ASPs Continue to Gain a Foothold

Although companies like Salesforce.com, Salesnet, NetLedger, and Upshot have already heralded the dawn of the new age of hosted CRM, a new report by Aberdeen Group says that more and more companies are taking a serious look at the hosted model. According to the report, "Hosted CRM Popularity Continues to Grow," 35 percent of survey respondents said they already use hosted CRM products, and 85 percent of respondents said they would evaluate hosting as they enter the market for CRM solutions. "Application hosting in the CRM market is clearly showing signs of robust growth," says Denis Pombriant, vice president and research director in Aberdeen's CRM practice, and author of the report. "Our data also suggests that companies are looking beyond the current slowdown to a period of more vigorous growth, and that application hosting is an important component to such growth strategies." The study surveyed companies "across the spectrum," Pombriant says, giving Aberdeen a wide insight into how companies with both small and large CRM budgets are viewing the ASP model. The report notes, however, that the CRM industry faces challenges in the years ahead. The sluggish economy and the changing complexion of the CRM marketplace will force vendors to find better, less expensive, and faster ways to provide the benefits of CRM to budget-constrained buyers who may be skeptical of the technology's ability to deliver value. "Hosting is a major challenge to an industry accustomed to selling software licenses at high margins, as well as a sibling services industry that frequently charges two or three times the license fee for implementation services," Pombriant writes in the report. "But for hosting to become a credible alternative to licensing, customers must be able to find long-term value in the solutions." Pombriant says that companies like Salesforce.com and NetLedger, by providing customers with more robust CRM suites, can provide that key long-term value. "One way to continue delivering value is to provide more functionality than a customer may want today, but can easily meet a customer's needs as the company grows," he says. "That growth path is so important to mid-market companies." Hosted CRM solutions are also gaining a foothold because companies are looking for CRM solutions that are fast to implement and easy to use once installed, Pombriant says. "This doesn't mean conventional CRM providers cannot compete on this type of playing field, but in some cases the hosted model is superior," he says.