CRM crisis? ASPs save the day

Eagle Global Logistics faced a complex problem plaguing many big enterprises: creating a global repository of customer information from disparate systems inherited via acquisition. An adaptable CRM solution was required, one that could be deployed quickly across 300 offices worldwide. After a careful look at the market, Eagle decided to standardize its global sales force of 850 users on Salesforce.com’s ASP offering instead of opting for internally deployed enterprise software, long assumed to be the only viable option for large companies.

“We wanted to manage our business and not the system,” says Stephen Russell, Eagle’s senior vice president of sales, referring to the deployment and maintenance overhead incurred by such enterprise CRM applications as Siebel 7 and PeopleSoft eCRM.

Russell is hardly alone. A September survey of enterprises by Aberdeen Group found that 35 percent of respondents are already using hosted CRM products, with 85 percent saying they will evaluate ASP solutions as they consider deploying CRM for the first time.

But Russell knew that a hosted solution would work only if it could meet his key objective: real-time visibility across sales channels, so that all opportunities and deals could be tracked up to the minute, worldwide. Salesforce.com met that goal, primarily by enabling Eagle to standardize the way data in the sales pipeline was captured and by providing a centralized reporting structure for global sales campaigns. The Salesforce.com solution, which was implemented in just 60 days, has opened a new window on consolidated customer data since the system was deployed more than a year ago.

“We have very strong confidence that we have secured business based upon this improved global view of our pipeline,” Russell says. “If there is a sales channel or customer touch innovation they’re not able to satisfy for us today … I don’t know what it is.”

The growing acceptance of hosted CRM offerings provided by the likes of Salesforce.com, UpShot, Salesnet, and RightNow derives from several factors. For one thing, ASP-based apps have matured over the past few years from basic SFA to full-blown CRM. And of course, the tighter the budget, the better the ASP subscription model looks compared to high software-licensing and deployment costs. More important, CRM by its nature must be widely distributed — and ASPs’ stock and trade is delivering high-functioning applications via the browser.

But recent enthusiasm for ASPs would falter were it not for new and improved integration and customization capabilities, which have finally become competitive with those of enterprise software.

Clearing the Integration Hurdle

When CRM ASPs first rolled out their hosted offerings, most offered minimal support for integration with back-end systems such as order entry or billing. That meant salespeople lacked access to such information as payment problems, purchasing history, or other data that could be used to enhance interaction with clients. On the flip side, without a tie-in to front-office applications that record expectations from the sales force for future sales, manufacturing couldn’t foresee the appropriate level of production.

Travelex, an international foreign exchange company that has standardized globally on Salesforce.com, provides one example of how much has changed. The company easily integrated Salesforce.com’s hosted application with its midoffice system to provide a complete view of its customers, says Michael DeSimone, Travelex vice president of operations and business solutions for the company’s Commercial Exchange Division of the Americas. Originally meant to be used by 65 employees in one division that couldn’t get Siebel to function adequately, 330 users throughout the company now tap the Salesforce.com system.

“The [ASP] apps themselves have been opened up, so that integration isn’t as much of a sticking point as it was before,” says Sheryl Kingstone, The Yankee Group’s CRM program manager. She attributes much of ASPs’ new integration possibilities to standards evolution, noting that “XML is a little bit more mature, and Web services models are more mature.”

Salesforce.com, for example, took integration to a new level last June when it rolled out S3, the newest version of its CRM solution, which is built on Sforce, a new Web services platform that emphasizes self-service integration and customization. In additon, the S3 Enterprise Edition works with a private-label version of Tibco BusinessWorks, offered on a subscription basis as the Salesforce.com Integration Server, which features application adapters for popular Siebel, SAP, Oracle, PeopleSoft, and IBM products.

Web services also provide integration points for RightNow Technologies’ hosted customer service and support solutions, allowing the company’s applications to link to ERP and other back-end systems. The RightNow suite helps companies consolidate customer service and marketing communication histories (obtained via e-mail, phone, or the Web) so that customers benefit from quicker responses to inquiries.

In fact, just about every ASP seems to at least give lip service to XML and Web services. Hosted CRM vendor UpShot Communications — bought by Siebel Systems in October — has improved integration by providing XML APIs that customers can use to tie UpShot to back-end systems and boost the global view of customer and pipeline data. Better integration has also enabled UpShot to address one of the thorniest problems plaguing CRM: getting salespeople to use the system.

Salespeople traditionally have preferred to use existing e-mail systems alone, rather than switching back and forth between e-mail and a CRM system. UpShot can integrate with Microsoft Outlook and Lotus Notes, so users don’t have to jump between applications, and critical sales lead information is automatically captured in both systems, says Keith Raffel, UpShot chairman and founder.

“We not only can tie into the back end, we can tie into the front end as well,” Raffel says. “We can integrate with someone who has … Outlook e-mail on their laptop. You can get access to all the features in UpShot from Outlook, which is huge for adoption because it makes it painless.”

One ASP, Many Faces

If ASPs have made great strides in integration, they’ve moved customization forward just as far. With early versions of their offerings, many CRM ASPs delivered only vanilla versions of their browser-based wares. Other ASPs tried to provide one-off custom versions to demanding customers but failed as businesses because that multiplicity of versions couldn’t be maintained. Today, ASPs are offering self-service customization tools to allow companies to more closely mold services to their specific enterprise processes, according to Yankee’s Kingstone.

“ASPs have gone from offering nothing to supporting very rich customization,” she says. “Salesforce.com can create custom apps and its Sforce platform provides personalization. You can’t necessarily do deep customization, which isn’t necessarily what everyone wants to do today. The goal is to keep that customization and configuration down no matter what,” Kingstone says, alluding to the difficulties IT has had maintaining heavily modified versions of packaged enterprise software.

UpShot is supporting customization through its MultiProcess Management, which is designed to allow all users involved in the sales process to have a view of data that matches the processes they use. Users can employ a drag-and-drop interface to design how they want to view, create, and update information.

RightNow has focused on providing tools to support customization. The University of South Florida in Tampa tapped RightNow after struggling to get an enterprise software solution to consolidate questions received from students and faculty over the phone, Web, and e-mail — all of which had to be routed to various departments to be answered, says Christopher Akin, the university’s assistant director of information technology. “RightNow provides a file-management tool that allows remote access to all of the files needed for product customization,” he says. In addition, the GUI tools for updating the database and configuring 80 percent of the options are built into the application, Akin says.

The university has customized the Web application’s look and feel and customized the e-mail messages the application sends to end-users. “RightNow has built it in such a way that you can have a small manual here locally and customize the app to do whatever you need it to do,” Akin says. “It’s true that after certain changes I have to call the hosting facility to have a server rebooted, but that same call would have to be made to my company’s datacenter if the application was hosted locally.”

In addition, upgrading the application — often a lengthy, complex process when an enterprise company rolls out a new version of software — is eased by a RightNow process that allows users to schedule an upgrade at any time of day or night, according to Akin. “I’ve never had any software upgraded so easily,” he says. “They give you a prototype [of the new version of the service] … to play with first, and then you choose your ‘go live’ date. Because they have already given you a test site, nine times out of 10 you’re not going to have a problem when you go to production.”

ASPs Go Upmarket

Buoyed by the advances they’ve made in integration and customization, CRM ASPs that were once labeled as viable only for the midmarket have raised their appeal to an entirely new market of high-end enterprises. In fact, according to Yankee’s Kingstone, smaller companies seeking out a CRM solution may now be the best suited to run their own software behind the firewall, because the software licensing costs for a midmarket CRM package will probably amount to less than the subscription fees charged by an ASP offering a hosted midmarket solution.

“The real slam dunk … is the upper midmarket and enterprises. That is who really benefits from this,” Kingstone says. “The alternative to a Salesforce.com is a Siebel or a Pivotal or an Onyx, which have pretty robust implementation and maintenance costs. The larger the organization is, the more an ASP solution makes sense because of the functionality they offer, and the fact that if you are looking at a higher-end app … then the ASP model is less expensive. The savings are dramatic.”

One caveat for larger enterprises, she added, may be Siebel’s recent announcement that it will begin offering a hosted CRM solution via a partnership with IBM. “If you do have an existing application deck that you want to integrate it to, and you are already a Siebel user, Siebel OnDemand … adds a wrench into the decision-making, especially for companies that want to easily extend Siebel to smaller departments and remote offices,” Kingstone said.

Siebel isn’t the only vendor of enterprise CRM software to team up with IBM on a venture into ASP territory. In June, IBM began hosting Onyx’s sales force and marketing automation software as the basis of IBM’s CRM OnDemand offering. Onyx’s is also allowing hosting companies to embed components of its suite, now accessible in its entirety as a collection of Web services. For example, Metavante, which offers hosting processing services to banks, now offers components of Onyx CRM to its customers.

The deal with IBM and the company’s embedded component strategy is growing faster than the company’s traditional enterprise software business, says Ben Kiker, Onyx senior vice president and chief marketing officer. In the future, the company expects these two strategies to comprise more than 50 percent of its revenue. “As opposed to buying a horizontal CRM application, these folks are looking to buy a business app,” says Patrick Angelel, Onyx director of corporate marketing. “They just know they have this set of business processes they need to automate and enhance.”

According to Yankee’s Kingstone, recent technology enhancements mean that “the majority of customers will get addicted to hosted CRM.” She adds, “There’s going to have to be a real compelling event to bring it back in-house.”

Denis Pombriant, Aberdeen Group’s vice president and research director of CRM, notes that enterprises may feel more at ease outsourcing customer-related information than more carefully guarded data, such as financials. “We have hit a tipping point, and the drawbacks of hosting have receded from pure showstoppers … to sales objections,” he says. “There’s evidence out there that this is a long-term trend.”