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Aberdeen Reports Web-based CRM Succeeding

By Dan Muse     Feedback

According to a report by the Boston-based research firm, customers of of hosted CRM application are satisfied and likely to subscribe to additional services.

That sound you hear may be Web-based customer relationship management (CRM) services starting to unseat traditional client-service CRM applications.

ASPs such as Salesforce.com, Upshot and Salesnet have trumpeted their success over software offered by Siebel, PeopleSoft and other enterprise independent software vendors (ISVs), but now research firm Aberdeen Group is reinforcing the success of hosted CRM applications.

The general assumption has been that users of this genre of software — once the domain of a small group of large software companies and consultants — are as a whole unhappy. However, Boston-based Aberdeen Group reports in its study CRM Spending and Satisfaction Report 2003 that customers who chose a hosted application stand in contrast and appear to be a content client base.

According to Aberdeen, when it asked existing users of hosted CRM applications if they would subscribe to additional services, 88 percent said they would.

While only 24 percent of respondents indicated that they were currently using CRM delivered as a hosted service, Aberdeen reports, 52 percent indicated that they would consider using a hosted solution in the future.

Aberdeen reports that its statistics are supported by interviews with hosted solutions users. Although some of the customer satisfaction is driven by the low prices this category promotes, the study says it would be a mistake to attribute the success of the group simply to price competition.

In addition to attractive subscription-based pricing, Aberdeen cites the following as reasons for the success of ASP-delivered CRM applications:

  • It works as advertised
  • It offers fast deployment
  • Training is easy
  • User interfaces are intuitive
  • Vendors also continue to add applications that appeal to companies of all sizes
The research also suggests that the biggest buyers of CRM will be organizations with revenues from $50 million to $1 billion — a group Aberdeen describes as "the antithesis of early adopters."

Not all CRM products delivered as a service are assured success, Aberdeen cautions. It described some hosted services as "one-hit wonders" that deliver only a single application, such as sales force automation (SFA), and fail to add value in the form of additional applications. The report adds that vendors shouldn't feel a need to fill out their suites by developing applications in house. The advent of new technologies, such as Web services, allow for data sharing and process integration over the Internet.

Will large ISVs adopt an "if you can't beat them, join them" strategy? That remains to be seen, but Aberdeen said that it will be interesting to see which large CRM software providers embrace a hosted model, reporting that vendors such as Siebel exited the hosted business when they discovered that their client-server applications could not be profitably deployed across the Internet. Aberdeen also warns that Microsoft, which launched its CRM application in January, may find that hosted solutions "represent an entrenched competitor that is not easily displaced."

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This article was originally published on March 11, 2003
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