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How Hosted CRM Could Shut down Your Business

Will your Hosted CRM Solution Create a Host of Problems?

Hosted CRM is hot these days, in fact all hosted enterprise applications or Software as a Service (SaaS) is making rapid strides in a market that was once dominated by on-premise solutions.

Hosted CRM is doing well for itself, so much so that even established CRM providers like SAP are now in the hosted CRM market. However; for all its speed of operation, cost-cutting, no maintenance issues and other benefits hosted CRM does have some problems that you should be aware of.

Hosted CRM could end up creating a host of problems for your business, especially if you are running a small to medium size business. SMBs are the favorite target customers for hosted applications vendors. This is because SMBs are often budget constrained, running and maintaining a CRM system in-house is often beyond them. Yet, SMBs have the same requirements as enterprises with respect to customer service, it is these requirements that on-demand CRM applications purport to fulfill and also help SMBs save time, cut costs, and better utilize their resources.

Will you Need Customization?

A simple CRM can be implemented quickly via the hosted route and it does offer reduced upfront costs and short time-to-benefit. Yet, with the passage of time the value proposition of a hosted CRM is questionable, this is because although the hosted offerings come in different packages, the extent of customization is limited. As companies grow they invariably need customization of the solutions they are using.

Hosted solutions are usually of the type where one size is expected to fit all. Offering customization is a cost that hosted CRM vendors can ill-afford to bear. On the other hand, larger players in the hosted domain do offer regular incremental functionality that customers are expected to benefit from. Doing this requires effort from the users as there is no IT staff and it may lead to adapting processes to updated functions a little too often for a company’s liking.

Long-term Costs

Also, over time SMBs are apt to question the costs of renting a CRM solution against purchasing it outright. As companies grow, they may want more control on their CRM operations and the value proposition of an in-house CRM system may appear more attractive but migrating from a hosted setup to an on-site CRM setup is not easy.

Vendors selling hosted CRM are not equipped to help companies with this type of migration. Migration support and migration tools are not provided. This is a serious issue that can have far-reaching consequences for a SMB positioned on the cusp of growth but with limited funds. After three years, the TCO of a hosted CRM exceeds that of an on-premise CRM. This is a long-term concern that hosted applications do not address well enough and it can come at a serious detriment to a company’s growth plans.

Vendor-Defined Methodology

One of the top reasons why CRM experiences for a company end on a sour note is that companies use a vendor-defined methodology instead of a CRM methodology; larger companies can absorb the shock of a CRM venture gone wrong but a SMB that goes for a vendor-defined methodology to run its business could well be forced to shut shop. And with vendors selling hosted CRM, companies have to toe the vendor’s line – for this is often the price of an inexpensive solution.

Hosting Reliability

For all the promises of information on your fingertips, your hosted CRM is completely dependent on the availability of the internet. What happens when connectivity is down, even if it is for a short duration? Your business is tethered to the internet, you get CRM on the move and employee mobility is improved but only to the extent of the availability of a network. What’s more, you are going to have to pay for connectivity, for example in an airport or hotel. That’s an added cost multiplied by the number of mobile employees.

Data Security

Then there is the small matter of data security. Customer information is the lifeblood of a CRM venture and with data stored on a third party there is always a greater risk of espionage from a competitor or hacking. If customer data is compromised, its curtains for a small company plus the multitude of lawsuits that it faces. For all the verbal guarantees that hosted CRM providers give, SMBs should be extremely careful when signing on the TOS with a provider.

Vendor Reliability

As with the bubble, SaaS vendors are mushrooming all over the place and often the lure of a low-budget CRM fix can lead companies to their downfall if the vendor packs his bags or his company folds or he just simply chooses to disappear. It’s not like he will give you an advance notice, in fact the vendor will not give you an advance notice even when changing the fee structure and the usage policies.

So, if you are indeed planning to avail a hosted CRM service, keep the points mentioned above in mind.