Software as a Service (SaaS) is not for everyone. In fact, some organizations that invested in SaaS are now looking for a way to move their CRM projects on-premise.

That’s the case for Projectline, a Seattle-based company that helps tech companies find and manage reference customers. It’s currently running Microsoft Dynamics CRM Online, but is in the process of moving that deployment back in-house.  “We’re still, in the next six months, going to run a hybrid model, using SaaS for certain things and internal reporting will be done on premise,” said David Jones, chief operating officer.

Projectline wants to move its CRM in-house in part to facilitate its reporting and analytics. And it’s not alone, according to Rob Desisto, an analyst with Gartner, speaking at the Customer 360 event here this week. He’s seen a number of Gartner clients express interest in moving from on-demand to on-premise.

“There are fundamental challenges that the general architecture features when doing SaaS,” Desisto said. “The Internet pipe is only so big. Any heavy analytics or large data set is very difficult.”

Running heavy analytics loads aren’t the only thing leading some to rethink SaaS. Some organizations are finding that SaaS isn’t as inexpensive as some SaaS vendors would have you believe. According to Gartner, the total cost of ownership (TCO) can indeed be lower with SaaS versus on-premise software, but it must meet a few conditions.

The IT staffing myth

For example, if a SaaS application project means reducing head count for things like database administration, system administration, software engineering and patch management that can mean savings, but it comes with a caveat. Saving just a part of someone’s job seldom equates to actual savings.

“If you’re a small business with no IT staff then the math is a lot easier. You need to buy the hardware. With a larger company, the math doesn’t always work out in favor of SaaS.”  Rob Desisto, vice president and distinguished analyst, Gartner

“I say head count, not [full time equivalency],” Desisto said. “Users are saying ‘this SaaS thing was going to save me money on? head count. We saved 10% of FTE with this.’ That doesn’t work with the CFO. The idea that there’s opportunity costs, doesn’t work for the people crunching the numbers.” 

SaaS can also mean lower TCO if an organization can avoid purchasing new hardware, databases and applications licenses. However, while it may seem obvious that an on-premise software purchase would require new applications licenses, many organizations have CRM already because it was bundled with their ERP licenses, Desisto said.

The hardware, software and IT resources question is dependent largely on the size of the organization.

“If you’re a small business with no IT staff then the math is a lot easier,” Desisto said. “You need to buy the hardware. With a larger company, the math doesn’t always work out in favor of SaaS.”

The myth of the rapid release advantage

SaaS vendors often tout the frequent updates and new functionality that comes with their deployment model, but this does not always work out in the customer’s favor, Desisto said. For example, SaaS upgrades, typically two or three times a year, usually happen on the vendor’s schedule, not the customer’s.

“If you’re a company that has a lot of Six Sigma processes around releases and testing, with this sort of rhythm of every three months or every six months you have to check integrations and do some level of regression testing,” Desisto said.

Companies that don’t necessarily need all the latest functionality and lag behind on upgrades may find on-premise a better fit, he said. The release schedule for upgrades is something that needs to be discussed in contract negotiations, he warned. Some vendors provide sandboxes and testing environments to facilitate the process.

“These are some of the questions you need to talk about,” Desisto said. “What is your sandbox? How quickly can I get access to a release before it comes out?”

The shelfware myth

SaaS vendors, and their sales reps, like to promote the idea that SaaS deployments remove on-premise software’s shelfware problem — software licenses that are paid for and require maintenance and support fees, that no one is using. Again, this is not necessarily always the case, Desisto said.

Take as an example a company that is deploying SaaS CRM to 2,000 users at $60 per user per month. Since most SaaS vendors require a contract agreement for everyone up front and the organization is going to roll the implementation out in phases, it will still wind up paying rent on software it’s not using. If it takes six months to roll out the deployment, that’s six months of subscription fees its paying for software it’s not yet using. If the company starts out with a pilot program of 300 users after the first six months, it’s typically still paying subscription fees for the other 1,700 licenses.

That’s essentially shelfware, Desisto said.

The pay for what you use myth

Many SaaS vendors tout the “utility model” of SaaS, suggesting organizations pay only for what they use. Yet, SaaS contracts are typically rigid. If business conditions change and an organization needs to lay off workers, it still winds up paying for licenses.

“They do not allow you to dial down the number of users,” Desisto said. “Not only are you committed, in many cases you’ve paid up from the anniversary of year one.

However, some movement has been made on this front. RightNow recently enacted a Cloud Services Agreement, a standard service level agreement (SLA) guaranteeing uptime, the ability to dial up or down with licenses and a renewal price cap.

The TCO myth

SaaS is not necessarily cheaper than on-premise.

“Over the first couple years, SaaS is less expensive typically because it’s an operating expense that starts flat and stays flat,” Desisto said. “On-premise has the [capital expenditure] up front.” 

Upgrades to on-premise software applications will usually push on-premise costs back above SaaS, but only for companies that stay on the most current versions.

“If you’re a company that doesn’t upgrade that frequently on premise, then clearly the SaaS number exceeds on-premise,” Desisto said.

More SaaS purchasing considerations

Gartner research has revealed a number of reasons companies are moving off of SaaS. Security is one, though that’s often due more to internal policies or national laws that require customer data to be stored in the country’s borders and not due to weaknesses of the applications themselves.

Performance can, at times, be an issue. While a SaaS vendor can point to sub-second server response times, organizations need to consider the entire process. How long does it take to go from inside a firewall in London, to the data center in California, back to London and through the firewall again? Latency issues are something that needs to be identified up front, Desisto said. 

“It’s not realistic for [SaaS vendors] to commit a response time to you because there are a lot of factors, but they should submit their strategy on latency,” he said.”This is the level of detail you need to get into when evaluating these SaaS vendors.” 

In fact, Gartner advises organizations to create a SaaS policy and governance document. Since SaaS is often times purchased without IT’s involvement, governance can be a challenge. Companies should determine who owns things like configuration change management, vendor management and ownership of internal contracts. 

Contracts should include up-time reliability clauses with well defined penalties, a data ownership provision and disaster recovery provisions.

“I guarantee 90% of you do not have RTO [Recovery Point Objectives] in your contract, if something happens physically to that data center,” Desisto said. “Very few vendors will provide it.” 

Companies should also carefully consider what happens if they end their relationship with a SaaS vendor. What format will their customer data be returned in, the vendor’s or the company’s? Running multiple SaaS applications also can complicate deployments. Upgrade cycles will not be synchronized.

Sean Sullivan, senior business system consultant at a Midwest financial services firm and an attendee at the conference, is thinking carefully about SaaS. The company runs Salesforce.com for its B2B business but is considering other options for its B2C operations.

“We’re making sure the business side is aware of the complexities of the issue,” particularly the reporting and analytics, Sullivan said. “It’s matter of putting more numbers behind it.”

Gartner Debunks SaaS CRM Myths

While attending Sage Insights Partner Conference last month, the big CRM buzz was focused around the cloud version of SalesLogix scheduled for release later in June.  What surprised me was the strong messaging not only for new clients, but for existing SalesLogix customers.  In fact, existing on-premise SalesLogix customers can migrate to the cloud for only $35 per user, per month.  This is an unbelievable value for clients who haven’t customized their SalesLogix systems, and could represent a significant IT savings.  The cloud version of SalesLogix is yet another solution to our growing arsenal of tools to help our clients with their CRM needs. Additionally, special incentives were announced to get former SalesLogix customers back to SalesLogix and back on track with their support plans.  Special financing terms were announced for brand new SalesLogix clients.  There has never been a better time to take a new look at your CRM system, and we look forward to walking you through that evaluation process.

The implementation starts: evaluate the processes and business requirements, design customizations, decide on implementation methods, assemble prototypes, convert data, and create integrations.  Then, the work with the users starts so that we can try to get a solution that provides all people in the organization value: the sales people have a tool to manage their prospects and customers, sales managers have a tool to forecast and evaluate their direct reports and the sales VP has a tool to see what is going on in his/her organization from a high level view. It’s the ultimate, all in one solution to everyone’s prayers.

During training the users extol the virtues of the new system and all it will do for them. The managers are promising accurate forecasts, customer service is promising to improve response to customer’s issues.

Then go-live and, nothing! A week later and only three people have started scheduling a few appointments. Six weeks later, there are only a hundred entries in history and 50 to 60 activities scheduled. No opportunities, no tickets. What’s going on?

At some point, someone comes to us and says, “They aren’t using the system  … why did we buy it?”

Back in the ‘80s, I was consulting in the medical equipment maintenance management industry. During my stent in the industry, we saw all kinds of quality improvement programs for hospitals. It seemed that every year, there was a new trend. I recall an article that was published in a business journal entitled ‘Why Quick Fixes Fail’.  The article outlined a scenario similar to the one above. An organization makes a substantial commitment to make a change, to improve productivity, to improve customer satisfaction, to improve employee morale; they bring in the consultants, do the evaluations and set up the training sessions. Everyone is on board and starts using their new-found procedures and knowledge and all works well until someone upstream has to change the way they work. The article concluded that quick fixes work until the boss has to change what they are doing.

We see a similar phenomenon with CRM solutions. We carefully craft our solutions to provide management with the information that they need to make informed decisions. We are much attuned to the end users, though. A hard to use solution will not be used. We have even recommended against customizations because we knew that the end-users would not cooperate and management would not get what they want. “Let’s hold off on that one and see how it goes. We can always add it later”.

Our goal for an initial implementation is to give everyone something; a tool to make their job easier or information to better manage the business. But everyone must do their part. 

Look at a simplified example: ABC Company has no CRM in place. They have five regions nationally with five reps in each region. Key performance indicators include number of on-site visits and pipeline activity. Any out-of-box CRM solution can meet these requirements. We need to count completed meetings and have an opportunity forecasting module. Three months after roll-out, there are no meetings and no opportunities in the system. 

The problem is not with the sales people. They will do what they have to do to increase their compensation. However, if the regional managers are not reviewing the reps’ pipelines and schedules with them on a regular basis and don’t make using the system a priority, then the reps will continue to work the way they have always worked. If, however, the regional manager developed the habit of reviewing completed meetings (from the CRM solution) and reviewing pipelines (from the CRM solution) then the reps would quickly learn to use the system. Likewise, the Sales VP should be reviewing pipeline statistics with the regional managers.

 I’ve heard that it takes three weeks to break or develop a new habit. If your sales reps have been using Daytimers for ten years, it is going to be a life-changing event for them to change. If there is no reason to change – i.e.: their boss isn’t using the information in the CRM system, then the change will never occur.

 Some people think that a new CRM solution will make everything work better. It won’t. Only people can make everything work better. It takes a team effort, with everyone at every level committed to the change. But the change has to come from the top. Without management buy-in and participation, you cannot expect more than about 30% utilization of your solution. The adopters will tend to be younger, more technologically savvy individuals. They will make great use of the system and even find ways to export the information to give to their boss the spreadsheets and Word documents that he wants for routine reporting. The remainder of the solution will go unused. 

To break this cycle, everyone must make a three-week commitment to fully embrace the solution. It will be very hard at first. Make sure that everyone throughout the organization understands what is expected. If the number of on-site visits is a key indicator, then the sales staff must at least schedule on-site visits in the system. During sales meetings, the regional manager should have the schedules available and discuss the visits. The reps will start getting the idea that if it isn’t in the system, then it doesn’t exist. Likewise, the VP of sales should be holding the regional managers accountable for meeting their numbers as recorded in the system. Throw away all other reporting. Do not accept spreadsheets or documents listing the activities. Commit for three weeks. 

At the end of three weeks, carefully review what is working and what isn’t working. You might even want to invite your business partner to the meeting. Additional training might be required or you might need to tweak the solution to improve the process. 

Regardless, if you haven’t made this level of commitment, then you have wasted your time and money. If you are considering a CRM Solution, realize that it will take this level of commitment to make it work. Software is not a magic pill that will cure all your ills. It is hard work. Once implemented and adopted, though, you should realize substantial improvements in productivity and information management.

With summer upon us, I wanted to share a photo I took a while back while on a business trip.  I hope your summer is filled with friends, fun, and sun (and a nap or two).

Cloud Computing is a deployment method and deployment is typically only one aspect in the selection of a CRM solution. We use the multi-year total cost of ownership (TCO) to compare on-premise and Cloud applications. Most companies rank usability, security, flexibility and ability to meet a company’s needs as well as the TCO in the selection of a CRM solution.

Our customers who are hosted all tend to be smaller companies with no IT resources. The cost for locating their CRM system elsewhere is less than building a server room with firewalls, routers, servers and Windows domains. Other customers with more than 25 users have elected to host the application themselves. They already have server facilities and IT departments and have found that hosting adds very little to their workload.

Selecting an Enterprise solution can be challenging. There are many aspects to consider – total cost of ownership is only one aspect. Below is more information on the economics of Cloud Computing as found on Wikipedia:

Cloud computing users can avoid capital expenditure (CapEx) on hardware, software, and services when they pay a provider only for what they use. Consumption is usually billed on autility (resources consumed, like electricity) or subscription (time-based, like a newspaper) basis with little or no upfront cost. Other benefits of this time sharing-style approach are low barriers to entry, shared infrastructure and costs, low management overhead, and immediate access to a broad range of applications. In general, users can terminate the contract at any time (thereby avoiding return on investment risk and uncertainty), and the services are often covered by service level agreements (SLAs) with financial penalties.^[15][16]

According to Nicholas Carr, the strategic importance of information technology is diminishing as it becomes standardized and less expensive. He argues that the cloud computing paradigm shift is similar to the displacement of electricity generators by electricity grids early in the 20th century.^[17]

Although companies might be able to save on upfront capital expenditures, they might not save much and might actually pay more for operating expenses. In situations where the capital expense would be relatively small, or where the organization has more flexibility in their capital budget than their operating budget, the cloud model might not make great fiscal sense. Other factors impacting the scale of any potential cost savings include the efficiency of a company’s data center as compared to the cloud vendor’s, the company’s existing operating costs, the level of adoption of cloud computing, and the type of functionality being hosted in the cloud.^[18][19]

People who have worked on projects with me over the years will be familiar with these tips that I’ve often evangelized about – some might even mention the phrase “Todd’s favorite soap box” if asked. Admittedly, I am passionate about the following:

• Consulting projects generate an avalanche of e-mails throughout the course of the project in the form of clarifications, changes, problems, status updates, and any number of other topics. It is important to recognize that most consultants are involved in multiple projects at the same time thus amplifying the situation even more.

• Dealing with e-mails is a disruption to the customization development process and has a very real cost both in hours to complete each task as well as overall delivery dates. I’ve read studies indicating that a common mental reset time for developers is 10-15 min given a 1-2 min disruption. My own experiences on various development and consulting teams over the years would tend to agree. And yet, we must be responsive to *some* e-mails. How can we bring some order to the chaos?

Recommendations and best practices:

• Recipient Lists – Use To/CC/BCC appropriately

• Subject Line – Well structured and specific • Content – Single topic whenever possible

• Body – Well organized and well formatted • Importance flags – Use High-Low importance flags

• Mobile Phone Email – Respond clearly or wait!

• Turn off e-mail – 1-2 hour work-only sessions

Recipient Lists: Use To/CC/BCC recipient lists appropriately. This conveys important information to the recipients of the e-mail in terms of primary and secondary responsibility indicating who the e-mail is actually targeted at. Take the extra second or two to review which recipients are in the To vs. CC list. Use BCC to keep non-project people (ex. Sr. Management) in the loop when. Using BCC will hide those Sr. Management names from other e-mail recipients and will avoid the recipients inaccurately reading anything into the communication about priority, politics, etc.

Subject Line: Must be well structured and specific. This is possibly the most important tip and will serve to minimize disruptions for your technical staff in particular. Recommended subject line template: – – For example: Customer Name – Account Summary Report – Missing Fields This subject gives recipients enough information to determine if they should disrupt their current task to read the entire e-mail at this time. We’ve found that customers do not mind seeing their company name/initials at the beginning of the e-mail subject line. We’ve also found that many customers begin to structure their e-mail subject lines in more organized and meaningful ways as well. Important Rule – never, ever, reuse an e-mail for a completely different purpose, friendly chat, etc. This will cause confusion for technical people in particular as they try to suspend the multiple details of their current work and shift mental focus to what they believe to be the topic of the e-mail only to be confused by the e-mail content.

Content: Stick to a single, narrow topic whenever possible. This is one of the more difficult things for team members to adapt to at first, however it is something that really pays off. Sticking to a single topic ensures that the thread of replies and counter replies will be about that specific topic only and when resolved, the specific e-mail thread will end with a clear understanding of final decision. This will result in many e-mails and is something you might prepare the customer or first time project members for. If there are topics that are tightly related, then use of a single e-mail is appropriate and necessary. However, it will be even more important to structure the e-mail body well.

Body: The e-mail body should be well organized and well formatted. There are important, timely, and probably non-trivial questions that you need clear actionable responses to – those responses can only be as clear and accurate as the questions themselves. For multiple topic e-mails, always provide an outline and then label sections using those outline items. For specific questions, begin a new line with “Q:” or “Question;”. Leave space after the question for the recipient to use to reply in-line later. We live in a multi-media world with rich display devices – make use of fonts, color, etc to organize your information. When appropriate, use screen capture and other graphics to ensure all parties share a common frame of reference.

Importance flags: Use High-Low importance flags when appropriate. Again, this helps the recipients organize their time, minimize disruptions, and respond quickly when absolutely necessary.

Mobile Phone Email: Respond clearly or wait! If you are not willing to type out clear and complete responses due to the form factor of your mobile device keyboard, then do not respond until you are at a computer. Clearing your e-mail box while at lunch or in a meeting might appear to save you time, but it might be at a cost to the project and other team members. Incomplete or implied responses will only lead to ambiguity which will usually impact the project during the critical final phase just prior to roll-out.

Turn off e-mail: Consider allowing (even requiring) the technical staff to turn off their e-mail for 1-2 hour work-only sessions. For a dire emergency the telephone will still function to alert them. Disabling the Outlook icon tray e-mail pop-up notification feature might also help better manage the disruption.

http://community.sagesaleslogix.com/t5/The-Sage-SalesLogix-Journal/Best-Practice-Tips-for-Consulting-Project-Communications/bc-p/9539#M153

We are looking forward to all the positive things 2010 is positioned to bring, and all the amazing advancements we expect to see this decade.  I can only imagine what the software and IT industry will look like in the next ten years, but I can tell you that CRMPlus will be there with you to continue to support your company in your sales automation needs.

Thank you for your continued support, and from all of us at CRMPlus, we are looking forward to growing with you in 2010 and beyond.

Charlie Kemmerer,

President, CRMPlus Consulting

I welcome any feedback you have .. especially ideas on things you’d like to see here!

Charlie