SaaS Model Hurting CRM: Gartner
By CXOtoday Staff
Mumbai, Nov 20, 2008 1530 hrs IST

Organizations are experiencing project savings of 25 to 40% by deploying CRM applications in a software as a service (SaaS) model, according to Gartner. Gartner said these savings came from reduced application expense and lower implementation costs.

Much of the savings that organizations are making is a result of a lesser dependence on large external service providers (ESPs), which typically help businesses improve customer processes as part of the CRM engagement but which play less of a role when SaaS is involved. Among the top 100 SaaS deployments in 2007 and 2008, fewer than 10% involved a large system integrator or an external enterprise business consulting team. This would indicate that the role of ESPs in designing, measuring, and driving CRM process improvements will diminish at enterprises deploying SaaS solutions for CRM through 2012.

"Due to the increasing use of SaaS for CRM, ESPs which include business consulting and system integration services will have less influence on CRM processes as SaaS accelerates," said Michael Maoz, vice president and distinguished analyst at Gartner. "This could result in an erosion of customer satisfaction among large enterprises that invest in SaaS solutions unless they invest their own resources to measure and manage long-term CRM process improvements."

Gartner expects a similar drop in customer experience scores from midsize businesses. They are a stronger target for SaaS offerings, and they rarely use ESPs for business consulting skills.

Maoz said many projects that involve complex customer service contact centers are reported to be "on hold" until better references are available from the large enterprise application vendors that are in the process of releasing a new generation of their products. However, he said that SaaS is the deployment model of choice for an increasing number of projects. Gartner predicts that all forms of SaaS-delivered customer service applications in the call center will grow by more than 20% per year through 2012, and this will deliver significant savings. By 2012, 30% of new customer service and support application investments will be through the SaaS model.

Because SaaS applications lack sophistication in BPM and process design, and due to the absence of ESPs offering business process advice, the growing spread of SaaS CRM applications threatens CRM efforts. "There will be significant savings in infrastructure and resource costs in migrating to SaaS, but to put that money to work in customer process improvements, careful performance measurement of 'before' and 'after' project spending will need to be performed," said Maoz. "If this does not happen, then the savings will be shortsighted, as they will not improve the relationship with the end customer."

In a difficult economic climate, it stands to reason that many businesses will make similar choices and choose not to measure the benefits of the SaaS model. Gartner's advice to organizations deploying SaaS for CRM is to ask the software solution provider for its CRM process credentials and those of its ESP partners.


Related links:
SaaS Catching On With the Enterprise