We’ve all heard about On Demand Software Delivery. It occurs when software is delivered to the customer via a network (like the Internet) as a service.
The current market has proven that on demand is in demand now, particularly among CRM companies, and that this will grow substantially in the coming years. Research firm IDC predicts that by 2008, subscription license revenues will hit $43 billion worldwide, or 34% of the total software market.
While on demand prevents many of the headaches that installed packages create for the customer, it presents new ones for CRM software vendors as they try to figure out how to deliver cost-effective solutions.
With only a few established on-demand vendors in the CRM space, this is uncharted territory. But market demands will require that all software vendors venture into this area. Following are some best practices for successfully deploying on-demand CRM software:
1. Business Model Challenges: CRM software companies must create a plan for successful introduction of on-demand solutions through new channels without distracting existing channels or cannibalizing existing license sales opportunities. They must also have a good grasp of how the new model will increase top line revenue.
Developing these new distribution channels is key to increasing top-line revenue. But CRM software companies must:
*Minimize capital required for partners to begin selling the solution.
*Maximize partner’s ability to independently demonstrate and extend the product.
*Insure partners can manage the implementation process and own the move-add-change (MAC) requirements not handled by the customer.
*Allow partners to build value-added services on top of your solution by bundling their own services or by adding business process/vertical expertise.
To avoid distracting existing channels or hurting existing license sales, CRM companies should target new markets like small business by creating a lower entry price point and a pay-as-you-go model. They can also simplify the product to better serve limited IT staffs.
Simplifying the product and restricting the functionality will also prevent overlap with existing and future licensed products.
2. Operational Challenges: An effective and flexible operations infrastructure is also critical. This infrastructure and the associated management are the greatest contributors to cost of goods sold and the most difficult to manage. For an effective infrastructure, you must have standardization of processes, increased automation, improved accuracy and lower component costs:
*Standardize key administrative workflow processes at the onset and refine them over time. A phased approach requiring new tools and process as you begin to achieve volume isn’t recommended as this is a crucial time to be efficient and not burdened with managing change.
*Build automation into as many tasks as possible to speed task completion, reduce personnel costs and minimize costly human errors in the order-to-bill processes. Improve the accuracy of common processes; errors are expensive and lead to customer dissatisfaction; for processes not easily automated, strive to simplify the workflow and implement better process checks; review all of your non-standard cases where high error rates are common.
*Deploy your infrastructure on “commercial off-the-shelf” products wherever possible to help keep costs down; research solutions that support Linux and other open source components, as they are now mature and reliable and can be deployed at much lower costs than comparable Unix and Windows systems. On-demand delivery will continue to evolve faster than the rest of the CRM software market. You must be able to adjust your offering quickly. Whether you are adding new distribution channels or new on-demand solutions, flexibility will separate the best providers from the rest.
Most CRM software vendors want on-demand solutions to expand their available market, often through new channels. Your infrastructure must be flexible enough to allow channel partners to resell and re-brand your on-demand offering. In addition to creating an infrastructure that can support your channels, it should integrate with the customer’s own infrastructure (especially for the large-enterprise sale) and it should have the ability to delegate user management and application administration:
*Design your infrastructure to deploy new services and add new providers easily allowing you to broaden your portfolio and allowing downstream partners to sell their own solutions in addition to your on-demand offering—all from a single instance of the infrastructure.
*Ensure integration with the customer’s existing infrastructure if you want to sell to larger enterprises; you must support connectivity to a customer or partner’s directory, HRIS system or other user profile data source as a standard process *Build in the ability to activate new users and manage MAC work through multiple methods to lower costs and increase customer satisfaction; the ability to delegate administration of MAC functions is a key to customer satisfaction.
3. Architecture Challenges: CRM software vendors must develop versions of existing and future products that support multi-tenancy at the business logic, data, and administrative levels. It is important to keep the following in mind when developing your application architecture:
*Build a reusable set of administrative components for on boarding users and managing MAC, this is critical even before your application is business logic and data multi-tenant.
*Leverage a common set of services for user access management across each software instance in your managed service environment; this is critical for your on- demand solution, but less important for software installed within the enterprise.
*Architect your solution so channel partners can “own” their own customer implementation and MAC work; this is vital for cost containment and enables channel partners to maintain a close relationship with their customer.
*Address both application data levels and business process levels of integration within your design; the application data level is where customers will integrate your solution with other applications in their environment; the business process level is where customers will integrate your user add and delete business processes with their existing directory or HRIS system.
On-demand software delivery is here and it will grow substantially in the coming years. Recent announcements by nearly all of the biggest software vendors shows that the trend is clearly growing. However, to assure a successful transition, CRM software vendors must first think through the business, operational or architectural challenges.
K.B. “Chandra” Chandrasekhar is CEO of Jamcracker Inc.
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