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You Demand On Demand...Now What?
Choosing an on-demand CRM solution just got more complicated.
Posted Nov 1, 2005
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Congratulations on your decision to choose an on-demand CRM solution. Now comes the hard part. Choosing the best on-demand solution is more complicated than you would expect. As on-demand CRM solutions continue to grow in popularity, so do your options. Before making a decision, you must research the numerous money-saving options now available, but also be aware of some common ticking time bombs. Money-saving options Most companies are well aware of the cost savings of on-demand CRM solutions--lower initial start-up costs and fewer internal IT resources. But another lesser-known benefit is available to on-demand CRM users that can save most companies up to 40 percent or more. Floating licenses are a well-known option in the on-premise CRM world, but recently they are beginning to be offered as part of an on-demand solution. Most vendors will offer dedicated user licenses, which require each user of the system to have a separate license. The increased cost of dedicated licenses makes sense if each user will need constant access to the application. But if every user in your company will not be using the application every day, or if you run a call center in different time zones, floating licenses are a more economical option. Floating licenses allow you to purchase a certain number of licenses that can be used by different employees at different times, without additional cost. Many people think that sharing dedicated licenses will give you the same benefits as floating licenses. This is not the case. Although sharing dedicated licenses will save you money, it will not allow you to track, monitor, and schedule individual activities for each employee, thus hindering many productivity benefits of the software. Because floating licenses allow you to assign numerous users to each license, you can still receive these tracking benefits for each user. Another money-saving option that is beginning to be seen in the on-demand world of CRM is host-to-buy CRM service. This option obscures the line between on-premise and on-demand by giving you a third, more flexible option.
Deciding between the two options of on-demand and on-premise can be difficult. Most small to mid-sized companies find on-demand extremely appealing, but would love the option of buying the software and converting it to on-premise if all goes well. And wouldn't it be nice if all the money you paid to rent the software during the first year were applied to the purchase price? Now creative vendors are offering this very option. Host-to-buy allows the customer to start its CRM solution as a hosted system, and then convert it to an on-premise system at any point in the relationship. All the money spent on the hosting solution thus far is automatically applied towards the purchase price. With host-to-buy, costs and risks are minimized in the short run, because there is no enormous investment up front. In the long-term, operating costs are minimized. For example, a 25-user host-to-buy system saves 14.9 percent over an on-demand and 18.1 percent over on-premise at the end of the fourth year assuming a $60.00 per-user hosting fee per month. From the fifth year onwards, the savings is a staggering 157.6 percent over a hosted solution! Ticking time bombs No matter which solution you choose, on-demand or on-premise, there is some amount of risk involved. But on-demand CRM presents some ticking time bombs that everyone needs to consider. Most on-demand vendors require a one-year contractual commitment. Things can change dramatically in a year--making changes mandatory. If you break the contract, will you still pay for the full year or can you negotiate for less? Are host-to-buy options offered if you decide to purchase the software and will any of the on-demand money be applied to the purchase? If you do decide to change vendors before or after the first year, what happens to your data? What contractual arrangements are in place for the transition of data from the hosting vendor's equipment to yours or to one of its competitors? Will they meet your expectations for a seamless transition? Another potential problem involves the customization of a hosted solution. Most on-demand CRM solutions have limited capability to be customized; therefore, you may not be able to effectively interface or adapt the product to your critical sales and customer support processes. Check to see how many administration and configuration capabilities are available and what changes will cost you. If you have employees who can perform some level of customization, investigate if the vendor offers customization tools and if there will be any cost associated with it. When deciding which on-demand solution best meets your needs, dig a little deeper. Find out what cost-saving options are available, such as floating licenses and host-to-buy options. To avoid ticking time bombs, ask questions about contractual obligations, efficient transition of data, and customization capabilities and cost. About the Author Manu Das is founder and president of Soffront Software, a pioneer of CRM since 1992. Mr. Das founded Soffront to create easy-to-use, truly customizable and adaptable customer and quality management software for the SMB. With more than 500 CRM customers worldwide, Soffront's customers include Fortune 500 companies, midsize businesses, and federal, state, and local governments. Mr. Das can be reached at manu@soffront.com or 510-413-9000 x 200.
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