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The top on-demand CRM and SaaS CRM FAQs

Browse our list of the top on-demand CRM and SaaS CRM FAQs and learn about on-demand CRM vs. on-premise CRM, common SaaS CRM implementation pitfalls and SaaS security. FAQ series  We've compiled this list of the top SaaS CRM FAQs from experts Paul Greenberg and Denis Pombriant. This FAQ series was designed to help you get quick answers to some of the most common SaaS CRM and on-demand CRM questions. Learn about the differences between on-demand CRM and on-premise CRM, what to look for in a SaaS CRM application and common problems with SaaS CRM implementations.


Denis Pombriant

Denis Pombriant, Founder and Managing Principal, Beagle Research Group, LLC

Researcher, analyst, columnist and blogger, Denis Pombriant has been providing innovative thought leadership to the CRM and on-demand markets since 2000. First as a vice president and practice leader at Aberdeen Group and, since 2004, as founder and managing principal of Beagle Research Group, LLC, Pombriant has provided unique insight into the rapid evolution of the on-demand and CRM markets.

Paul Greenberg

Paul Greenberg, President, The 56 Group

In addition to being the author of the best-selling CRM at the Speed of Light: Essential Customer Strategies for the 21st Century, Paul Greenberg is President of The 56 Group, LLC, an enterprise applications consulting services firm, focused on CRM strategic services and a founding partner of the CRM training company, BPT Partners, LLC, a training venture composed of a number of CRM luminaries.


  Comparing on-demand CRM and on-premise CRM  

Q: What are the main differences between on-demand CRM and on-premise CRM?

Paul Greenberg
President, The 56 Group

A: The differences between on-demand CRM and on-premise CRM are substantial. They are architecturally different, with on-demand CRM being constructed around what is called a multi-tenant architecture – meaning many clients can run off a single instance of the applications/services that reside on a server at a remote site. On-demand applications are ordinarily accessed via the Web. Alternatively, the on-premise versions are each a separate version that resides on a server that sits behind the firewall of a company. The CRM application there is ordinarily accessed via the desktop or some remote connection to the desktop.

The on-demand business model is hosted, meaning that the CRM provider is not the company that is using the application but another company that is assuming the overhead -- the server maintenance, the data maintenance and the costs associated with that. A company usually pays for on-demand CRM through a per-user monthly subscription fee. Often, there are costs associated with the start-up of the application or the customization required, but the maintenance costs are built into the subscription fee. Alternatively, the on-premise model includes a license fee that pays for the installation and implementation of the software and the hardware that it needs to run. There are usually service fees associated with the implementation. The license to use the software is also often priced per user or by server or by flat fees.

The features and functions are pretty much the same in each. For example, whether it's on-demand or on-premise, the sales functionality is the same. The on-demand model has gained huge ground over the past few years, and all but the most complex implementations are likely to benefit from going on-demand rather than on-premise.


  Evaluating on-demand CRMor SaaS CRM?  

Q: What basic criteria should we use to evaluate Software as a Service (SaaS) CRM? How is evaluating SaaS CRM different from evaluating on-premise CRM?

Denis Pombriant
Founder and Managing Principal, Beagle Research Group, LLC

A: You should evaluate Software as a Service (SaaS) CRM the same way you'd evaluate any CRM product -- first, take stock of your needs and then try to find a product that best meets those needs. Also, you need to take into account the time and cost of customization, because no solution will ever be perfect.

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 SaaS presents additional issues to consider. We're in a building phase for SaaS, and most of the infrastructure that provides high reliability in other utilities, like the phone system, is still being deployed in SaaS.

One of the most important issues, in my mind, is backup and how well protected you are against experiencing downtime. I think it is unreasonable to think that you will never experience downtime, so you want to ensure that it will be minimal. In my opinion, a vendor that has a fully redundant data center to back up the primary gains points in the evaluation. A vendor that needs to ship backup tapes to another location in the event of a problem is a less desirable choice.

Evaluating and managing your expectations appropriately will be a big help in this era when the SaaS infrastructure is still being built out.


  Common problems with SaaS implementations  

Q: What are common problems with SaaS implementations for ERP and CRM, and how should we plan for them?

Denis Pombriant
Founder and Managing Principal, Beagle Research Group, LLC

A: A SaaS implementation for ERP and CRM is a big deal and you do need a plan, but even before that you should be looking at your business processes and asking yourself what kind of support those processes need. What applications are involved? Where is the data stored? What kind of response times is needed? Can you work with a batch update to the data once a day, or do you need near real-time access to new data regardless of which system owns it?

Batch data updates tend to be relatively easy and there are extract, transform and load (ETL) tools to help with the process. For more real-time data sharing, you need integration technology or middleware, and you need to evaluate the options out there. I can't tell by the question whether both your ERP and your CRM systems are SaaS or just one, but any time you deal with SaaS you need a service-level agreement (SLA), and if the two systems are from different vendors, you need to consider what happens if one system is down -- how is transaction data stored, etc?


  SaaS rolloutimplementation cost  

Q: Is there a general rule on the implementation cost for a SaaS rollout at 20+ locations?

Denis Pombriant
Founder and Managing Principal, Beagle Research Group, LLC

A: If you have 20+ locations, this will significantly affect implementation costs owing to travel and training, and those costs are highly variable -- so no, there is no rule of thumb. There are also customization costs and other services that the annual fee may not cover.

I would look at the costs involved in deploying other systems or the costs of other similar projects within your organization to come up with an estimate. You could also ask to speak with reference customers for the vendors you are considering and get their input on projected costs.


  Are there SaaS CRM security risks?  

Q: What are the security risks associated with SaaS CRM?

Denis Pombriant
Founder and Managing Principal, Beagle Research Group, LLC

A: This is a great question on several levels. Security issues with SaaS were largely settled for many vendors a few years ago, but the issue of security -- and a formal approach to managing it -- is causing some old issues to resurface. The formality is being driven by new technologies that live under the umbrella of governance, risk and compliance (GRC).

There are industry standards in place for data centers but, in my opinion, that's not enough because vendors aren't required to use them. A large and successful SaaS vendor may have all of the security bells and whistles, but a small vendor that is just starting out may not. The problem is that on the Internet both vendors can look big, prosperous and secure. Buyer beware!

I think physical security is pretty well managed for most vendors, and procedures within any organization can help prevent hacking, phishing and other attacks. However, the evidence suggests that it's not perfect. Still, I think vendors can do a better job of maintaining security than many small companies can simply because they have more capital and other resources dedicated to the task.

In my opinion, security risk gets dicey in areas you don't see or think about much. For example, what about the risk of having a single data center backed up to tape? The single location might be at risk for a natural disaster, and without a live, mirrored backup, recovering from the tape might be possible, but who knows how long it could take for the tape to reach a safe place?

I think business downtime with on-demand CRM or SaaS CRM, not outright data loss, is the big security risk today. It's not what you'd think of first, but I guarantee it's something a lot of vendors are already working on. When an on-demand vendor has an initial public offering (IPO), one of the targets for that new money is a mirrored data center. Check the government filings.


  SaaS CRM pitfalls  

Q: What kind of support can we expect from SaaS CRM software vendors? What are some common pitfalls?

Denis Pombriant
Founder and Managing Principal, Beagle Research Group, LLC

A: There is no concise answer to this question because many things can happen, and each vendor might prepare differently for those possibilities. For example, downtime is something that many people keep under a microscope -- for good reason. Most large SaaS CRM vendors have taken the step of ensuring that their facilities are up to the standards that the industry has developed over the last few years. These standards insulate the physical facility as much as possible from things like earthquakes and floods. They also have uninterruptible power supplies, and each has rigorous on-premises security to prevent intrusion. Nevertheless, people still worry about backup and recovery as well as security and encoding their communications, and a great deal more. Suffice it to say that the foreseeable problems -- the ones that made some people skittish about this form of computing -- have been dealt with.

Pitfalls include downtime and data loss, which can take us in a lot of directions. Data loss is not something that I lose sleep over, given the redundancy of modern systems, but downtime can still be an issue. Downtime might not cause you to lose your data, but it may prevent you from getting at your data -- which can be just as bad. Many of us think about SaaS in Boolean terms -- it's either on or it's off, and we have been conditioned to think that it's always on. But consider what would happen if a primary site were to suffer a catastrophe that caused the site to restore a backup. While it is very possible that no data would be lost, it is also possible that restoring from a backup could take a while -- 24 to 48 hours or more.

My advice is to ask your vendor what the recovery plan is in such an event. Some vendors have mirrored data centers so that a problem in one will simply mean that another center has to take over the load. That could degrade performance temporarily, but considering the alternative, it might be fine for a short time.


   Planning for SaaS CRM downtime  

Q: If my on-demand application goes down, what are some best practices for dealing with users during downtime?

Denis Pombriant
Founder and Managing Principal, Beagle Research Group, LLC

A: The best practice that I can think of is to have a plan ready for such a possibility. Better yet, ask yourself whether there are ways to build redundancy into your daily practices. For example, most on-demand solutions give you a remote or disconnected user capability for those times when you might be out of wireless range. Most also offer a download of some information to desktop products like Outlook. Using some of those capabilities can build redundancy into your daily practices, so that if you have an event, you might be able to get by for a short time.


  BPO and CRM  

Q: I sell SaaS CRM applications to different vertical industries. I'd like to understand how a company using business process outsourcing (BPO) can benefit from deploying an on-demand CRM solution.

Denis Pombriant
Founder and Managing Principal, Beagle Research Group, LLC

A: One of the advantages of on-demand applications in a situation like this, where BPO is being used, is that the application can be made accessible to any party in the company's business process network, with proper security being observed. You could do the same thing with an in-house system, but you would be responsible for essentially building your own on-demand solution with a private network and all the rest. Who needs that?

CRM brings together all of the information about a customer in one location or database. There could be situations where you might be doing your job in North America while a part of service and support is taken care of by an on-demand call center in some other part of the world. Having a single version of the truth across all elements of an outsourced business process network is a great way to enable information sharing throughout an organization.

Much the same can be said of national accounts. Are you serving national accounts from regional offices that don't share information well? If so, you are losing a lot of valuable opportunities to serve your customers with consistent pricing, policies and services. Whatever the customer-facing business process, having the flexibility that an on-demand CRM system provides gives you the benefit of being able to see the big picture.


  Will on-demand CRM replace on-premise CRM?  

Q: In your opinion, in the future, will on-premise CRM be completely replaced by on-demand CRM, or will on-premise implementations always have a place in the CRM market?

Denis Pombriant
Founder and Managing Principal, Beagle Research Group, LLC

A: When I think about on-demand CRM and this question my mind goes naturally to -- radial tires. Yup, radial tires came on the market in the 1960s or 70s, I believe. At first they were available only on imported cars -- my brother's MG had Pirellis, and I will never forget the experience of taking my first corner in a car with rack-and-pinion steering and radials. Wow! It was better in so many ways. Old bias-ply tires were the norm, and for a while it seemed that there would always be a division and the two types would co-exist. Then, the inevitable tipping point occurred. Radials lasted longer, gave a better ride, used less fuel and wore more evenly -- overnight, we all went to radials.

We've been through the same kind of transition in the last eight years with on-demand computing. We've seen the superiority and the ease of use associated with on-demand CRM. In my mind, the question is this: When will vendors wind up their on-premise businesses and go completely on-demand? This changeover is a business model issue and very complex -- more complex than changing the tire-making technology.

The other thing to keep in mind is that tipping points are very specific. For example, on-demand sales force automation software (SFA) is a "no-brainer," but using on-demand software in the call center is a different matter. There is still a legitimate reason for a large call center operator to operate an in-house call center despite the fact that on-demand call center solutions already exist. The issues are cost, complexity and control. So, for the time being, I think we are in a transition state. The real question is: How long will the transition last?


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