Insight into alternative CRM: on-demand and open-source.

According to Gartner, roughly 50 percent of CRM implementations fail to meet customer expectations. It's no secret that getting your employees to adopt a CRM system is often difficult and incredibly stressful. How can you find a "magic" CRM system that will grow your business, give you an edge over the competition and be readily adopted by your employees? The answer: do your research.

Unfortunately, there is no magic CRM system out there. Choosing the right CRM solution for your company will depend on a variety of factors, including your company's size, competitive environment and strategic goals. If you're willing to look beyond the most popular enterprise CRM vendors out there, you may discover that alternative CRM deployments, such as on-demand and open-source applications, can better suit your needs.

Lesson #1: Forecast Your Short- And Long-Term Needs

When choosing a CRM system, you'll want to focus on what features your business needs in the short term. On-demand, or software as a service (SaaS), CRM deployments continue to grow in popularity for companies that need dependable CRM solutions but that don't have the internal IT support to manage an in-house solution. If you prefer for a vendor to manage your CRM application, on-demand may be the best deployment option for you. With the growing availability and speed of the Internet, on-demand CRM presents a convenient method for accessing your data and maintaining relationships with your customers. If you're a small company with little need for complex technical customizations, purchasing an on-demand CRM solution for ease of access may fulfill your CRM needs and help grow your business.

Today, on-demand is gaining speed in the marketplace as AJAX and other Web 2.0 scripting languages enhance the functionality of Web-based applications. For example, AJAX (asynchronous Javascript and XML) allows users to easily customize the look of on-demand applications. If you have ever used Google Maps, you've used AJAX, and you understand the luxury of dragging around images or modules and loading information instantly in one portion of a Web page without reloading your whole browser. In addition, on-demand CRM applications often have more features and modules than needed by smaller companies. AJAX allows customers to design user interfaces (UIs) for on-demand applications, thereby helping each user customize the layout of the application to optimize user interaction.

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Though an on-demand CRM application may be the simplest way to manage your customer relationships, remember that SaaS is not a common adoption for the enterprise. In a recent report (June 2006) on the presence of SaaS in the marketplace, Gartner analyst Michael Maoz wrote, "Right now, SaaS is a very small part of the marketplace. It only takes up one-half of one percent of overall enterprise applications. If you look out eight or 10 years, that might go up all the way to 30 percent."

If you decide that on-demand CRM is preferable for your business in the short term, don't forget that it's a good idea to forecast your long-term CRM needs before investing in a solution. For example, as a small company, you probably won't need to customize your system very much and will therefore be well serviced by the basic or easily-customized features of an on-demand system. You probably also won't have sensitive information from your clients and can therefore stand to host your CRM solution through a Web browser rather than behind your firewall. As your business grows, however, you may need to build more functionality into your CRM system--capabilities not available through or supported by your Web browser-based on-demand solution. In addition, while on-demand applications require only an Internet connection for access and therefore seem convenient, a faulty ISP or bad Internet connection can leave you completely locked out of your system.

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This brings us to the issue of security. On-demand systems require you to send information outside of your firewall, compromising the security of your clients' data. In the event that your business grows to hold sensitive financial or personal information about your client base, you may run into corporate or regulatory requirements that will force you to look into an installed (on-site) application, or even an appliance.

Another issue to consider with SaaS applications is interoperability. A good on-demand CRM application may not serve a growing company's reporting, analytics, marketing and project management needs. To avoid this problem, some on-demand CRM vendors offer exchanges where customers can shop for third-party on-demand applications to run on top of their existing CRM database. In this case, your CRM vendor will most likely certify and support the third-party solutions.

Ideally, your small business will grow, right? Forecasting your long-term CRM needs may alert you to the possibility of your business needing to switch to an on-site deployment in time. Unfortunately, if your growing business begins to outgrow an on-demand CRM deployment, you may find yourself in a fix when migrating to an alternate installation or appliance. Switching from one CRM vendor to another can be costly, time-intensive and just plain painful.

The best way to avoid this is to ensure that you have a variety of deployment options. If you'd like to start with an on-demand system but can foresee moving to an on-site application later on, consider a CRM configuration that offers both types of products. If you're switching systems within a single vendor, you will probably face added migration costs, but you are more likely to avoid the headache of integrating your old data with a newer system. This means less training for your sales force and more time for interaction with and service to your customers.

Lesson #2: Look Into Open-Source

If you are in need of a stable and reliable CRM application but don't have the capital to finance a proprietary deployment, remember that open-source CRM applications are cost-effective alternatives that may offer you the same capabilities and features that you need to manage your customer relationships and to grow your business.

Because proprietary applications are closed-source software, customers are always in danger of facing vendor lock-in after the initial buy. After investing in a proprietary CRM application (on-demand or on-site), you may eventually find yourself using a CRM system that doesn't play well with other applications (unless you pay more). Similarly, as you look to customize a proprietary CRM system, watch out for unexpected hidden costs.

Commercial open-source CRM is available from multiple vendors through on-demand and on-site deployments. Often, these vendors offer a free open-source version of their product as well as commercial professional and enterprise versions based on the same open-source code. The professional and enterprise versions are available for sale, usually through an annual subscription, and often include added support and increased functionality, and will accommodate larger deployments.

When looking into an open-source or commercial open-source CRM solution, remember that open-source applications follow a different development model than proprietary applications. Open-source applications expose their software source code and rely on developer communities to scan the application's code base, fix bugs and build additional plug-ins and modules to extend the functionality of the open-source project core platform. One benefit to adopting an open-source CRM application is that you will gain access to a community of developers that can help you with customization and support questions through online forums and wikis. Open-source developer communities can also help internationalize an open-source application quickly. If you have a global business, you may look into an open-source CRM vendor that offers a variety of language packs, recognizes and accommodates data entries from various time zones and integrates with various scripting languages.

Open-source CRM vendors often have much newer code bases than large, proprietary CRM vendors and can therefore develop flexible, user-friendly solutions using today's popular software development languages. Because open-source software development relies heavily on a developer community that works pro bono, commercial open-source companies are able to invest heavily in research and development while maintaining lower costs than proprietary vendors.

Your open-source CRM provider may also have an exchange where developers can sell their certified extensions to the open-source CRM platform. If you're a small business with niche CRM requirements, open-source CRM may help you gain a business advantage that only your largest competitors can afford.

When looking at open-source CRM applications, don't forget to research how active the development community supporting the open-source project is. If there is a large community of registered developers and if you see a healthy number of vibrant projects and active forum postings, you'll know that you're looking at a good, mature project. If you don't see an excited community, you are looking at either a very young project or one that doesn't serve a large variety of customer needs.

One final bonus to note: if you're interested in shopping around for a CRM system, keep in mind that you can download open-source applications and start using them for free. If you're on the fence about what type of solution to choose, consider testing one or more open-source applications before turning to a proprietary vendor. Though you may find that open-source CRM products serve you well, you will at least have the opportunity to try out a CRM application before investing money in a particular solution.

Chris Harrick is director of product marketing at SugarCRM (www.sugarcrm.com), a provider of commercial open-source customer relationship management software for companies of all sizes.

By Chris Harrick

SugarCRM