News & Analysis-1023355

Hosted CRM is hot... and so is "dynamic" CRM, a service-oriented approach to improving customer service.

February 20, 2004

9 Min Read

Hosted CRM Game Heats Up

Siebel moves, other ASPs stand their ground., an application service provider, attracted some special new customers to its CRM service in January. These customers, such as ABP International, were won away from Siebel after it had entered the hosted CRM game itself.

While it's true that has a huge head start in the hosted market, Siebel is primed and ready to go head-to-head with and other ASPs in the next year. The company rolled out its new CRM OnDemand solution at the end of 2003, which has comparable functionality with any other hosted CRM solution. Also, Siebel is offering a price promotion for new customers. Siebel and the others now must differentiate themselves to gain customers in a barely tapped CRM market.

Wendy Close, research director at Gartner, believes Siebel, "will give a run for its money." She cites Siebel's recent acquisition of Ineto Services, a hosted contact center services company, and Siebel's ability to offer an on-premises and hosted hybrid CRM model. customers get their call center technology through partners.

"Siebel would love it to turn into a feature war, because they have all that functionality," comments Close. "Also, they have an edge because they offer both hosted and on-premises solutions. Siebel can use a hybrid model, where a company can start out using both types of solutions, but eventually buy the on-premise product. Siebel has a better long-term model for keeping clients."

Although Siebel has no current plans to implement a lease-to-buy option, Close brings up an important point. It's, appropriately enough, a principle behind the CRM software these vendors sell: Gaining customers is important, but keeping them is even more so. contends customer retention and satisfaction is exactly what sets it apart. A recent Gartner survey on hosted CRM that Close conducted had scoring the highest in customer satisfaction. "They have a large client base that is more satisfied than those with Siebel mid-market," says Close.

Kaiser Mulla-Feroze, director of product marketing says, "Winter '04 is the 14th generation of We have a tremendous head start, not only in functionality, but also in understanding the customer that is looking for a hosted solution." At first that customer was mostly the small to midsized business, but Mulla-Feroze says now one-third of customers are large enterprises.

Close suggests that many large enterprises may see hosted CRM as a viable alternative whether deployed companywide or in smaller divisions. "I spoke with one CEO of a company with 3,000-plus seats who decided to go with," says Close. "She believed it would actually be less risky to go with a smaller hosted solution than to spend the money on an large on-premises solution. So some large enterprises are going that [hosted] route."

Ken Rudin, vice president and general manager of Siebel CRM OnDemand, believes that Siebel will eventually be a customer favorite because it offers CRM training and the hybrid model. Both Siebel's on-premises solution and OnDemand solution have identical back ends and therefore can work together as one system.

Mulla-Feroze believes this model is unnecessary, and says hosted CRM is "eliminating the need for an on-premises solution."

"The main battleground [in the hosted CRM market] won't be on features and functionality," says Rudin. "A major mistake of the market so far has been hosted CRM companies saying hosted CRM is simple. Sure you can get set up and enter a new contact, but how do you use that information? You need training, professional services, and customer support, so people can make hosted CRM part of their overall CRM strategy and overall view of the customer."

Jeanette Perez is a freelance writer and former editor at Intelligent Enterprise.

Life at the Edge

Is Dynamic CRM Taking Off?

It has already come and gone as the "next big thing," but there are signs of new life in CRM. And 2004 could be the year that redefines the discipline.

The action will be in what the Yankee Group calls "dynamic CRM." According to Yankee analyst Sheryl Kingstone, dynamic CRM is different from the more familiar kind in that integration with operational systems, content management, and analytic applications is an essential ingredient. "Traditional, core CRM is more internally focused," says Kingstone, "and it really was more about making employees more efficient than it was about improving customer experience."

Making the customer experience better, she says, will require a new kind of CRM that is less monolithic and lives at the "edge of the enterprise." By applications at the edge, Kingstone means software that deals more directly with customers and suppliers and is driven more by process than it is by data. Preliminary Yankee research shows that, last year, the budget for software at the edge of the enterprise grew at a whopping 75 percent, compared to an anemic 3.7 percent for the overall IT budget. Kingstone credits dynamic CRM as the single biggest driver for the increase.

The goal, says Kingstone, "is CRM that functions in a services-oriented architecture where you can easily assemble applications from components." And these components can come from different vendors, which is why integration is so important.

This idea dates to at least the mid 1990s when standards like CORBA were touted as the solution to most integration problems. "Yes, we have heard this all before," says Kingstone, "but things are different now. Until very recently we did not have Web services, nor did we have J2EE and .Net standards. These really do make open, modular components feasible."

Bob Sutor, director of WebSphere software at IBM, agrees. "CORBA tried to address many of the same issues, but it was a heavyweight. Now we have one way of networking, (TCP/IP), one data syntax (XML), and one way to assemble components (Web services)."

To get ready for life at the edge, Kingstone recommends that enterprises look beyond packaged CRM software from the likes of Oracle, Siebel, and PeopleSoft. "Application servers, such as IBM's WebSphere and BEA's WebLogic, will play a critical role in the deployment of dynamic CRM applications," she explains." You will also need to add analytics, content management, and of course integration."

She points out that many of the analytic and content management vendors now offer CRM-like functions that can either complement or replace traditional, packaged CRM. On the analytic side, she points to NCR Teradata, E.piphany, Chordiant, and Unica. Vendors of note in content management include Vignette, BEA, ATG, and IBM WebSphere.

Even so, she also recommends upgrading to the latest version of your core, packaged CRM software. "The mainstream CRM vendors recognize that they have to change and make their applications not only modular but open."

Not everyone agrees. Vendors like E.piphany and Chordiant want to knock some of the big names in CRM into the "legacy" category. "I absolutely agree that we are on the verge of a new era of more-dynamic CRM applications," says Mike Trigg, vice president of corporate marketing at E.piphany, "but, for that very reason, I question the wisdom of upgrading your old CRM package."

However, consultant Joe Kulak, managing director of the customer management practice at BearingPoint, says it's too early to junk your old software. "All the major CRM vendors have taken great strides in the last two years to incorporate Web services into their EAI [enterprise application integration] layer."

Kulak is more cautious in his assessment of the coming year, but he agrees with Kingstone that CRM is a happening place. "Our clients are telling us, 'We are buried in data but we can't get the information we need. The services-oriented architecture that Kingstone talks about will play a role in solving this problem. I'm not sure we are on the verge of a new era in applications, but we are seeing more spending on CRM."

Mark Leon [[email protected]] is a freelance business and technology reporter.

In Brief

High-level intelligence at a glance

Privacy Controversy Flares.NASA obtained commercial airline passenger data soon after September 11, 2001, in order to try applying data mining techniques for airline security. The Electronic Privacy Information Center has filed a complaint against Northwest Airlines in the matter, stating that the airline released the data in violation of its own privacy policies. When JetBlue was criticized in September 2003 for releasing similar data to the U.S. Department of Defense, Northwest spokesman Kurt Ebenhoch was quoted in the New York Times as saying, "We do not provide that type of information to anyone."

Oracle's About-Face.Remember when SAP, the former standard-bearer for closed, monolithic enterprise apps, finally conceded the need to be open and interoperable, to everybody's relief ... and then Oracle conspicuously announced just the opposite strategy? Now Oracle is getting back in step with the times. It announced the Customer Data Hub at Oracle AppsWorld, which is supposed to create an enterprisewide view of customer data, including data from legacy and competitors' applications.

New Web Services Spec Published.A coalition of middleware vendors will propose a specification for WS-Eventing to an undetermined XML standards body after review and testing is complete. The spec includes protocols, message formats, and interfaces that let one Web service subscribe to another Web service for event-triggered interaction.

Eclipse Incorporates.The Eclipse Consortium, first formed when IBM released the Eclipse platform into open source, has become a not-for-profit corporation. Now, a full-time Eclipse management organization is being established to engage with commercial developers and consumers, academic and research institutions, standards bodies, tool interoperability groups and individual developers, plus coordinate Open Source projects. At press time, Sun still refused to join Eclipse because of the requirement to "reconstruct all of [its] existing tools."

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