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CXO – European Edition, 9/28/2006

What Solution is Best for Large Enterprise with Complex Demands

By Neil Davey

Excerpt from article

Hosted CRM has captured the imagination of enterprises and is showing robust growth with its promise of low costs and easy implementation. Some suggest the tipping point is on the horizon. But is it the right solution for everybody?

Complex demands

Evidence suggests, however, that small and mid-size firms still remain the core customer base for hosted CRM. Whilst there certainly appears to have been growing interest from the higher end of the corporate ladder, with companies such as Salesforce.com touting success in attracting large companies like SunGard, Gartner studies estimate that around 80 percent of Salesforce.com deployments still have fewer than 20 users. Despite the insistence of some hosted CRM providers, it would appear that not all enterprises are yet prepared to join the on-demand parade – and their case certainly won't have been helped by the questions being raised over CRM's ability to cater for the larger enterprises and their more complex demands.

When Jürgen Huf, Project Manager at Assa Abloy in Germany , approached CRM, he at first considered on-demand CRM, but was unimpressed with what he found. “Today, the market is in constant movement and ever changing, so new adjustments with tools must be made again and again,” he explains. “On-demand was not the best way for us to achieve our goal. When you have a tricky IT infrastructure with lots of other software that must communicate and integrate with your CRM system, you must have a detailed look at the required interfaces. Not every solution can bring these interfaces without a large expenditure. For companies that can operate with certain standards, and who want to have clear costs month-on-month, on-demand is a possible solution. But, for those who need to have flexible processes and solutions, a traditional licensed solution is the better option.”

Moeller similarly believes that larger firms tend to profit less from on-demand CRM packages than SMEs. “The higher complexity and scale requires a higher grade of tailoring product and services – whether for set-up, maintenance or upgrade – yet the on-demand model by definition has a quite high grade of standardisation,” he explains. “Because of their specific requirements, large companies often need a higher degree to control their systems by themselves, which is not the case with hosted on-demand solutions. They need to plan early for complex long-term projects and often have even higher demands regarding security issues since they are constantly in the public spotlight. In short: SME's will profit more from the on-demand model, larger corporations often more from a purchase.”

Customisation and integration

Nelson comes out of the hosted CRM corner fighting, however: “On-demand applications are far more customisable than traditional applications. The biggest challenge for traditional applications is that once you customise them it is very difficult to upgrade to the next version of the software without losing all your customisations and all the work you put in. We don't have that problem because we know that if every time we upgraded the software customers lost their customisation we would be out of business! So we have an architecture that enables us to carry forward these rich and complex customisations. If you talk to any customer of traditional enterprise apps the number one thing they say is that it is impossible to upgrade an application once you have customised it.”

But Gartner's DeSisto has also put the boot in to on-demand – this time about the cost model. Despite his TCO estimates favouring hosted CRM in the short-term, DeSisto suggests that within three years of a Salesforce.com deployment, more than 60 percent of large sales organisations will find their costs double due to customisation and integration issues. The Gartner analyst concludes that after three years, complex sales organisations will find the TCO for Salesforce.com will be greater than a packaged solution.

“The Gartner report concludes that if you need to complicate it, don't do it, because it is going to get very expensive, very quickly,” suggests Guy Tweedale, Managing Director for the UK and Northern Europe at Saratoga CRM. “I believe that if you are confident that your sales process is fairly straightforward and that it is not going to change much over a period of a few years – and you can continue to justify the monthly cost associated with it – then hosted is a good business model. But if you are going to continually change your business process, which most companies today do, then you finish up riding with an extremely high cost and an extremely frustrated user base.”

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