Four simple questions to evaluate on-demand CRM.

It's hard to ignore the intense interest that on-demand CRM has been generating lately. Like many new computing paradigms introduced over the years, on-demand CRM is being touted as a revolutionary replacement for on-premises CRM, which is dismissed as an antiquated enterprise software model.

Noticeably absent from all that attention has been a clear-eyed assessment of the on-demand model. A closer examination of the history of computing indicates that new paradigms don't always replace earlier approaches that have proven value. For example, the vast majority of corporate information in the U.S. still resides on mainframe computers, which allegedly were being replaced by minicomputers, PCs and networks. Evolution, not revolution, drives the technology adoption in a very practical sense.

A realistic way of thinking about on-demand CRM is that it is another deployment method, one that may be appropriate for some companies, given the right circumstances. A clear understanding of the benefits and limitations of both on-demand and on-premise CRM is required if your company is to make the correct choice.

What should you be thinking about as you consider whether on-demand CRM makes sense for your company? There are four key issues you should consider: building competitive advantage, managing complexity, application integration and security. Weighing the relative strengths and weaknesses of the CRM solutions available to you in these four, closely interrelated areas--regardless of their delivery option--will make your decision easier.

How Do You Define Competitive Advantage?

In today's intensively competitive markets, many products are commodities. Successful companies in many sectors often differentiate themselves by the quality of the services they provide and the depth of the relationship they establish with their customers. If your company uses services as the basis of its competitive advantage, you will probably require a CRM system that you can easily customize to support the delivery of those unique services. Your system will also need to be flexible so you can quickly adapt your customer-facing business processes to respond to shifting market requirements. Most on-demand solutions provide some customization capabilities, but on-premises systems typically offer stronger process and workflow capabilities that enable easier customization and greater flexibility.

How Complex Are Your Customer Relationships?

Some companies have a multi-unit business structure, with relatively complex customer interactions. For example, a financial services organization may have different business units selling various insurance and investment services and wants to leverage cross-sell and upsell opportunities. Other organizations need to share customer data across their sales, marketing and service functions. Your marketing department may need to provide sales with data on special promotions and campaigns.

Anytime different parts of your company need to talk with the same customer, you need a CRM system that can coordinate and synchronize these activities, otherwise you risk confusing and alienating the customer. This is where many on-premises CRM systems excel, while most on-demand solutions are designed to work within a single department or business unit.

Is Integration Essential?

In many industries, there is no single ERP solution that companies use to manage their entire business. This is especially true in the services sector, which has a history of creating highly customized applications used every day to support mission-critical functions. These specialized applications represent a substantial investment and are not likely to be displaced any time soon. An enterprise CRM solution for customers with this type of environment must be able to easily fit into the existing IT infrastructure. For example, providing sales with the billing history of a customer stored in an accounting system ensures that sales personnel won't try selling a product to someone who doesn't pay their bills. Making that information available to other applications for customer management purposes requires the ability to share data across multiple systems through a variety of interfaces. While most on-demand offerings claim to have integration capabilities, close examination reveals that it typically is done using fairly rudimentary approaches. If your environment requires active bi-directional integration with multiple back-office systems, be sure you have a clear understanding of how your software supplier is going to link in your customer management system.

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What About Security?

Many companies view customer data as their crown jewels. Their systems make extensive use of customer data, and both they and their customers want that information kept as secure as possible. In certain industries (such as healthcare), regulatory compliance and privacy laws demand secure and verifiable protection of information. If this sounds like you, ask yourself if you are comfortable with the notion of your vital data being kept at a remote data center, outside your control.

"Like Deja Vu All Over Again"

On-demand is not a particularly radical new approach to software. In fact, in some respects, it closely resembles the timesharing architecture that prevailed in the 1970s. Regarding it for what it really is, a software delivery model, creates the proper framework in which to evaluate if it is a good solution for your business needs.

It's important to assess your business goals and objectives against the capabilities of the CRM solutions you're evaluating, regardless of whether they are delivered using an on-demand or on-premises approach. This will allow you to reach the right decision for your company. As Yogi Berra sagely observed, "You've got to be very careful if you don't know where you're going, because you might not get there."

Janice P. Anderson, the chair and chief executive officer of Onyx Software Corp. (www.onyx.com), is a seasoned business executive with 22 years executive management experience at both large and small technology companies including Onyx, Lucent Technologies and AT & T. At Onyx, she is spearheading the company's drive to extend its core enterprise CRM solutions with integrated business process management and analytics offerings.

Janice P. Anderson

Onyx Software Corp.