Hosted CRM

salesforce, NetSuite, RightNow

Holy moley. I've known for a couple of years that the hosted CRM segment was going to explode. This is part of a general trend towards outsourcing processes, but it's also an acknowledgement that the battle for the top is over: Big iron CRM deployments built from scratch just do not constitute a market that companies are willing to compete for. They want the big mid-market, and the mid-market doesn't want the nightmarish complexity and expense of custom-from-the-ground-up CRM solutions.

Ah, but there's the rub. The key to success nowadays is to create a DIFFERENTIATED multi-channel experience for and relationship with your customers. How are you going to do that without a custom-from-the-ground-up strategy? You can't. So, are the hosted CRM solutions for you? Only if they provide you the business process customizability that gives you strategic advantage.

Unless, of course, your goal is to do CRM "tactically". Fine. Pull in an analytics module, a call center module, and so on. Don't risk a lot of money. Don't force a big culture change on your company. For some companies, this can work for a while. For an even smaller number, these tactics can even swing some marketshare to you that won't leave you when your competitors finally wake up. Good for you.

But the downside of hosted CRM is that it is cheap and lower risk, which means anyone can do it, and that means any move you make can be quickly copied by your competitors.

Software always has this characteristic: Over time, it does the same stuff, better and cheaper. The scale attribute of hosted CRM has pushed costs down even faster.

The conclusion? You must choose a CRM strategy that gives you sustainable competitive advantage over a long enough time horizon that you get a better return than your competitors can.

That's a bigger chunk of work than just choosing your next hosted CRM vendor. And guess what? It'll be expensive, and probably require a culture shift at your organization.

Darn. No such thing as a free lunch.

And the same is true of CRM vendors. Luckily, a good number CRM companies are smart marketers and have aggressively differentiated themselves win sustainable marketshare. (Check out SearchCRM's good article on recent moves by RightNow and salesforce.com here). This actually lets you match your strategic needs with a specialized hosted CRM offering. The downside is that the same option is open to your competitors.

Saleforce.com, I believe, has made a good step in fixing this problem by making its basic offering extensible through what amounts to being an "on demand development environment," as SearchCRM aptly puts it. Others are competing on hosted business rules services (RightNow, a great company that gets it) and better dashboards for decision makers (NetSuite). Where will the CRM initiative win at your company: in IT, in the C-suite, or in an more integrated approach that spans all channels and many departments? The answer may help you pick a vendor.