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Gartner questions benefits of on-demand CRM

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16th Jun 2010
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While software-as-a-service remains a popular option for CRM projects, the delivery model will not become as dominant as once thought, with large numbers of licences already just sitting unused on shelves, according to Gartner.

Although SaaS will continue to play a role and, over time, will be adopted in some role by most organisations, growth has not been as fast as first expected – a situation not helped by the fact that many of the bad practices existing in the on-premise software world have simply been transferred into the cloud-based one.

David Cearley, vice president and fellow at Gartner, said: "In 2009, within enterprise applications, SaaS represented 3.4% of total enterprise spending, slightly up from 2008 at 2.8%."

Some 65% of such SaaS purchases were generated in the CRM, content and collaboration and communication arenas, he added. The global enterprise applications market is expected to be worth $8.8 billion this year.

One of the biggest challenges in terms of future sales, however, was the problem of so-called shelfware. "Shelfware-as-a-service is the concept of paying for a software subscription that is not being accessed by the end user," said Cearley. "This most commonly occurs in large organisations, but if could happen to any company, especially those that have downsized their workforce, or one that has oversubscribed to trigger a volume discount."

Nonetheless, although SaaS did not "solve all the problems of software delivery" and 90% of all SaaS deployments were not based on pay-per-use models, it was not all bad, he added.

For example, the introduction of such offerings had "re-energised the software market and added choice", Cearley said. Such services were also beneficial in certain circumstances as they were quicker to implement and configure if the problem to be solved was straightforward and lacked complexity.

Key considerations that organisations should bear in mind if going down the SaaS route, however, included determining the real value of such purchases. Because the delivery model was "not a panacea", companies needed to evaluate and understand the trade-offs generated.

While SaaS could help to cut both infrastructure overheads and management requirements as well as reduce short- to medium-term total cost of ownership, third party application tools were limited and SaaS offerings could not be accounted for as balance sheet assets.

Moreover, like their on-premise cousins, SaaS services required effective governance and policies, but any resultant document should always be a collaborative effort between the business and IT.

A third recommendation was that prospective customers should carefully evaluate vendors’ commitment to SaaS for their specific application requirements. Such evaluations should be based on both business performance and technical factors such as operations management capabilities.

Finally, organisations would also be well advised to develop a roadmap in order to understand how prospective SaaS services could be integrated with existing and future on premise applications and SaaS offerings.

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By Intelestream Inc
03rd Jan 2011 22:15

I think it’s very telling that businesses are projected to turn to more SaaS over the next several years. It makes sense, given that more traditional marketing and sales approaches are not working as well, if at all. Significant benefits can be achieved by working closely with a specialized SaaS consultancy to get a more competitive advantage over today’s marketplace: take advantage of their expertise and free consultation. Well-seasoned consultants should provide a solid overview of the marketplace, competitors and opportunities; how to leverage and improve upon your current business model; and hopefully, fresh approaches to familiar goals: bottom line sales. If you don’t get the feel that the consultancy is there to help take your business strategy to the next level, move on to the next one. 

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