Posted by William Band on May 30, 2012
Enterprises of all sizes like the low upfront costs, usability, flexibility, and time-to-value of CRM software-as-a-service (SaaS) solutions. Solutions I see enjoying increasing popularity include salesforce.com, Microsoft Dynamics CRM Online, and Oracle’s cloud CRM products: Oracle CRM On Demand and RightNow (now called Oracle RightNow CX Cloud Service). The Sage CRM products for the medium-size organization market (Sage SalesLogix and Sage CRM) have been also retooled to include “on-demand” options and SugarCRM is also available in variety of on-demand deployment configurations.
There are many advantages to moving your CRM solution to “the cloud.” But follow these best practices to avoid the pitfalls that can trip you up:
- Dig deep to understand total costs. Understanding the true cost of a SaaS solution is important. The cost elements are software license fees, internal labor implementation costs, professional services fees, and user training costs. Additional SaaS cost drivers include fees for extra features like mobile and offline access, industry-specific functionality, storage capacity beyond a preset limit, and premium help desk support.
- Spotlight the risks. Vet your CRM vendor carefully to make sure it will be around for the long term, and be sure that you have contract provisions that protect your company if the vendor is acquired or goes out of business. Additional risks for SaaS solutions include loss of control, weaker integration, limited virtualization, and more restricted customization capabilities compared with on-premises solutions. Buyers also worry about physical and data security.
- Strive for a price lock-in at renewal time. Firms are often able to negotiate substantial discounts when signing initial contracts with SaaS vendors. But these firms don’t always consider what happens at the end of the initial contract term. Strive to include language in the contract that specifies how pricing will be determined upon contract renewal.
- Clarify the impact of scaling users up or down. CRM SaaS contracts can prevent you from scaling down the number of users or the tier of the product (e.g., going from the “enterprise” to the “professional” editions).
- Understand the fees for getting your data back at the end of the contract. Unlike on-premises software that physically resides in a firm’s own IT department, SaaS buyers’ data sits off-premises, often in a multitenant architecture. This means that you are faced with new challenges if your company decides it doesn’t want to renew at the end of a contract.
- Be aware of hidden cost drivers. Many buyers have told me that they were not alert to hidden cost drivers in their contracts with SaaS vendors. As the amount of data and transactions increase, so too do the costs of the SaaS deployment escalate. Make sure that the vendor makes these cost escalation elements transparent in your contract.
- Avoid painful service outages. Most CRM SaaS vendors have 99.5% guaranteed uptime built into their SLAs. But few contracts include planned maintenance windows into that uptime — and few users track actual uptime. When unexpected outages occur, payout should come in the form of service credits or months of free service. Although some SaaS providers claim to track outages proactively, users generally shoulder the responsibility for tracking and requesting payouts themselves.
- Watch out for declines in customer support. Forrester has found that SaaS buyers are generally very satisfied with the level of support included in their base contracts. Help desk support is often available 24x7, both electronically and via telephone. However, some users we have talked with cite decreasing levels of support over time, and some buyers tell us that some of the leading CRM SaaS vendors have grown so quickly that getting attention has become more difficult.
- Understand disaster recovery procedures. Although the SaaS providers can talk at length about their security and disaster recovery capabilities, we find that users have generally far less conviction when asked what security and disaster recovery clauses are included in their SLAs. Make sure to perform due diligence around disaster recovery prior to signing the contract.
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