Software Supplement Part 2: CRM software gets SaaSy

16th Jun 2009

co-founder

diginomica

One evolution of the CRM technology market that has won enormous attention in recent years has been the growth of the software as a service (SaaS) or on-demand delivery model. Stuart Lauchlan takes a closer look at its rise.

Back in the day, on-premise packaged CRM offerings such as those from Oracle, Siebel and SAP were purchased with upfront licences, taken back to a data centre and then deployed (perhaps!) by busloads of Accenture consultants. This was costly, protracted, complicated and often resulted in systems that did not meet the requirements of the organisations anyway. When this happened, the end-users would submit a revised set of requirements, the IT department would go off and try again and the whole process would start all over again. Activity without conclusion was the order of the day.

With the SaaS model. customers choose how much CRM functionality they need, pay for its on a 'per drink' subscription basis, have it hosted for them by a third party and access the systems using a commodity web browser from the comfort of their own desktops. When a new version of the software is available, it just appears on a Monday morning without the need for complicated upgrade programmes. It is, in short, cheaper, quicker and easier.

Gartner analyst Michael Maoz predicts that by the year 2012, 30% of investments in CRM will be via SaaS. Gartner sees the SaaS market overall as achieving $8bn this year, almost a 22% increase from 2008 revenue of $6.6bn. The market research firm projected the SaaS industry to achieve consistent growth through 2013 when worldwide revenue will reach $16bn for enterprise applications overall. One of the main drivers that is particularly appealing in the current economic crisis is the lower costs of the this model.

Gartner suggests that organisations are experiencing project savings of 25 to 40% by deploying SaaS CRM. Much of the savings that organisations are making is a result of a lesser dependence on large external service providers (ESPs), such as the Accenture's and IBM Global Service's of the world. "Due to the increasing use of SaaS for CRM, ESPs - which include business consulting and system integration services - will have less influence on CRM processes as SaaS accelerates," says Moaz. "This could result in an erosion of customer satisfaction among large enterprises that invest in SaaS solutions unless they invest their own resources to measure and manage long-term CRM process improvements."

But Moaz also suggests that without due care, SaaS CRM can also damage customer management efforts. "There will be significant savings in infrastructure and resource costs in migrating to SaaS, but to put that money to work in customer process improvements, careful performance measurement of 'before' and 'after' project spending will need to be performed," he says. "If this does not happen, then the savings will be shortsighted, as they will not improve the relationship with the end customer."