Software as a Service: Handling Customers, Hands-Free
Still paying hundreds of thousands of dollars on hardware, labor and maintenance for in-house customer relationship management systems? Hosted CRM is not a new concept, but more and more companies are deploying the software to pump up their sales operations.
Those companies are finding cost savings in reduced maintenance fees and deployment times. They're also gaining more visibility into their sales and service operations than ever before.
Handling Customers, Hands Free
A stream of consolidation and new offerings reshaped the on-demand CRM market, pitting high-profile insurgents against some of the world's largest software makers. See how a major market research firm, a health food maker and an English consulting giant boosted their customer relationship operations with hosted software.
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Handling Customers, Hands Free
Customer relationship management software covers a spectrum of service issues, from tracking sales leads to fielding customer complaints. Historically, this software was sold as an on-premise system, meaning the customer purchased the program and deployed it out of the box.
The market changed in the late 1990s, with the arrival of firms like SalesNet (1997) and Salesforce.com (1999), which offered customer relationship management in the "software as a service," or SaaS, model. The fancy phrase is essentially a new name for an application service provider, in which the vendor maintains and supports the software for the customer, which accesses the product via the Internet. The concept reemerged with the popularity of on-demand customer relationship management software.
Proponents of SaaS tout the model's many attributes, but perhaps none more than the elimination of in-house maintenance. For Dan Chiazza, global sales operations director with Rochester, N.Y., market research firm Harris Interactive, deciding whether or not to pay maintenance fees was a $250,000 question.
In 2003, Harris replaced its in-house Siebel system with an on-demand solution. The Siebel system cost a quarter of a million dollars and suffered from poor user adoption, primarily because sales staffers had to be logged in to the firm's virtual private network or in the office to enter sales data, Chiazza says.
And Harris didn't use the system to see how much potential revenue was coming down its sales pipeline. Instead, team leaders and sales proposal writers would have to copy all e-mails about sales proposals to one of two accounting staffers who amassed the firm's total sales prospects and results. The system was not programmed to do so automatically, and Chiazza says some managers forgot to copy the accountants.
Chiazza looked at Siebel's on-demand offering but opted for Salesforce.com's eponymous hosted software, citing its open application programming interface, which helped Harris connect its sales operations to its financial and back-office operations, negating the need to copy accounting on sales e-mails.
Since the software is hosted, Harris no longer needed to pay $250,000 just for maintenance costs (he now pays about $300,000, total). Integrating sales and financial systems was another eye-opener: because so many e-mails weren't copied to the accountants, Chiazza says Harris, which brought in $216 million in revenue for the fiscal year ended June 30, 2006, had shortchanged its pipeline's potential revenue by up to $40 million per month.
The Need for Speed
Salesforce.com founder Marc Benioff touts the SaaS model as the "end of software." Well, at least software as we know it. In the dominant client/server model, the user company maintains the program as well as the databases and application servers needed to run it effectively.
But the on-demand model is gaining speed. With 2006 worldwide sales pegged at $8.35 billion, the hosted customer relationship management space is expected to grow at an average of 7% annually, reaching almost $11 billion in 2010, according to Forrester Research.
On-premise software leader SAP got into the mix in early 2006, rolling out its first on-demand customer relationship management offering. Microsoft is expected to follow suit this year.
And vendor consolidation is changing the competitive landscape. Last year, Oracle bought Siebel Systems, in part for its on-demand offering, which debuted in October 2003. Also in 2006, RightNow Technologies bought SalesNet to boost its marketing and service software.
Besides cutting costs, an oft-mentioned benefit of the software is speed of deployment. For Pleasanton, Calif., health food and personal-care product maker Shaklee, a fast deployment was key.
Shaklee came under new ownership in 2004. At the time, the company had no customer relationship management tools. Most important, it had no apparatus for tracking what questions its customers were posing to call-center representatives, and no online self-service tools like a FAQ page, according to chief information officer Ken Harris.
Tabulating questions and complaints was done with pen and paper; follow-ups were also manual, and records were kept by representatives in separate files. "The business had been slowly declining through the years, so [there was no] investment in technology to stay abreast of what's possible," Harris says.
Harris and his team wanted a solution that could be deployed quickly. They opted for an on-demand solution, expecting the deployment to take three to six months, as opposed to an on-premise system, which could take up to 18 months to implement, says CRM project manager Melanie Peters. After speaking with a number of vendors, Shaklee got a commitment from RightNow Technologies to meet a three-month time frame.
RightNow met that goal, deploying the software in 90 days, says Peter Neels, Shaklee's director of field support. "They wanted to work with us, to help us be successful," he says. "And we were."
Saving Time and Money
Reduced maintenance costs and quick deployment were important to Nicholas Kontopoulos, director of sales management for Capita Group, a London-based management consultancy, but so was the ability to change his mind.
As of early 2006, according to Kontopoulos, Capita's salespeople managed their own accounts on individual laptops, and managers aggregated the data by business unit on spreadsheets. "But we couldn't see the whole pipeline, in terms of what was coming through and what was working out," he says.
At first, Kontopoulos leaned toward an on-premise suite from SAP. But when the German software giant informed him it was releasing an on-demand suite, Capita became its first European customer, going live in April 2006. One driving factor was cost: Kontopoulos says the hosted version cost about $200,000 to $300,000 less than the in-house offering.
Also, they could quickly decide if the software was right for themwithout having to go a year or longer deploying an on-premise solution. "Because we hadn't done this before, I was quite keen to run with a solution that could be shut off if it didn't work for us and not be left with a huge cost," he says.
Pulling together the individually kept records used to require four hours per month each from 10 to 15 staffers, a total of 40 to 60 hours spent on reporting alone. Today, scattered sales representatives enter sales figures directly into the SAP system, which automatically aggregates them across the company's units, producing reports instantly.
Having those reports at the snap of a finger not only helps Capita's operations, Kontopoulos says, but it adds to collaboration with clients: "That's where you drive out the savings: that unseen cost that managers don't see."