Greg Gianforte is a self-confessed serial entrepreneur whose latest business venture, RightNow Technologies, was founded in 1997. Unusually headquartered in Bozeman, Montana, a long way from the software hothouse of Silicon Valley, it began life in the crowded world of conventional CRM software. But the way RightNow delivers its product has changed dramatically since the company was launched. While the company was always able to sell its software as one slice of a larger program accessed over the internet and paid for in monthly rental instalments, RightNow signed most of its initial deals in the traditional manner, with software licensed and installed at the customer’s premises. Today, those deals are in a minority. “We always offered to host software on the customer’s behalf and now 90 per cent of our customers choose that route,” says Mr Gianforte.
The hosted model has generated the usual plethora of buzzwords that the jargon-obsessed IT sector so loves. It is referred to variously as On Demand software, Software as a Service (SaaS) and hosted. But like all good ideas this one is really very simple. The customer rents out a chunk of a large computer program, pulling down what he/she needs via the internet and leaves all hardware and maintenance considerations to the supplier. The best way to describe this model is online software rental, and it has provided a rapid route into CRM products for thousands of small businesses that would never have wanted to take on the responsibility and complexity of a traditional CRM software package.
RightNow’s founder stresses that his hosted software has plenty of corporate users, and notes that there is more to moving software offsite than saving money and hassle: “Hosting is just as advantageous to large companies where IT projects tend to hit delays.”
Mr Gianforte ticks off the practical attractions of hosting. Any upgrades are done by the supplier at his site, hardware purchase and maintenance is the supplier’s problem and above all, the IT staff are working for someone else. This latter point brings the argument back to the small and medium sized enterprise (SME) sector, where recruiting and retaining IT specialists can be tough in a buoyant economy.
Carol Meyers is senior vice-president at Unica, a company that sells data analytical programs and the expertise to delve into CRM statistics and spot when a valued customer may be about to defect. Unica offers on-premise and hosted services, and has carved out a niche providing highly specialist support at an affordable rate. Ms Meyers notes that hosting “gets a lot of headlines” but still only accounts for about 10 per cent of the CRM software market. Staffing is the key issue for smaller customers, she believes: “Hosting is great if you don’t have, or need to have, the necessary expertise in-house.” Shrugging off the responsibility of sourcing rare talent in fields like data analytics appeals to executives way beyond the IT department.
The company that has done more than any other to amplify the hosted CRM noise is Salesforce.com. Launched in 2000 with a cheeky motif featuring the word “software” trapped in a red circle and cancelled out by horizontal band indicating that the staple product of IT sector giants was now a banned activity, Salesforce.com thrived on a radical image. The company blasted out the message that software was now a utility to be rented at monthly fee and consumed as casually as electricity. The company portrays itself as an evangelist for change, sweeping away the old practices of traditional software vendors.
This aggressive approach has certainly paid off. Today, Salesforce.com boasts 30,000 subscribers representing 646,000 active users. It is in the process of rolling out online customer tracking and product sales support to 25,000 staff of financial giant Merrill Lynch. Apart from giving Salesforce.com a blue chip customer to crow about, this deal underlines one of the big attractions of the hosted argument. To introduce a critical support product across this many users in the traditional way would be a huge undertaking with high risks. Cost overruns and deadline-busting are commonly associated with large in-house implementations.
The online rental model offers to cut through the traditional software project timeline and bring the product straight on to the users’ PC screens. Thus, it dispenses with the potential of a failed strategic project, a nightmare that haunts all career-conscious corporate IT managers. And the marketing doctrine of Salesforce.com speaks directly to anyone who sees IT as a commodity that has spent far too long preening itself in front of overawed customers. “Any 12-year-old can use this”, says Steve Garnett, Salesforce.com’s European chairman. “It’s a utility – we are not trying to sell them software.”
The level of enthusiasm around hosted CRM makes it hard to find critics beyond the traditional vendors, who have all rushed out their own hosted versions in order to cash in on a wave of interest from smaller customers. One observer who thinks the hype may have been slightly overdone is Terry Doherty, founder of Doherty Associates, a London consultancy that manages IT for SMEs across Europe. Remote support via satellite links is standard practice at Dohertys, so Mr Doherty doesn’t dispute the value of popular hosted CRM products. But he cautions against seeing the hosted model as a substitute for solving deeper problems. “The real power of all CRM is that it automates an existing sales process,” he argues. “So you must know what it is that you need to fix before you take the decision to employ it, and what it is that you need from it.”
In the end, all software is only as smart as the people who use it.
