The Demand for Hosted Service Offerings Is on the Rise

KANA is throwing its hat into the hosted CRM ring with the release of an on-demand variant of KANA Response Live, the company's online support and collaboration product. "We're seeing a wide variety of alternative licensing models," says H. A. Schade, vice president of products for KANA. "Five or ten years ago you bought hardware and software and hired engineers to run it, but the software-as-a-service model really took off." "With the economy picking up, we have seen an increased demand for hosted CRM in general, and not just on the service side, from the small to medium-size businesses in particular," says Tim Hickernell, vice president of META Group. "In KANA's case this is going to help them compete with LivePerson and RightNow." Hickernell says that KANA needed to take this step to create a presence against those established outsourcing providers: "They've ceded a lot of the SMB market to RightNow and LivePerson, so this is an opportunity to get some of that back, and leverage the Hipbone base to try to sell more KANA products." KANA Response Live made a logical first offering because the product, recently added to the company's lineup with the acquisition of Web collaboration firm Hipbone in February, was already built on a multitenant technology platform. "They didn't have to start from scratch. Hipbone had a hosted model for its capabilities," Hickernell says. KANA customers will be able to integrate Response Live with a larger suite of service management products. "[Response Live] is going to be operating in our global hosting centers, " Schade says. "There is the ability for enterprises to directly access those integration points as part of the hosted service." The next hosted rollout is expected to be KANA's email response product, launching by the end of June, but a full transition of the company's entire slate of services is still some time in the future. In addition to the hosted model, KANA is also experimenting with a subscription-based pricing service, rather than a flat licensing fee, for customers who install and manage the software on-site. The value proposition for this option remains to be determined by the market. "When it's hosted, you get the savings of someone else handling the hardware--that's clear," Hickernell says. "It is yet to be seen whether the market is going to accept a subscription model, especially given that there's not a lot of compelling potential upgrades in that area from the perspective of the end user."