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Evaluating online CRM models

What do you think of the online model for CRM? What are the risks and benefits? When evaluating an online solution against traditional client-server software, what questions should I ask?
The online or hosted model for CRM delivery is not right for everyone but for the growing number of companies that have tried it and liked it, the hosted concept can provide an elegant solution when business needs collide with budget realities. We've done some studies that indicate that hosted solutions can save up to about 80% of the cost of a conventional licensed solution because users of hosted solutions don't have to pay for licenses, hardware, and networks as well as the IT labor costs associated with keeping the systems up and running. And while there are some implementation costs associated with a hosted solution, they are nothing compared with the months long customization and implementation costs associated with a conventional system.

That all sounds good but there are also some down sides. Depending on the application and the business need, an organization may determine that it requires customizations to its selected solution(s). If that's the case, you're better off with a conventional approach which you can customize till the cows come home (and that's a potential problem). Hosted vendors have been good about building solutions that can be configured (i.e. you change the behavior of the system by adjusting parameters through the user interface rather than touching the source code) instead of customized and this approach works well most of the time.

So the questions you should ask, in my opinion, when deciding on a CRM solution, start with your needs. Evaluate your requirements very carefully and make sure you define them in business terms. For example, a statement like "We need to boost sales rep. productivity as measured by number of sales calls per day or proposals per week or whatever." is much better than "We need to increase sales" or "We need a CRM system". So think about it a lot.

Things you'll want to ask the vendor about might include the SLA (service level agreement) i.e. what does the vendor guarantee about system up time, What happens to my data if the vendor goes out of business? What provisions are there for me to get my data back from the vendor if I decide to go elsewhere? Can I use the hosted solution with an in-house application or one from a third party? Most of the hard questions have been asked and answered already so don't be bashful about asking.

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