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Think You Know On-Demand? Think Again
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August 05, 2008
by Jason Compton
Think You Know On-Demand? Think Again
Special report: on-demand
The business of technology-aided customer strategies continues to evolve. And with that evolution comes an expanded range of solutions designed around the one-to-one interactions of companies and clients, geared for quick deployment and fast results using proven strategies. On-demand solutions, which are typically provisioned on a subscription basis and deployed to users through Web browsers, can help modern businesses get the right customer insight to the right user at the right time to build a relationship, close a sale, or save a defection.
Experts have tended to be bullish on on-demand solutions' collective ability to win customers and drive expectations of how quickly and cost-effectively CRM solutions can be delivered. "The nature of business applications will change so rapidly through 2012 in the CRM market that the traditional notion of a CRM application suite is already being destroyed," writes Michael Maoz in the Gartner report "CRM Beyond Web 2.0 Features 'Rich Clients' and Software as a Service."
The focus is no longer on the viability of software-as-a-service but is now on the extent to which on-demand customer-facing applications will continue to alter the CRM landscape, and deliver not only the commodity services of customer databases and opportunity tracking, but a flexible, powerful solution to govern the entire course of the customer relationship.
Still Strong in Sales
Despite being one of the first successful areas of on-demand development, sales automation continues to win new converts every day. On-demand SFA providers have moved beyond least-common-denominator functionality and have expanded both the breadth and depth of their offerings, expanding to financial services, complex sales cycles, and multilingual support.
"We wanted an ASP because there was no value in supporting [sales automation] internally. Our IT resources are limited, as they are in most organizations," says Sean Foley, vice president of network operations at Acadian Asset Management. After several years of experimenting with various on-premise solutions, Foley was so frustrated that he ran customer operations on Act! for an interim period, simply because he knew the data in the ubiquitous information manager would be portable to any solution the company selected. Ultimately, the company implemented Satuit's on-demand solution for customer management over both on-premise and generalist on-demand solutions because of the focus on the financial management vertical. The company has been able to quintuple the number of users who have daily access to customer management data, without devoting IT resources to support basic customer contact and service activities.
Keeping IT out of the equation has long been a selling point of the on-demand set, especially when it comes to basic sales force automation. Vendors have attempted to stick close to that message through a combination of prepackaged integration wizards and a canny focus on the most important, lowest-common-denominator problems facing businesspeople. "Quite frankly, once you've integrated with an accounting package and Outlook, that meets the requirements of 90 percent of SMBs—and that's who we serve," says Paul Johnston, president and CEO of Entellium.
On-demand vendors like Salesforce.com, RightNow Technologies, Salesnet, and NetSuite also recognize the value of integration, and so continually add new capabilities, offering both breadth and depth in all areas of customer interaction.
Breadth and depth for on-demand
On-demand knowledge bases and customer self-service are other growing areas for the discipline. Newer solutions focus on merging information available to end customers and internal support agents while still preserving unique functionality for each, as well as having greater awareness of customer activity outside the support center.
Zone Labs, publishers of security software for desktop computers, has moved its external customer service knowledge base to an increasingly on-demand model since it first adopted UniPress Footprints almost four years ago. The application, which manages tens of thousands of customer requests per month, was originally hosted and managed internally, but over the past two years, has been made available on-demand from UniPress's data center. The change has enabled Zone Labs' customer service organization to get faster and better action on its requests for new functionality or changes. "Footprints kept getting bumped down in priority by IT for adding more fields or forms. It just made more sense to go with hosting," says Gary Garcia, director of endpoint product escalation at Zone Labs. "Our internal tools weren't getting the highest priority."
In addition to faster turnaround on changes to the customer service system, uptime on the Footprints interface has jumped from 82 percent to 99 percent, meaning Zone Labs can properly field all customer inquiries without losing customers to frustration over a broken support interface.
Now companies are turning to on-demand solutions for broader self-service requirements, particularly to solve a mounting problem in a short period of time. Mobile email provider Visto, for example, has turned to self-service to support its resellers. Visto managed its own online document and information portals for its reseller partners, but as the number of partners grew and as those partners increasingly required access to custom-branded materials, the company's lean marketing staff found the situation was becoming unmanageable. "We would give out a generic username and password so people could jump in and grab what they wanted—but there was absolutely no security, and I was the middleman for all of the updates," says Todd Lauer, Visto creative manager.
A veteran online content manager, Lauer felt confident that the company could have deployed its own customer portal system, but experience taught him that he wanted an alternative. "I've been through the hunt multiple times now. It's not a security thing or a question of whether we could do it, but the manpower to design it, run the servers, would be just one more thing we have to do," he says. "You need resources for that, which we don't have, because I am basically the creative department." So Visto engaged iCentera to deliver its reseller portals on-demand. Since iCentera charges primarily based on internal publishers rather than external clients, Lauer estimates that the company saves at least $15,000 per year over the cost of internally licensing comparable technology, while incurring none of the management headaches. In return, Visto's reseller partners get easier and faster access to just those documents that are useful to them.
Making the marketing move
Marketing activities remain an interesting but still underdeveloped area of on-demand. "[On-demand] marketing applications are still fairly weak. The only company that has put in a lot of R&D has been RightNow, outside some of the best-of-breed, independent vendors such as GotMarketing and ExactTarget," says Sheryl Kingstone, CRM program manager at Yankee Group, referring to mainstays of largely Internet-based on-demand marketing solutions.
Some of the other successful on-demand marketing forays have attacked problems that benefit from a proven, programmatic solution. Loyalty Lab, for example, has identified a specific niche of clients that have sophisticated needs for customer intelligence, but limited means and ability to implement their own loyalty and analysis programs. High-end steak catalog retailer Montana Legend adopted Loyalty Lab to augment its existing CRM efforts because it needed an edge to stay competitive against other local and national sellers, but lacked a large IT infrastructure to develop and deploy real-time loyalty offers. "We want to focus all of our marketing and customer service efforts on our best customers, and the toolset Loyalty Lab offered made that easy," says Keith Lauver, CEO of Montana Legend. "We had some very specific marketing-driven goals we wanted to accomplish that a general tool wasn't able to support." Using the system, Montana Legend is offering everything from promotional gift certificates to cattle ranch tours to its customers, based on their purchase history and value, all provided in real-time to the company's Web site through Loyalty Lab's on-demand system.
In a natural fit, analysis of online customer activity is increasingly available through Web-based channels. Companies such as WebTrends and Omniture offer on-demand access to powerful data processing and reporting tools that can act on a company's internal Web site logs, or account for a variety of online marketing campaign profit-and-loss measures. The idea of on-demand tools as tracking a process rather than simply examining a single data point or managing a single customer record has spread as well to the area of workflow management, which is available both as a stand-alone offering and is embedded in the growing sophistication of integration and on-demand marketplace offerings from companies such as Salesforce.com.
"[AppExchange] stems from what Salesforce.com is trying to do with its platform, and follows where these applications are all going as a whole—to give process tools to the line-of- business people, and not just to IT," says Yankee Group's Kingstone.
One of the most potentially exciting, but still selectively implemented, prospects for on-demand growth is the fully on-demand contact center. Provided in various formats by companies such as Contactual and Five9, the promise is simple: Using nothing but an Internet connection and a decent headset, any computer can become a fully wired customer service agent desktop, complete with access to a voice caller queue and company data, screen-pops, and all. It has worked well in experimental, overflow, and smaller deployments, but conventional call-handling gear is not being put up for auction just yet. "I haven't seen tons of slam-dunk deals for on-demand in the large call center space," Kingstone says. "The RFPs I see in those large markets with 4,500 seats are still for Amdocs, Siebel, and SAP."
To date, growth in on-demand call centers has focused largely on the ability to get unconventional contact center groups operational in a short time frame and with minimal infrastructure. "Many of our customers are not traditional call centers at all, [such as] an advocacy group that helps individuals navigate through a complex health care system. There are a lot of third-party contacts, like nurses and doctors, who help the [callers]," often from their own homes, says Randy Saunders, marketing manager at Cincom. "The company is a services-advisory company, so they don't have people with technology skills, an IT department, or all the things you need in house to run an on-premise solution."
An integrated on-demand future?
AppExchange and other on-demand development platforms promise the ability to string multiple Web services together to form new applications, uniquely suited to the needs of the individual business customer. Web services have been deployed internally with some success in both private and public projects, but a global marketplace for the products remains unproven.
"There are a lot of risks with that model. If Salesforce.com were to cut one of these people off, what would be the implication?" muses Forrester Research analyst Liz Herbert. "It's a very new thing, monitoring these applications and putting them through a certification process, and I'm not convinced how rigid that is."
It is also unclear that the same companies that turned to on-demand for quick, easy, and low-maintenance solutions that require minimal investment will line up to pay extra for more complex, integrated applications. "Almost all of our customers used Excel, and couldn't afford our [on-premise] solutions or our competitors' solutions," says Bob Conlin, CMO of compensation management provider Centive. The company's Compel product targets companies with 50 to 500 sales reps—big enough to have complex incentive plans, but not necessarily large enough to justify an investment in a dedicated hardware and software platform to manage them.
Integrated applications will also have to prove themselves to be just as easy to use as the component parts. Success in on-demand software is still largely defined not by power but by accessibility. Of winning deals, Njal Larson, Satuit senior vice president of product strategy, says, "A lot of it is usability—a perception that our software is easier to use, easier to customize, easier to deal with. It's about keeping people out of training by keeping things intuitive."
Who's on board?
Initiatives such as AppExchange and NetSuite's NetFlex have made it clear that on-demand providers are far from satisfied with simply cornering the market on five- and 10-employee implementations. "We have huge banks, huge insurance companies [subscribing] because they have realized that the enterprise model is so riddled with costs," says Christopher Cabrera, founder and CEO of Xactly Corporation, a publisher of on-demand sales compensation management tools. As more companies use on-demand solutions over the long term, however, awareness is spreading that recurring costs can add up over time to be greater than a single license purchase. In a series of recent reports, Gartner has begun calling out the often unanticipated long-term costs associated with on-demand software, including higher license fees to open data to partners and an often tricky integration process with other applications.
The reluctance for all customers to flock to on-demand has already played out at Merced Systems, a developer of contact center analytics tools. Although Merced has expanded its offerings to include both a hosted and an on-demand option, no customers have yet given up their perpetual licenses in favor of on-demand. "Ours is a very data integration–intensive process and has typically not been a category people considered for on-demand, [although] 25 percent have asked us to host," says Merced president Marc Selcow. "We prefer to offer the customer maximum choice, and we're hoping for it, and our business plan calls for it, but nobody's taken us up on [on-demand]."
An extra wrinkle in on-demand development is the renewed interest in so-called "thick" or "smart" clients on the desktop, which are not tied to a Web browser but are instead conventional programs that communicate over the Internet to the on-demand server for data and additional processing power. "We are advocates of smart clients, because we think there's a tremendous amount of work that needs to be done on the user experience that Web-based applications limit," says Entellium's Johnston. And with even entry-level desktops and laptops capable of number-crunching beyond the wildest dreams of 1980s mainframes, the Web-based model can unnecessarily slow down operations. "Time kills deals," Johnston says. "The processing power on the PC is worthy of leverage."
In the long run, the ability to use more of the assets on a user's desktop could help tilt the balance in favor of on-demand applications for a larger variety of companies. "The tradeoffs and the gap is really starting to narrow," Forrester's Herbert says. "In the future, at some point, I and some of my colleagues feel there will not be a tradeoff—you can simply get what you're looking for in on-demand or on-premise, based on what your IT organization looks like."
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