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SaaS CRM and Cloud CRM Software Evolution

The intersection of Customer Relationship Management (CRM) and SaaS or hosting technology are far more than
simply methods to realize lower computing costs and faster ROI.
SaaS CRM and cloud computing is a disruptive innovation in CRM software and enterprise software and clearly
represents the next battleground for the business systems evolution. The future of CRM SaaS and information
systems hosting will change the CRM software adn enterprise applications industry through four individual, and
somewhat overlapping phases.

  1. First version CRM hosting applications reduced computing costs and increased information systems ROI,
    however, did not provide the CRM software capabilities, automation and information comparable to the
    decades old host-based, client/server and on-premise products. First generation SaaS CRM solutions
    appealed to organizations concerned about high cost and low value CRM systems, failed on-premise
    implementations and high risk user adoption challenges.

    Although first generation CRM hosting products were limited in scope, they provided both a meaningful
    solution to an undeserved market and a far less risky solution to a market littered with unsuccessful implementations.

    The SMB market has historically not made the transition from simple contact management systems to CRM applications. According to Aberdeen Group, when SaaS CRM solutions originated, "Less than 15 percent of the 5 million to 6 million US companies with fewer than 500 computer users had CRM software installed" and according to research firm Morgan Stanley, only 10 percent of companies with revenues under $500 million had acquired CRM software. Reasons for historically low CRM adoption by these market segments are largely price and resource (staffing) related. Acquisition barriers included the high up front capital expenditures as well as the recurring expense for additional IT staffing.

  2. First version hosting providers delivered CRM applications without upfront capital investment, complex software installations or other financial barriers. Recurring costs such as computer hardware and IT or support staffing were largely eliminated. The subscription-based delivery removed the financial risk by licensing the software on a monthly pay-as-you-go rental basis, removed the time-to-benefit risk by achieving a very short implementation timeframe (normally weeks as opposed to months or years) and operational risk by outsourcing the administration and maintenance to trained experts. The result was a limited but trouble-free CRM information system which permitted customers to increase customer facing systems effectiveness while also focusing on their core business activities and achieving dramatically reduced total cost of ownership (TCO).

  3. Second generation CRM hosting applications will mature to possess business functionality and automation that rivals or even exceeds that of the decades old high-risk and high-cost on-premise products. This generation will change market dynamics in terms of hosted solutions being perceived as inferior or immature when compared to tier one or traditional on-premise systems.
  4. CRM SaaS solutions are currently advancing their software to achieve this evolution vision. This evolution phase will weed out the many CRM 'point solutions', market niche and piecemeal component players in favor of broader suites and enterprise-wide business solutions.

  5. The third generation of SaaS CRM solutions will be characterized by the integration of multiple vendor SaaS products and the linking of business processes across products, companies and geographies. Just as Internet-enabled CRM applications have connected the decentralized operations and staff across the enterprise, Web services will act as a platform and catalyst to link multiple Web-based applications together and extend the Internet backbone to connect different organizations in a structured and real-time collaborative environment. A standardized and real-time integration of business processes among business partners or distinct organizations holds tremendous value in seamlessly delivering multiple vendor solutions to satisfy client demand. Service oriented architectures (SOA) and Web services uniquely permit loosely coupled online business integration among business partners, customer and vendors, and even disparate organizations whom will achieve real-time collaboration, information sharing and business process automation.
  6. We also expect the this wave of to negatively affect or eliminate those SaaS solutions that are 'all things to all people'. These organizations often use partnerships or shopping carts to cobble together whatever anyone asks for and really don't have areas of excellence. The allegedly integrated products fail to work in a trouble-free environment and deliver the promised value. The goal of seamlessly integrated products from different vendors failed to materialize during the host-based era and the client/server era. We suspect a repeat performance with this topic in the SaaS era. Those CRM vendors who focus on particular target markets and deliver broader and deeper solutions will achieve competitive advantage over those whom do not.

Subsequent to the previously listed eliminations, the Customer Relationship Management software market will be left with the most strategic online CRM providers. It is our opinion and strategy that the keys to long-term success include the following critical success factors:

  • True thin-client technology focus. Those software vendors whom continue to screen scrape legacy fat client code over the Internet will fail when compared to the true browser-based SaaS solutions. Performance, scalability, flexibility, maintenance and total cost of ownership (TCO) are far superior from those software publishers who originally developed their products for the SaaS platform.
  • Target market focus. Over the next 12 to 24 months, the different target markets will further segment in terms of their business and systems requirements. The days of middle market and enterprise organizations considering small business SaaS solutions simply because of the lack of competitive solutions are nearly over.
  • Industry focus. Those SaaS software publishers who provide industry specific and vertical market business application software will best meet the business objectives of their clients.