SaaS CRM Simplified

Software as a service, or SaaS CRM, promises to free enterprises from the annoyance of having to deploy and maintain software applications that require frequent upgrades and qualified personnel to run apart from taking up valuable floor space. The two most prominent SaaS CRM providers include Salesforce.com  and NetSuite.

The two companies have created a niche as service providers who help organizations to reduce the time and costs required for installing and running applications by taking over these responsibilities. Yet, even though SaaS CRM has its advantages, not every one is buying into it; there are companies that just cannot afford to have their data outside their systems and others point to the recent outages at Salesforce.com which left several users helpless.

These companies have recognized the inherent inefficiencies of the traditional software market, including the tremendous time, effort, and cost that organizations — especially large-scale midsize businesses — have to expend to install applications and keep them up and running.

It is a common misconception that SaaS CRM is a largely untested phenomenon. Salesforce.com, with its 399,000 subscribers and 20,500 locations has been offering SaaS solutions for the past five years. The company is growing at a rate of 80% per annum. NetSuite, which has thousands of customers all over the world, has been in the business for eight years. ADP, which is the largest payroll application company in the world, has been in business for 60 years. It is the biggest and the oldest SaaS CRM provider with around 590,000 clients around the world.

SaaS CRM has a better chance at succeeding as compared to the ASP models that preceded it. It is favored by a congenial economic climate and new generation application development tools. Hosted CRM solutions and ASPs that came earlier did not succeed because they essentially just sold old wine in a new bottle. The architecture of the software was unchanged; the only service that the ASPs offered was that they housed the applications. However, the ASPs found the operational costs of hosting legacy systems too high and many of them folded up. Also, in the early days of online business, companies viewed their IT departments as strategic assets and were loath to outsource their application needs to third parties. However, the competitive business environment of today and the improved services offered by third parties mean that companies now look at IT as just another business function and not core competencies.

SaaS helps in achieving lower costs by eliminating the license fees and also the infrastructure costs that are a major cost component with on-premise applications. SaaS can be metered as per actual usage and increasing capacity is easily achieved. This means that the cost-of-ownership is significantly reduced, there is no capital expenditure and on-going costs are in sync with the business trend.

SaaS CRM initially found its footing with SMBs but has added scalability to its architecture so that now even mid-sized and large companies can start with a limited deployment to assess the service for reliability and performance and then increase the extent of deployment. SaaS CRM vendors have successfully adopted the strategy of acquiring individual users by offering them free trials or single user subscriptions at very low costs. This has helped companies like Salesforce.com to achieve market penetration and catch the attention of enterprises. The level of acceptance that SaaS CRM has gained can be gauged from the fact that several top companies like SunTrust, AOL, and Nokia are customers of Salesforce.com’s cloud CRM.

SaaS has made appreciable headway in CRM and salesforce automation and is well suited for several front-office functions. At the same time SaaS CRM is increasingly being looked upon as a solution that can be implemented for managing finance as well as the supply chain. Click Commerce, which is an on-demand supply chain management vendor, has Arrow Electronics and Volvo as its customers. SaaS talent management solution by Taleo is used by Aramark, Honeywell, and Dow Chemical.

Surveys carried out by several research firms indicate that industry people and industry watchers feel that SaaS CRM is here to stay and so long as it provides quality and reliable service at a good value for money, its popularity will only continue to grow. The sentiment was most pertinently endorsed in the now famous memo by Bill Gates in which he stated “This coming ‘services wave’ will be very disruptive….Services designed to scale to tens or hundreds of millions will dramatically change the nature and cost of solutions deliverable to enterprises or small businesses.”

The growth of SaaS CRM poses a challenge for the established software vendors who are now being forced to remodel their existing applications, alter their sales and marketing strategies, and also redesign their financial models so that they can factor in the pay-as-you-use fee structures. Companies dealing in legacy software are also focusing on changing their corporate culture and making it more receptive to a service orientation.