are looking to get a more accurate read on technology spending throughout the year. Also, IT departments are not overtaxed with building and maintaining the system. Implementation times, hosting providers say, range from a few days to 90 days, depending on the size and scope of the project. Benioff cites a recent deployment for Eagle Global Logistics, a provider of international airfreight forwarding and related transport and logistics services. The company was able to implement Salesforce.com within 90 days for 800 users in 63 countries, running in several languages. Furthermore, most of the CRM ASP leaders either have wireless capabilities or are adding them, which enables anytime, anywhere access to the application and customer data. These benefits are not enjoyed without trade-offs: Industry pundits argue that some concerns remain about security and privacy; integration with other systems; data ownership and access; connectivity and performance; offline synchronization; and customization. Giga's Kinikin points out that certain features may be lacking in hosted solutions, such as support for marketing and partner relationship management, advanced knowledge bases, sales compensation, and territory management, as well as vertical-specific functionality. CRM hosters are steadily providing advancements in all of these areas, though, making the reasons for a hosted CRM solution strong, especially considering the minimal risk. "The logic [for hosted CRM solutions] is almost irrefutable in terms of customer benefits," says Laurie McCabe, an ASP analyst at Summit Strategies Inc., a research and consulting firm based in Boston. The risk is worth the reward, she maintains. If a company tries Salesforce.com or NetLedger for three months and is not happy, it would only be out the cost of a three-month subscription, she says. With a licensed model it would have to buy the systems and the software, and hire a database administrator and an IT staff to run the system. "After that you're not going to turn back even if it's failing, because you're sunk," McCabe says. Does Size Matter? For some the jury is still out on what markets CRM ASPs should target: small, mid-market, or large enterprises. Traditionally big enterprises like customization and flexibility. "It's really not clear to me that that's what ASPs are for," Kinikin says. "The whole value proposition of an ASP is that I can get CRM faster and cheaper than if I did it myself. ASPs are going to stay at what they're good at and keep getting smaller companies or training-wheels implementations to try it out and see how it goes. " But hosters say that like a bicycle, training wheels can come off. "There's no reason you can't take the training wheels off and have a bicycle," says Zach Nelson, president and COO of NetLedger, a newcomer to the industry, with its NetCRM product released last fall. Greg Gianforte, CEO and founder of RightNow Technologies Inc., which has more than 1,000 clients in the mid-market and in departments of Fortune 500 companies, concurs: "There had been a perception that hosting is for small companies. That's a myth. There's no correlation between company size and hosting," Gianforte says. According to Gianforte, currently 80 percent of his customers use RightNow as a hosted solution; he expects that to trend upward to 90 percent within a year. "We don't define ourselves as playing in the large, mid-size, or [SMB] market space. We define it as companies that have field sales forces that are process oriented and that are really interested in increasing sales effectiveness," says Mike Doyle, chairman and CEO of Salesnet, which already has several clients with more than 1,000 seats. There's no question in Doyle's mind that ASPs can effectively compete in the large corporate enterprise market. In fact, he predicts that in 2003 that the market will see 5,000 to 10,000 hosted seats installed at a single company. Yet, Kinikin says most of growth will remain in the mid-market. "There's a lot of upside in the mid-market. The enterprise CRM market is going to be flat or down for the next two to three years, and the mid-market is going to grow at fifteen to thirty percent annually. Mid-market companies care about simplicity and ease-of-use and low cost, and that's one of the advantages of ASPs." Contact Senior Editor David Myron at dmyron@destinationCRM.com
Page 1
To contact the editors, please email editor@destinationCRM.com
Every month, CRM magazine covers the customer relationship management industry and beyond. To subscribe, please visit http://www.destinationCRM.com/subscribe/.
Learn more about the companies mentioned in this article in the destinationCRM Buyer's Guide:
{0}
{0}
Search
Popular Articles
 

BodyBGRight
Home | Get CRM Magazine | CRM eWeekly | CRM Topic Centers | CRM Industry Solutions | CRM News | Viewpoints | Web Events | Events Calendar
DestinationCRM.com RSS Feeds RSS Feeds | About destinationCRM | Advertise | Getting Covered | Report Problems | Contact Us