On-demand business applications are seeing increasing adoption among business users large and small. These services have become popular largely thanks to the internet and secure broadband connections. Users are able to access their business applications via a browser, and pay a per-month, per-user set fee to do so.
As a result, on-demand services can offer users a predictable cost, with fees typically being about £40 to £50 a month per user.
Customer relationship management (CRM) software has been the most successful application available on an on-demand basis, and Salesforce.com has been the main proponent of on-demand CRM.
Salesforce.com specialises in CRM and sales force automation, helping a sales force to record and manage their sales efforts. Salesforce.com also offers marketing automation. The company dates back to 1999 and now has 500,000 registered users.
Other companies offering on-demand CRM include Siebel, RightNow Technologies and NetSuite. SAP has been offering on-demand CRM since February, and Microsoft is expected to offer its on-demand CRM service in the first half of next year.
Any company can use the service, whatever its size. Steve Garnett, general manager EMEA, at Salesforce.com, said, "We see customers with two or three users, with the attraction being you do not have to own your own software, manage it and run it."
This approach is not confined to smaller businesses. The Salesforce application is also used in some of the largest companies, such as Merrill Lynch, ABN Amro, Cisco and Nortel.
The compelling argument for going to a hosted, on-demand model is when IT is not regarded as core to the business. Traditionally, companies had to build their own IT systems because they had no alternative. That all changed with the web. In Garnett's view, IT should be like utilities and sanitation, in that you should not have to build your own systems.
However, one concern users have is what will happen to their business if the service provider experiences downtime. This happened to Salesforce.com last Christmas.
Salesforce.com suffered a major system outage in December. This raised alarms among its users, who questioned whether they should really trust an online system which holds their core customer data.
As a result, Salesforce.com redeployed the applications running on its main US server to three separate servers. Since then, it has not experienced any major performance issues, but remains chastened.
The company has spent more than £26m enhancing its datacentre replication processes, security and reliability. It has a number of big Sun Fire E25K servers running the Oracle database.
"We publish our availability. We will show you all of our servers, when we had an outage and how long for. We also do some service level agreements," said Garnett.
Salesforce.com has also developed an on-demand application platform called Appexchange. This allows users to run the latest version of Salesforce CRM and the other applications, and develop and share their own on-demand applications.
Since it opened up the architecture to users, Salesforce.com now hosts 300 applications, which range across the vertical industries and cover areas such as project management, recruitment and financial services. Because Salesforce.com hosts the software, it can migrate its users onto the latest version.
Conversely, on-demand CRM supplier RightNow allows its users to upgrade when they are ready to, and supports multiple versions of the applications.
"That is very important if people use it for integration," said Wayne Foncette, RightNow's vice-president for the UK and Ireland.
Another differentiator for RightNow is that it will host the software in-house for some customers - 10% at present.
"We give the option of going on-premise - we are not against it. The commercial benefits and time to market sometimes make it a better option," said Foncette.
As with the other on-demand CRM hosting firms, RightNow can get a user up and running in about 30 days, which is shorter than if an organisation had to test and implement its own CRM system.
Foncette added that taking the on-demand route allows users to scale up their usage easily if they grow the business or hit a busy period.
Education services company Edexcel is a RightNow user. It has integrated the CRM front end into its own back-end applications and Frontrange contact management system.
Marie Gower, head of customer services at Edexcel, said it was easy to integrate RightNow into Edexcel's Frontrange contact management system, which the company did itself. The integration was done using open standards based on XML application programming interfaces.
Edexcel's RightNow set-up took eight weeks to complete, and included training two non-technical specialists to use the system. Edexcel chose a perpetual licence with a tool to predict its usage of the CRM service. It also pays an annual maintenance charge.
Siebel is one of the leading in-house CRM systems but there is also an on-demand version, Siebel CRM On Demand. Siebel, which is now owned by Oracle, is on version 10 of its hosted CRM sales and marketing service, which was launched in 2003.
The service has a lot of customisation, and numerous vertical industry features. For example, Custom Tabs allow the end-user to embed information and screens from other web-based applications into their CRM application, so they can perform multiple operations from the same screen.
NetSuite's CRM service also features customisation capabilities, and makes use of personalised dashboards. These online panels give the user an aggregated view of information, such as new sales orders, commissions and forecasts.
NetSuite's unique selling point is that it can integrate the order management process into the CRM system to create a purchase history and include channel partners into the mix.
CommNet, a European small and medium-sized enterprise business network is offering a new hosted CRM service. It is partnering with Really Simple Systems to offer the outsourced, web-hosted CRM service to its 2.3 million global members, as well as new users.
CommNet described the CRM system as "functional rather than having the complex design of more expensive competitor products".
For example, it uses elements like Google calendar to add tasks to the user's existing diary. It is also cheaper than rivals, costing £35 per user, per month.
In July, Microsoft gave details of its on-demand CRM suite, Microsoft Dynamics CRM Live, for small and mid-sized businesses. It is planning two products, Dynamics CRM and CRM Live.
Both are roles-based, and have a Microsoft Outlook look and feel. Both will have standard CRM capabilities designed for small and mid-sized firms respectively.
Oracle is also developing on-demand CRM software, separate from the software available from its Siebel division.
In general, the CRM service providers make it easy for users to move their data off their servers if they end the contract. Most of the service providers said they will export it in an open standard format, such as XML, which takes between two and seven days, depending on the volume of CRM data. They can then deliver data via a secure network link, if required.
However, while it is easy to move from one service provider to another, there appears to be little user churn yet, mainly because on-demand CRM is still an emerging area of technology. However, as more suppliers come on board, users will undoubtedly face a wide range of services and benefit from lower monthly prices.
All in all, on-demand does appear to give IT directors the ability to implement business systems quickly. But the monthly costs mount up over time, and will eventually exceed the cost of an in-house system. Users need to balance this with the attraction of getting up and running very quickly.
Case study: Ease of integration key to ITN source's choice of on-demand CRM
One user of Salesforce.com’s on-demand CRM service is ITN Source, which provides content for broadcast footage.
Sue Thexton, managing director for ITN Source, said that the organisation worked with Salesforce.com’s professional services team to write bespoke code that allowed it to hook the Salesforce service into its back-end finance system.
However, this work has allowed ITN Source to generate and deliver invoices as a result of a quote, and pull these back into the Salesforce system. She added that such integration work is the exception rather than the rule.
Prior to using Salesforce in March 2005, ITN Source used a system with little scalability or flexibility. It did not have any in-house CRM expertise, and used Deloittes to help it select a CRM system.
The consultant’s report shortlisted one on-demand and one in-house CRM system. Salesforce.com could deliver the system faster and to budget, and also provide the integration, which is why it was selected.
“We are a small company, and we have specific requirements. We were not trying to replace our back-end systems,” said Thexton.
“For us, a benefit is that you can turn off Salesforce tomorrow if you need to,” she added.
She said that ITN Source talked to Salesforce.com specifically about data protection, because it was very concerned about it, being a news organisation. However, Salesforce.com, like the other hosted CRM suppliers, must adhere to the data requirements of the countries in which they operate. They also argue that they meet the security requirements of their largest customers.
“[The service] is as safe, if not safer than our own internal security measures,” said Thexton.
CRM service providers maintain that their agents are unable to see any customer data, although they can manage it. They tend to know which users are logging in, and from which machine, but this is all, according to the suppliers.
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