Channel Daily News

CRM hosting heats up

Where’s there’s smoke there’s fire, goes an old saying.If true, VARs are seeing flames in a news story from a U.S. technology Web site.
It quoted an SAP press official by name as saying the company will introduce this year a new CRM offering that combines elements of both hosted and on-demand computing.
Details were missing, but if accurate it would inject one of the world’s largest software companies in the middle of the hot hosted applications market.
Hot enough that Gary Shaffran, a senior vice-president of Montreal-based SAP partner Syntax.net, said his firm would “absolutely” be interested in reselling an SAP hosted product.
“The CRM market is finally growing again,” notes Rob Bois, a senior research analyst with AMR Research in Boston, and hosted offerings are one of the key drivers.
The industry is suddenly seeing new kinds of partnerships. Recently global system integrator Accenture argeed to become a reseller of hosted leader Salesforce.com.
“We will see more of that,” predicted Liz Herbert, an industry analyst with Forrester Research. “Clients are demanding it.”

Spending leap
Worldwide, spending on hosted CRM alone leapt 105 per cent last year over 2003, according to AMR. It now represents nine per cent of total spending in the customer relationship management market.
However, the level of hosted CRM spending in this country is unknown. IDC Canada doesn’t break out that category in its figures, but the research company believes it is small.
Still, when SAP enters the market resellers of CRM applications such as Siebel, Oracle, Sage and Microsoft — some of whom already have a hosted option — will have to take notice.
How thick is the smoke?
Initially, SAP Canada told CDN that Peter Weitzman, its national CRM sales director, could be interviewed about the news report.
Then it withdrew the offer.
Instead it e-mailed the following statement from Emile Lee, SAP Canada’s director of corporate communications:
“As the market leader, we have indicated that SAP will continue to expand our CRM offering, and enter markets where customer demands suggest SAP solutions can play a role.”

Analysts certain
Regardless, Bois and Herbert are certain SAP is about to release some sort of hosted CRM solution. The only questions are what market it will be pitched at and how its partners will sell it.
The U.S. report “is probably the most public information they’ve given thus far about getting into the hosted market,” said Bois.
Why are businesses reaching for outsourcing?
Aside from the savings from not spending on software licences and buying servers, it appeals to companies who anticipate a quickly-growing sales staff and want pricing that will scale up as bodies are added — or down, if they have to be laid off.
Young companies also appreciate the relatively simple interfaces and features some hosted applications offer compared to licenced CRM software.
Hosted CRM offers two potential benefits to a VAR: the first is a recurring source of revenue, and the second is the possibility the customer will grow big enough to want to switch to a more sophisticated version of the application.
According to a recent Forrester Reseach survey the biggest interest in hosted sales force automation is from mid-size (500-plus employees), said Herbert, although 40 per cent of small firms who responded to the survey were also keen.
But before resellers start counting the bucks consider this: Siebel’s CRM OnDemand averages 20 users per company, according to Herbert, compared to thousands of users for the licenced version.
At a recent Sage Group conference some partners told Herbert they were making up to twice the licencing fee in consulting, implementing and customization for customers using Sage’s on-premises CRM application. But they were earning less than half that in extra fees from customers using the hosted version.
However, she added, the VARs said they had to have a hosted offering because that’s what many customers want.
Eyes are on Microsoft, which this week began promoting its upcoming CRM 3.0. The company already has a version partners can host, but will it offer a fully hosted solution?

No plans to change
“For the last 20 years Microsoft has relied on the partner channel,” answered Krista Kuehnbaum, the company’s CRM product manager in Canada. “We do not forsee any plans to change that.’
AMR’s Bois sees Microsoft as the biggest challenger to Salesforce.com, in part because its CRM application integrates with Outlook, a choice of many sales and marketing departments.
Even Salesforce.com CEO Marc Benioff has been quoted as saying Microsoft is his target, Bois said, and offering a so-called operating system called Multiforce. “I can definately see them really clashing,” said Bois.
Before VARs become tempted by the lure of hosted customer relationship management apps — or on-premises versions — consider this observation of the Canadian market by Shaffran:
“It’s one of the mysteries to me that there hasn’t been much uptake in the SMB space on CRM.
“I don’t know if hosting is the issue. Before I had CRM solutions to sell, every customer I spoke to said I had to have CRM.
“As soon as I had them it was, ‘Yeah, but I really don’t want to pay for it.’”