The demands of on-demand

It sounds ideal - no infrastructure to build or maintain and no code base to support. Hosted CRM (Customer Relationship Management) is well and truly here, and the likes of have picked up the growth in the CRM market that deployed enterprise solutions had previously enjoyed. It's taken so seriously that virtually all CRM providers are jumping on the hosted bandwagon, including of course Siebel OnDemand.

So why can hosted CRM succeed where the Application Service Provider (ASP) model in general failed? Go back a few years and ASP was how everyone was going to get their technology - internet based solutions would avoid local maintenance problems and we would all be using the modern equivalent of dumb terminals. Of course it hasn't happened (completely) yet but Google is providing services in this way and many analysts think it's inevitable.

There are however specific issues with business critical applications such as CRM that we believe make the choice of hosted solutions far from obvious.

Total Cost of Ownership is often vaunted as the great benefit of a hosted solution. No need for infrastructure, large initial capital outlay or additional IT support costs. While year one costs are almost certainly going to favour a hosted solution, look over three years or more and often a mid-market CRM package can be more cost effective. Initial implementation costs are of course dependant on requirements, but if you need non-standard functionality then it's likely you're not going to be favouring a hosted solution.

Security of data is a large concern when you're using your CRM system to store not just your company's major asset of customer/contact data, but potentially financial and other sensitive data. Partly the issue here with a hosted solution is around confidence in the provider, and an emotional issue of "losing control" of your main database, but there are also considerations around internet access to key business systems. Hosted solution vendors may counter this by suggesting local storage of key data integrated to their hosted solution, but this negates many of the cost benefits aimed for in terms of running costs and up-front integration.

The future. When we engage in vendor selections, our clients are always rightly concerned about product roadmaps and future-proofing their investment. The fact is though that in many organisations legacy systems go for many years without major investment or upgrade. With a hosted solution you need to be confident that the provider will still be here in the future or you may not have a system at all; that the solution will meet your changing needs without the "hands on" control you may be used to; and that the product roadmap will ensure that it will cater for changing technological or business non-functional requirements. These concerns are to a degree present in any deployed system, but a hosted solution requires serious thought.

Reliability of a hosted solution is not just a result of the availability of servers and your internal network; you have to consider the provider's capabilities and the network connection to the provider. There have been well publicised "downtime" episodes with hosted CRM providers, but we shouldn't be too harsh - it may be as good as an organisation's existing internal systems. Here you need to look at your own needs and capabilities - if it's a business critical system, are you confident the hosted provider can provide the guarantees you need?

Strategy. Finally, from a strategic viewpoint, your organisation should be looking at your sourcing strategy in general. Just choosing a single hosted application may be missing a trick if your continue to maintain deployed applications on the desktop. It may be that a wider review of your out/insourcing strategy and infrastructure is required. 

Hosted solutions are undoubtedly here to stay, and will provide an increasingly important part of the enterprise application market. However, there are significant issues that should be considered before making the decision to use them.

If you're interested in discussing in more detail the issues discussed in this analysis, please contact us.