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 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. As the list of salesforce.com customers shows, many heavy hitters are SaaS devotees.

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 an on-premise application, in part 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 little over one 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.

The gist is that 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.

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 [has] 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. To which the cloud adds an infrastructure layer (servers, storage and bandwidth from the likes of Amazon and Google) and platform layer (such as Force.com). Altogether, these layers can make any SaaS application much more useful and easy to work with.

Bigger Clouds, Greater Benefits

As cloud computing expands, it makes SaaS more extensible, useful and cost-effective. Hence my prediction is that SaaS CRM will evolve to become more deeply connected with the expanding cloud ecosystem. In other words, organizations of any size will be able to support much more complex business processes, at lower cost, using SaaS CRM applications.

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, in another three or five years, will we even bother to ask?

Learn More

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 aforementioned white paper, The New CRM Choice: On-Premise Software Or SaaS.

Finally, want to know which SaaS CRM software is best? See our CRM Software Smackdown.

Don’t Just React: Be Proactive

Who says silence is golden? Photograph by luisvilla.

Retention is a Virtue for Service Too

The adage about how much less it costs to keep the customer you have, instead of finding a new one, is even more true in a down economy. Indeed, if the cost ratio between acquiring new customers and retaining old ones was 10:1, today it’s probably more like 100:1, given the relative scarcity of customers with available spend.

Of course organizations want to do everything they can to retain their existing customers. But that raises an interesting question: Can the service department do more to help?

Already, there are at three things that every service department should be doing:

• Provide customer great service
• Exceed customers’ needs
• Alert account managers whenever there are big issues

These are a given. But in our “where’s the value add?” era, many companies are asking: How can we move service beyond the obvious, and into more advanced areas of retention? And also, how can CRM help?

Silence Isn’t Golden

Here’s an example of what advanced customer retention looks like: When I go to my gym, they swipe my membership card. Up pops my picture on the computer so they can verify that I am who I say I am. But they’re also swiping that ID to build usage reports. The gym wants to know which customers aren’t coming in, and thus are at risk of not renewing their annual memberships, which would be bad for annual revenues. So they see who’s a regular no-show, and then target those people with offers, such as discounts on personal training and special events, to draw them back in.

In other words, my gym practices proactive service. But too many service interactions today are merely reactive. Something doesn’t work, and it needs to be fixed. Of course, you must satisfy customers by fixing the problem in a timely manner. Just don’t expect to win any hearts and minds.

Advanced and proactive customer retention, by contrast, means asking: “What can we do to make your life better?” Being proactive also helps nip service problems in the bud. For example, say you’re a high-technology software vendor and haven’t logged any service tickets or heard from a particular client in six months. Don’t assume you have a satisfied customer. For all you know, your customer may not even be using your software. So when it comes time to renew their service contract, they might be expecting an even bigger discount. (Of course, pricing and price discipline is an art unto itself.)

Service: Know Thy Customer

But how many service departments think this way?

In fact, some do. For example, for membership organizations and professional associations, excelling at member service requires knowing who your members are, what they’ve achieved, and what they need. Many high-technology companies are also very good at advanced customer retention, but leading software-as-a-service (SaaS) application vendors are in a class by themselves. That’s because SaaS applications succeed or fail based on how well the vendor handles hosting, maintenance and upgrades, not to mention software functionality, all for a per-user monthly subscription fee. This is one of the big draws of using SaaS applications (for example, for CRM) instead of on-premise options. Salesforce.com, Oracle CRM On Demand, RightNow, Workday, Eloqua, Google, Netsuite and any other SaaS vendor you can name will succeed or fail based on their ability to keep customers satisfied, and ensure that the software evolves to meet customers’ needs. Otherwise, customers will subscribe to something else.

Of course, SaaS vendors have a big advantage in that they host their own software, and thus accumulate volumes of data about each subscriber—usage patterns, when they log in, how much storage they consume, application response time, application integrations, features used, service ticket histories, and so on. By mining this data, SaaS vendors can ensure they enhance the software to meet customers’ needs.

The challenge for other industries, then, is amassing enough data to better understand who your customers are, how they use your products or services, and most of all, what else they require. And once again, when it comes to making sense of all this data, CRM—not to mention business intelligence tools—can help.

That said, is increased customer retention thanks to proactive customer service possible in all industries? Perhaps not. For example, many health insurers have been retooling to become more member-centric. And many have rolled out portals to help increase customer retention by offering 24×7 self-service. But are they going further, by taking a page from the preventive medicine playbook and proactively contacting members who haven’t seen their doctor in a while? Perhaps so, but perhaps not.

Hold Marketing Accountable

For companies that want to create advanced customer retention programs in their service departments, where do they start? The simple answer is to start with the marketing team. At Innoveer, we’re encouraging CEOs to hold everyone—sales teams, marketing, as well as customer service—accountable for customer retention.

But where service is concerned, marketing leaders must take the first step and begin tearing down the walls between the marketing and service groups. Too often, these departments not only don’t have lunch together; they’re not even in the same building (speaking metaphorically or otherwise).

Marketing and service must begin working together—designing special offers, listening to and learning more about customers, and finding added value, to demonstrate that they both have customers’ best interests at heart. Of course they almost always do. But as far as customers are concerned, it’s still “show me the love.”

All you have to do is learn how.

Learn More

Our white paper on how advanced call centers increase customer loyalty and retention, among other upsides, contains numerous best practices for making call centers more proactive.

For best practices for keeping and managing customers, and paying proper attention to all parts of the “customer lifecycle,” see our Q&A with Monster.com, which has advice that’s applicable to more than just the high-technology industry.

Likewise for consumer manufacturing, good customer management is essential for making the customer king, not to mention for customer retention.