In-Depth

Resistance to Hosted CRM Fades, Survey Finds

CFOs' concerns about hosted CRM are no longer deal-breakers

• By Stephen Swoyer
• 09/24/2003

A new report from research firm Aberdeen Group suggests that hosted customer relationship management (CRM) services may have turned a corner—in the minds of enterprise CFOs, anyway.

Aberdeen teamed up with CRM portal site RealMarket Inc. to solicit survey responses from the site’s readers about application hosting in the CRM market. They found that a surprising number of respondents (35 percent) were already using hosted CRM applications. Just as striking, say researchers, was the fact that 85 percent of prospective buyers plan to evaluate hosted solutions when they enter the market for CRM services.

When CRM as a service was first introduced, many organizations were troubled by the drawbacks associated with the hosted model, such as the lack of customization and configurability; third party storage and control of data; support; and lack of interoperability with existing back office applications.

Survey respondents seem to have warmed to the hosted CRM model, however. The upshot, researchers say, is that while many of the traditional concerns are still operative, they’re no longer the outright deal-breakers that they once were. Moreover, writes Aberdeen’s Dennis Pombriant, vice president and research director for CRM, IT buyers have largely accepted the arguments in favor of a hosted CRM model: “The basic benefits that vendors have touted since the beginning of the industry are still important motivators for a purchase. Overall, the reduced buyer wariness and proven benefits (see below) are resulting in solid growth in the hosted-CRM sector.”

Adopters gave hosted CRM high marks for ease of maintenance, easy implementation, low cost, and good overall value.

Researchers found that hosted CRM adopters and prospective buyers are more likely to tap hosted CRM to support specific applications, such as sales force automation (SFA). The majority of respondents gave hosted SFA modules high marks in both importance and likelihood of use. Other important applications are customer service (ranked second in importance, third in likelihood of use) and marketing (third in importance, second in likelihood of use).

Aberdeen identifies a statistically meaningful gap between the percentage of respondents who ranked SFA and customer service applications as important and those who indicated a likelihood of using them. The research firm notes that such applications are already ubiquitous in many environments: In another survey question, for example, 64 percent of respondents acknowledged that they already use sales technology and 46 percent said that they already use customer service applications.

Marketing, sales, and customer feedback applications topped respondents’ lists of technologies that they’re evaluating in 2003. Sales, customer service, call and contact center, and customer feedback modules were tops in the “Will definitely use” category.

The outlook for hosted CRM isn’t uniformly rosy, however. Aberdeen researchers found that when consideration of benefits and drawbacks shifts from the lower cost advantage of the hosted model, support for hosting is correspondingly dampened. Although hosted CRM vendors (such as SalesForce.com) have made noises about ratcheting up the customizability of their applications, the same can also be said of conventional software vendors; many have already done the development legwork to make their applications more easily customizable without requiring source code modification.