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If you're a small or medium sized business, chances are you've heard the new Customer Relationship Management (CRM) catchphrase being tossed around frequently called 'on demand CRM' or 'hosted CRM' or 'CRM software-as-a-service'. On-demand CRM should imply that the CRM is web based, hosted and licensed as a service over time rather than incurring high up front costs.
On-demand CRM is a natural progression of CRM that uses the Web as a delivery medium for the software, reducing costs while simultaneously increasing time to market for feature upgrades and providing better security, scalability and reliability due to a multi-tenant software architecture and sold as a vendor managed service. Upgrades are included free during the lifetime of the contract for service.
In the following article, we'll discuss some of the pitfalls of traditional installed-on-premise software based CRM solutions, which until recently were the only choice and due to high costs and severe complexity were only available to the largest companies, governments, etc., and contrast them with how hosted CRM leverages the Web to alleviate the problems encountered by customers of traditional CRM.
Problems with Traditional installed-on-premise CRM:
High Cost: One of the main pitfalls of a traditional installed-on-premise CRM software solution is the high Total Cost of Ownership (TCO). Most small-medium sized business can't afford the enormous software acquisition fees, let alone the cost of purchasing or upgrading existing IT infrastructure, hiring and training new IT staff to maintain this infrastructure, training all existing staff to use the software efficiently, et cetera. The list is almost endless, and most of these costs, save for the up-front acquisition fees, are hard to predict and often run over budget by folds. When a company is setting up a budget for a project of that magnitude, they will generally have to see a guarantee potential for a large ROI (Return on Investment) for that project before even undertaking it. The problem is that return can be often difficult to predict for traditional CRM, leaving the customer holding the bag.
This cost is also compounded by the extensive time it takes to im plement an on-premise enterprise CRM solution. Implementations can take up to 8-12 months to get a fully functional solution in place and usable. Frequently, more than half of this time is billable to consultants ? before employees actually get to use the CRM. This extensive time sink is not only detrimental to the time frame it takes to begin seeing a positive ROI on your CRM solution, but when all your IT consultants and Systems Analysts are charging you by the hour to discuss how to implement your software based system ? it all adds up quite quickly. Failed on premise, installed enterprise software implementations are notorious for failing, often the quickest solution being to upgrade to the latest version of the software; and you're back on the treadmill.
Lack of Flexibility: The idea behind any business is to grow and prosper. A CRM solution will help accelerate that process by increasing the LTV (Lifetime Value) of your current customer base, help increase sales and gaining control over marketing. However, as your company grows, your CRM needs will change in many areas.
As these needs become more and more pressing, a software based solution will cease to be everything that it was when it was first implemented. Faster servers, newer operating systems, outdated software all contribute to the necessity to overhaul the entire system periodically. In today's world this can easily mean every year or two which factors greatly into the total cost of your CRM solution, as you'll have to acquire new or upgraded software licenses, retrain your staff with the new changes so that they can again be as productive as possible, and possibly upgrade your IT infrastructure again, depending on how out-of-date the previous implementation has become.
With no room for potential growth of your business without incurring substantial costs and to be locked out of the latest in technology that your current vendor currently sells is what is referred to as 'vendor lock-in' and it is traditional enterprise CRM's dirty little secret.
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