Key business drivers for ondemand or SaaS solutions

In addition to the regular benefits of SaaS application such as Cost effectiveness, ease of use and maintainability, some of the other drivers of OnDemand solutions are -

Today, organizations are expanding geographically and need their employees to work from home and on the road. OnDemand solutions help develop better communication, coordination and control across the workforce.

Now that everybody has become familiar with varied OnDemand solutions such as email, photo sharing, news, gaming, movies, social networking etc... Organizations are easily adapting to OnDemand solutions.

According to AMR Research 31.1% projects are cancelled before they are completed. Out of the projects that are finally completed, 52.7% overshoot the estimation by doubling the time or budget. For those software applications that are deployed, the maintenance and management costs often amount to ten times the original license fee. In fact, Gartner estimates that 80% of IT spending is consumed by routine maintenance and support, leaving only 20% of the IT budget to focus on strategic initiatives and innovation. The failure of legacy applications are making organizations take up OnDemand solutions.

Most organizations do not use all of their licensed ‘seats’ (software capacity). High maintenance fees and support costs for under-utilized applications are incompatible with the current environment of intensifying competition and tightening operating budgets. Legacy applications are reducing the return on the investment (ROI) and compounding the total cost of ownership (TCO).

In response to these trends, THINK strategies have found a growing willingness among organizations of all sizes to "out-task," or selectively outsource, the deployment and ongoing management requirements for an increasing array of business applications. Over the past two years, THINK strategies have teamed with the Cutter Consortium to survey over 100 IT and business decision-makers worldwide about their interest and adoption of On-Demand, SaaS solutions. The proportion of organizations that have adopted or are considering SaaS solutions has jumped from 65% in 2005 to 74% in 2006.

Not only is SaaS interest and adoption growing, but THINK strategies/Cutter Consortium’s survey research has also found that over 80% of current SaaS users are satisfied with their on-demand solutions, plan to renew and expand their use of SaaS, and would recommend SaaS to their peers. These are far higher satisfaction levels and referral rates than traditional hardware and software can boast of.

The growing success of SaaS has led Gartner to forecast that 25% of software sales will be in the on-demand category by 2010. IDC predicts that the SaaS market will grow at a 21% compound annual growth rate (CAGR) during the next three years, reaching $10.7B worldwide in 2009. In contrast, Forrester Research predicts that traditional on-premise enterprise application sales will only grow 4% per year through 2008.

Is a hosted CRM solution right for your organization

Read some of the analyst comments about hosted CRM.

Leslie Satenstein
With the advent of several “technological changes,” it hardly matters (from a performance point of view) if your CRM package is local or remote.

• Operating systems are becoming less and less important for hosting desktop applications.
• High-speed (fiber) connections are becoming increasingly low cost and widespread, suggesting very rapid display updates.
• Mobile access is becoming increasingly significant.
• Any operating system (Mac, Linux, XP, Vista) that can host a Web browser can be used as the application interface.

CRM hosting is a business that allows one company to provide an application at lower cost than having the same application executing on a local system. The support costs are shared amongst the clients and the host, the licensing costs for the host are lower because of economies of scale, and the client thus benefits.

Remote hosting does and will work for most companies because the data to be hosted can be historic (one day or more older). Therefore, the selection of a CRM application is just based on the distinction between competing hosting vendors and local package vendors. It comes down to mainly ergonomic and business function considerations.

Only when CRM data has to drive sales, marketing, or HR is it necessary to install this functionality in house.

Hosting advantages

• No software investment—just license for each user and, of course, costs per client registered. (Got to make money somehow).
• Salespeople on the road can use the BlackBerry to fetch information.
• Not sure that a CRM hosted product demand can be automatically converted to a sales order. The reverse is possible, however: sales order info can be uploaded to CRM host.

Jeff Spitzer
Advantages of an On-demand Solution

There are many benefits to using an on-demand solution. The most important benefit is that organizations can minimize the amount of resources applied to IT, thereby allowing for a greater concentration on their core business.

As such, an on-demand solution has appeal for the following reasons:

• there’s no need for infrastructure or specialized IT staff
• software upgrades are done automatically on a regular basis
• Web-based systems can be accessed 24/7

On-demand solutions are easier and faster to implement because they are Web-based applications, and therefore it is not necessary to install any software. All data can be accessed from any computer, anywhere in the world, that has an Internet connection. Generally speaking, in the short term, on-demand applications have a much lower setup cost, since an operating system license is not being purchased for each workstation. On-demand applications are billed as a recurring service, either in monthly, quarterly, or yearly billing cycles. The payment cycle is dependent on what the vendor is offering and the organization’s negotiating position. The lease costs can be allocated as a business expenditure, and your organization can get a tax break by leasing out the software, as opposed to the on-premise model which must be amortized over a specified time period, depending on the cost of the software.

An on-demand provider may be able to offer its clients a more sophisticated security system than each individual client would normally be able to afford. This is because although each client pays a relatively low monthly fee, the combined revenue to the provider gives it the financial ability to provide a quality of security comparable to that of large organizations.

Disadvantages of an On-demand Solution

Since an on-demand solution relies on a third-party provider, it puts your business at its mercy. If a vendor goes out of business, there will be a substantial amount of work involved in finding another solution, with a resulting loss of productivity during staff re-training.

There are also security concerns that are particular to an on-demand solution. Your data resides in an external data center that your organization has no control over. Security breaches and natural disasters such as earthquakes and flood can occur, potentially causing the loss of your data. That’s why it’s important to find out if the service provider offers a plan of action to protect your data, known as a redundancy, where the data is stored in a second location, providing a backup in case the data in the first location gets lost or corrupted.

Since an on-demand solution is a pay-as-you-go service, users do not own the rights to the software; it is being leased out to the client, at a premium in cost because of its convenience, ease of use, and most importantly, its limiting the need for an internal IT presence. Several licensing options that have a buy-back clause as part of their agreements are available, but this option tends to be more costly over time compared to an on-premise solution.

Alex Hankewicz

Companies operating in the SMB sphere may prefer the hosted solution based on the following information:

• Cost appears to be dropping—a recent study by Yankee Group estimated that a company with less than 150 employees would have to invest $1.5 million (USD) to achieve traditional CRM with all the bells and whistles—a sizable investment.
• A hosted solution can cost you about $50,000 (USD) per year—you have all the support you require, with customizable look and feel.
• Without in-house technical skills to support CRM, an on-premise application may take limited resources off other more pressing concerns. This is especially true in the SMB market, where resources are scarce.
• If you have a hosted solution, you can claim its cost as a business expense on your taxes.

David Bourque

What Alex mentions is true. However, let me make the following comment:

If your organization is either large or a bigger SMB, then an in-house system will probably outweigh the costs of a hosted system. In the long run, hosted solutions are strictly run from the provider’s servers, and clients must pay the service fee if they want access to use the system. With a hosted solution, this issue is not inherent when procuring the solution. As well, larger firms will want a more complete CRM package, including features such as analytics, sales and customer forecasting, etc. Thus, there are many advantages to an in-house solution for organizations in the call center environment.

The BIG fight (OnDemand Fight)

The OnDemand Fight is getting bigger and better. With the release of Hydrazine from Sun microsystems, the list of big players trying to get into the OnDemand space has become longer. What this proves is that OnDemand is here to stay and all the big players want a piece of the OnDemand Market.

But what is OnDemand, why is it that there are so many companies trying to get into OnDemand space and why is there so much competition?

OnDemand is a convenient new delivery model ( Software as a service) where the vendor will host the IT application maintain and enhance it. This is the most cost- effective and hassle- free way for a organization to go for an IT application.

Customers have begun to accept this model are migrating in big numbers to OnDemand applications.
This has encouraged all the big players to come out with innovative OnDemand applications. Gmail and Yahoo! have e-mail OnDemand. Google has many other OnDemand applications like blogs, calendar, chat, document management desktop etc...

Salesforce has started with serious applications like CRM, which was quickly followed by IBM, Oracle with their own set of applications. IBM came up with platform OnDemand. Oracle has both platform OnDemand and CRM OnDemand. SAP has their OnDemand ERP (SAP by design). Microsoft has recently launched Live Mesh(CRM application). Sun has revealed their plans for OnDemand application.

There are lot of other companies which are getting into Ondemand space with niche applications.
With so much competition and so many launches this space is getting to be a lot more interesting and fascinating. Waiting to see more launches. :)