SaaS Seeking Large Enterprises

As the cloud expands, it's extending SaaS to even the biggest businesses. Photograph by doug.siefken.

Large + Complicated = On-Premise CRM?

Why not run CRM in the cloud? In other words, why not use software-as-a-service (SaaS) CRM applications, provided they deliver—as they typically do—more rapid procurement, easier manageability and a lower total cost of ownership, compared to on-premise CRM applications?

Well, size may be one factor. Many people’s perception is that SaaS doesn’t work well for large enterprises. But in fact, we’ve found that SaaS solutions are quite a good feature and functionality fit for many organizations, large or small. Many heavy hitters are devoted SaaS users; just scroll the list of salesforce.com testimonials.

On the other hand, SaaS isn’t the best fit for every organization, and especially large organizations with quite complex requirements. For example, we’re currently helping a large legal information services provider to adopt a new CRM system. Based on our recommendations, the company is implementing a traditional application, running on the premises, because it needs to integrate its CRM software with various back office, order management and provisioning systems. The goal: to enable the company’s sales force to quickly move from quote to order, and then organize product delivery, all from within the CRM application. Building this is relatively complicated, technologically speaking.

Given that technical complexity, as well as the required integration, this type of project is not a great fit for SaaS—at least not in 2010.  I include that caveat because, going forward, we do see more projects of this nature—technically complex CRM implementations requiring advanced functionality and integration—being well served by SaaS.

Redefining the CRM Choice: On-Premise or SaaS

A year ago, Innoveer released its guidance about when to use SaaS versus on-premise CRM software: The New CRM Choice: On-Premise Software Or SaaS.

In 2008, SaaS CRM applications didn’t offer as many features, or as much functionality, as on-premise applications. For projects with a greater degree of technical or organizational complexity, on-premise CRM software was the better choice.

Bigger Clouds, Greater Benefits

But that equation has been changing rapidly (and will continue to do so), as cloud computing evolves, further extending SaaS and providing greater business benefits. CRM analyst Denis Pombriant explains:

The Cloud needs to have three parts: infrastructure as a service (IaaS), software (SaaS) and, now, a development platform (PaaS). (…) The new ubiquity [of computing access] spawned by Cloud Computing — all three components — is spawning new, fast and, above all, mobile business processes, not just applications.

In other words, SaaS is now just an application layer—albeit with some minimal accompanying tools—in the cloud. The cloud, however, adds an infrastructure layer (servers, storage and bandwidth from the likes of Amazon and Google) and platform layer (such as Force.com). Altogether, these can make any single SaaS application much more useful.

In other words, as cloud computing expands, it makes SaaS more extensible, useful as well as cost-effective. Hence my prediction for how SaaS evolves:

Going forward, as SaaS continues to become more deeply connected with this expanding cloud ecosystem, organizations of any size will be able to support much more complex business processes, at lower cost, using SaaS.

In 2008, we said that “CRM projects must now begin by answering this fundamental question: On-premise or SaaS?”  Today, however, the question is simpler: Why not use SaaS? And as the cloud evolves, soon we may not even bother to ask.

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When weighing the pros and cons of on-premise versus SaaS CRM software, assess functionality requirements, organizational structures, costs and long-term goals. For more information, see our white paper, The New CRM Choice: On-Premise Software Or SaaS.