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Hosted Software Gains More Converts

Polaroid embraces the model to cut costs as it moves to increase direct sales
The board of directors at instant-camera maker Polaroid Corp. last week tapped computer-industry veteran Michael Pocock to run the company. A former VP of strategy at Compaq, Pocock helped the PC vendor develop a direct-sales model, and he's charged with bringing the same playbook to Polaroid as the company looks to boost revenue by increasing its online sales and relying less on its dealer network. The problem will be to keep customer-support costs in check, but Polaroid expects that using hosted software to automatically generate answers to frequently asked questions and control the flow of customer E-mails to support staff will help it meet the challenge.

Polaroid has subscribed to customer-management software from RightNow Technologies Inc. RightNow's hosted software is significantly less expensive than running those applications in-house, says Yale Cohen, Polaroid's group manager for worldwide service communications. "We've saved a huge chunk of money in growing this self-service environment," says Cohen, who declined to be more specific about the savings. The return on investment so far has been enough that Polaroid is considering ditching its packaged software from Siebel Systems Inc. for managing customer telephone inquiries in favor of using RightNow to handle that aspect of customer care, as well. "The ideal scenario is to have all transactions in one place," Cohen says.

chartThe U.S. hosted software market grew 35% from $1.7 billion in 2002 to $2.3 billion in 2003, according to data soon to be released by research firm IDC. Vendors are responding to the uptick in demand with new products and richer services. Last week, IBM said it plans to expand a program under which it works with independent software vendors to adapt their software for hosted environments. IBM plans to increase the number of vendors in its hosting program from 30 to 60 by year's end; among IBM's latest partners for hosted software are providers of accounting, records-management, and communications-management software. Also last week, hosted customer-relationship-management software vendor NetSuite Inc. added new capabilities--such as a contract-management module--to its software. RightNow may soon add sales-force-management capabilities to compete more directly with Salesforce.com Inc., CEO Greg Gianforte hints.

IDC analyst Amy Mizoras Konary says businesses' desire to reduce IT complexity along with improved delivery and integration technologies, such as Web services, are helping reinvigorate the software-as-service concept. That rings true with Gary Burgess, CIO at PolyVision Corp., a seller of graphic communications equipment. Burgess says integrating incoming customer data from his company's Web storefront, which is hosted by Digital Agent LLC, with Salesforce's CRM software through XML was straightforward, taking only about two hours to accomplish.

Some users remain cautious. Apparel maker VF Imagewear began using hosted CRM applications from Salesforce in November, but it took several months for the company's IT department to green-light the project. "There was some initial resistance about letting that data outside the company," says Susan Vincler, sales research manager at VF Imagewear. With their security concerns satisfied, the company's IT officials signed off. Now officials at parent company VF Corp. are mulling use of Salesforce's software in other areas. Says Vincler, "It's catching on."

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Brian T. Horowitz, Contributing Reporter
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Brandon Taylor, Digital Editorial Program Manager
Jessica Davis, Senior Editor
Cynthia Harvey, Freelance Journalist, InformationWeek
Sara Peters, Editor-in-Chief, InformationWeek / Network Computing