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CRM Software-as-a-Service Industry News
Whether referred to as Software as a Service (Saas), On-Demand, Utility Computing, ASP or Hosted, the subscription-based Customer Relationship Management SaaS industry is clearly outperforming all other business software sectors and CRM applications are leading the way.

  • Big Problems for SAP SaaS
    Seven months after officially unveiling its on-demand ERP system and just one week before its annual user conference, SAP's CEO, Henning Kagermann, has confirmed that the highly touted Business ByDesign software as a service product has incurred significant problems and will be delayed at least another 12 to 18 months. More >>
  • SAP Pushes ERP into SaaS
    SAP’s software as a service (SaaS) business strategy and flagship product, Business ByDesign (previously code named A1S), was officially introduced on Wednesday, September 19, 2007 as a one-size-fits-all, subscription-based package aimed at midmarket companies up to 2,000 employees. More >>
  • NetSuite Fails to Provide Backup Services Capability
    NetSuite states in their July 2007 S-1 statement, "We do not currently operate or maintain a backup data center for any of our services or for any of our customers' data, which increases our vulnerability to interruptions or delays in our service." Breathtaking stupidity or just disregard for their clients businesses? More >>
  • Google to buy Salesforce.com?
    No chance. While salesforce.com is salivating to be acquired by Google, there is a complete mismatch of cultures. Google is humble and stands for no evil. Salesforce.com is a guerilla marketer who is far more known for its hype, bravado and beating its own chest. More >>
  • Oracle and RightNow Deliver New CRM Versions
    Both Oracle and RightNow Technologies released the next iterations of their CRM Software suites. And both companies, though hoping to attract a similar audience, are taking decidedly different routes to customer information. More >>
  • SaaS Bad Boy Salesforce.com
    Salesforce.com CEO and industry commentator Marc Benioff does not mince words or shy away from media opportunity. More >>
  • The Promise and Pitfalls of Service Level Agreements
    Some CRM manufacturers have treated SLAs more in line with a cat and mouse game, or at best a game of salesmanship, whereby software sales people discourage the need for SLAs or use them as negotiation sales closure tactics. More >>
SaaS Benefits

The SaaS value proposition varies based on each organization's objectives and business requirements, however, a number of unique SaaS advantages include the following:

SAAS CRM No Capital Expenditures
A combination of hosting the CRM application and the subscription-based pricing model remove up front hardware and software capital expenditures as part of the CRM acquisition process.
SAAS CRM Accelerated Implementations
According to analyst Phil Wainewright of Summit Strategies, the cost of implementing conventional enterprise software is typically four to five times the cost of the original software license. Hosted CRM software however removes the installation process and dramatically accelerates the implementation timeline. Analyst firm Yankee Group cites that the goal of hosted solutions "is to deliver a standardized application that only needs to be configured, not highly customized, thereby reducing the end customer's time to go live by 6 months or more."
SAAS CRM No Long Term Commitments
Unlike software licenses which are acquired for perpetuity, software subscriptions can be negotiated by the month, quarter or year. Users are free to change CRM systems upon demand.
SAAS CRM Predictable Expenditures
In contrast to the software procurement method and its subsequent 'pay and pray' implementation process, hosted CRM solutions are delivered based on an agreed fee for the duration of the contract.
SAAS CRM Lower Costs
According to analyst firm Yankee Group, "Hosted CRM solutions lower the customer's TCO (total cost of ownership) by running its software in a centralized bank of computers, which dramatically reduces the cost of service per user. Because they are not installed on the customer's premises, hosted solutions also can reduce software implementation and customization costs by as much as 90 percent."
SAAS CRM Superior ROI
In a 2005 study, Vice President of Research Rebecca Wettemann of analyst firm Nucleus Research found that while only 40 to 50 percent of customers with licensed CRM applications achieved a positive ROI, 82 percent of companies using hosted CRM saw positive returns.
SAAS CRM A Vested Partner
According to IDC analyst Amy Konary, a major advantage of the SaaS model is that it aligns the interest of vendor and customer. With traditional licenses, she says, "there's no strong vested interest from the vendor perspective to make sure the customer is successful." Once a software license is sold, she says, "the vendor is not coming back until it has something else to sell." By contrast, SaaS vendors must ensure continued client success or risk losing their recurring subscription. "They aren't just throwing software over the fence," says Konary. "They have to make sure the customer is happy with it month after month."
SAAS CRM Superior Uptime & Reliability
According to Yankee Group, "The hosted CRM provider remotely manages and operates the technology, offering the customer measurable availability, reliability and performance based on service-level agreements. Hosted providers can centralize and utilize cutting-edge infrastructure technology and techniques, including redundant data centers that ensure application availability and business continuity. In addition, the hosting vendor can employ expert personnel to maintain the applications and provide the customer with ready access to its IT staff. Customers benefit not only from the high-availability infrastructure, but also from reductions in IT-related infrastructure, labor and training costs.
Software as a Service Obstacles

While the SaaS industry offers significant advantages over traditional software licensed approaches, it is not a panacea.

Concerns about SaaS solutions initially revolved around vendor uptime, security, scalability and vendor viability. Learning from their ASP predecessors of the past, SaaS CRM vendors have focused on building customer value one seat at a time and making it as easy as possible for customers to "pay by the drink," lowering the risk and cost of deployment.

Industry hurdles remain for several SaaS solutions.

SAAS CRM
Customization
While most hosted CRM solutions offer some level of customization tools, most tools are not operable by non-technical users. Further, customization tools which do not change the source code are needed so that vendor upgrades technical support continue to be viable.
   
SAAS CRM
Software Integration
While most SaaS CRM solutions leverage Web services for integration, several continue to rely on APIs and outdated middleware.
   
SAAS CRM
Homogenization
Most current hosted applications require users to adopt a single version and upgrade to new versions in mass.
   
SAAS CRM
Sophistication
The feature sets and functionality requirements are still lacking when compared to the prior era of client/server CRM systems.
   
SAAS CRM
Administration
While IT labor is significantly reduced in a hosted delivery, a level of ownership and System Administration is still required for users to fully leverage their CRM systems.

 

 

 

 

 

 

 

 

 

 

 


 

 

 

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Software Historical Comparison

To really understand the advantages and disadvantageous of the SaaS business model, it’s helpful to recognize where on-premise, traditional (perpetual) CRM (and ERP for that matter) software licensing and information systems delivery incurred historical repetitive failures.

The most notorious failures include the following:

SAAS CRM Drive-By Sales Pro's
While one large vendor in particular seems to be associated with this moniker more than others, the truth is that once traditional on-premise software was sold, the client/vendor relationship forever changed. Once a perpetual license has been sold, it cannot be sold again. Granted, there will always be upgrades and ancillary ad-on's, however, those procurements are small potatoes and certainly don’t create any vested vendor interest in the client’s software success.
   
SAAS CRM Shelfware
How many times did organizations’ accelerate their CRM software purchase decisions in order to take advantage of a one-time quarter-end or year-end vendor financial promotion that would save them loads of money – only to then receive the software, put it on a shelf and never implement it (largely because they were never really ready to purchase the software)? Several analyst studies have illustrated the massive amount of licensed on-premise software that was procured but never implemented. A few years ago a Gartner report found that 42% of purchased packaged CRM software licenses went unused - at an estimated waste of $1 billion to $1.26 billion with continued losses due to companies paying annual maintenance on software licenses they are not using.
   
SAAS CRM Feature Bloat
Many traditional software sales folks had a reputation of promoting their solutions by upselling features. Many buyers would purchase these yet unneeded features in advance as they thought they would be eventually needed and wanted to capitalize on that massive one-time quarter-end discount. Many times the utilization of these features never came to fruition and further contributed to the shelfware phenomenon.
   
SAAS CRM Unmanageable Evolution
Traditional licensed software has a way of turning Parado’s law on its head – effectively, using about 20 percent of the software’s capabilities, however, carrying the implementation, maintenance, upgrade and support costs for much of the unused 80 percent. Combine the low utilization factor with the traditional CRM software evolution of customization and integration and the carrying cost grows.
   
There are certainly many more reasons why traditional software licensing failed to achieve consistent market success. It is also certainly appropriate to note that these historical failure points can be replicated in the on-demand SaaS model, however, the risk and downside magnitude is dramatically decreased with SaaS hosted and subscription delivery model.

 

 

 

 

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It seems particularly relevant when organizations benefiting from licensed software tout the SaaS market growth. For instance, according to Jim Corgel, General Manager of IBM e-business Hosting Services, "The hosted market will grow at 20% annually - that's four times as fast as unhosted software."

quote 10 to 1 quote
The ratio of how much companies may spend on hardware, maintenance and support of purchased software, compared to the initial price.
Source: Garner

Lastly, we think that former Oracle President & COO Ray Lane said it best, "Software-as-a-Service is an inevitable, fundamental shift in enterprise software culture."


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