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Making the Case for On-Demand CRM Software
How midsize businesses can avoid the pitfalls of enterprise systems.
Posted Mar 1, 2006
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Imagine trying to return a shirt, only to be told by the clerk that not only does the store not accept returns, but that he's going to force you to buy all your clothes from him for the next five years even if they go out of style or fall apart after one trip through the dryer. It sounds ridiculous, but unfortunately it's the standard way of doing business in the CRM software world. The good news is that there is an alternative to being stuck with outmoded solutions that no longer meet your needs or simply don't work: on-demand software.

Enterprise software systems have long been the dominant paradigm in the CRM industry. Companies pay millions of dollars for a software package and then spend even more money buying the hardware to support it and paying high-priced consultants to come in and make it integrate with their existing systems. That's a lot of money to plunk down even before employees can use the tool, and it creates an in for a penny, in for a pound mindset in which companies are compelled to use software that they don't even like. After all, who wants to pull the plug on a multimillion-dollar investment and admit that the entire project was an expensive flop?

The high cost of installing an enterprise-level CRM package is probably not a problem for a Fortune 500 corporation, but for small and midsize businesses (commonly lumped together under the SMB banner) it's simply out of the question. It's one thing for a $3 billion firm to spend two or three million on a new CRM package, but it's quite another for a company with revenues of $50 million to take the same approach.

Because enterprise software has long been the only game in town, companies often find themselves trapped between two unpleasant options, one, to shell out more money for a good CRM application, or the other, to use an inadequate system, which usually means an Excel spreadsheet. That's where on-demand software provides a far better option.

Simply put, on-demand CRM solutions allow your software and data to be hosted offsite and accessed by company employees through the Internet. That's it. There's no need to buy three or four hundred thousand dollars' worth of new servers (or pay an equal amount in annual maintenance fees) to support the application because that's all taken care of off site. As an added bonus, new features, updates, and even new versions can be rolled out without the added expense of having to buy and install a new software package. Everyone has a war story about installing a new CRM package, only to be forced to replace it after a few months when the newest iteration hits the market. On-demand software makes these tales of woe about as quaintly obsolete as an improperly punched FORTRAN card.

As impressive as these savings are, the biggest advantage of on-demand software might not be measured in terms of cost, but in terms of productivity. Enterprise systems are not only expensive, but they can take months--or even years--to install. That's simply not acceptable to dynamic businesses that want immediate results when they buy new CRM software. In contrast, on-demand CRM packages can usually be installed in a matter of days. That translates into less wasted time and energy -- and the ability to focus on what really matters: customer satisfaction.

So if on-demand software is so great, why isn't it vanquishing enterprise CRM packages to the world of the Betamax and the Delorean? For starters, the enterprise paradigm goes all the way back to the earliest days of computing, whereas ubiquitous high-speed Internet access is less than a decade old. That's not a lot of time to change the ownership mindset, which dictates that corporations need to install and host their own applications, but in the last five years the idea of using Web-based tools has become far more accepted, especially in small and midsize companies.

Part of this acceptance is the advent of security standards that make externally hosted data as secure, or even more secure, than information stored in the company's own data center. Whereas the fear of hackers may have been a barrier to acceptance of on-demand CRM, Type II hosting facilities and SAS 70 certifications have made it safe to use Web-based software without worrying about some 15-year-old hacker playing WarGames with companies' private data.

There will always be a place for enterprise CRM software, but its primary customers will be large corporations that can afford to invest millions of dollars to deploy their systems. For smaller companies that want the advantages of a CRM system without needlessly sacrificing cash or productivity, the future is only a mouse click away.


About the Author
Christopher Cabrera is the founder, president, and CEO of Xactly, a leading on-demand sales compensation provider. He is a noted industry expert in issues relating to sales compensation and is the co-author of the upcoming Sales Compensation for Dummies. He can be reached at 1-866-469-2285. Please visit www.xactlycorp.com.


Please note that the Viewpoints listed in CRM magazine and appearing on destinationCRM.com represent the perspective of the authors, and not necessarily those of the magazine or its editors. If you would like to submit a Viewpoint for consideration, please email viewpoints@destinationCRM.com.  

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