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CRM Makeing the decision to Build, Buy or use a Hosted Solution Provider

May 21, 2008
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Should enterprises build, buy, or subscribe to a hosted service for their CRM applications? The results of a Gartner Consulting survey of CRM requirements indicate that a majority of respondents favor packages over internal development. Of the 600 respondents, 35.8 percent favored prepackaged suites, 37.9 percent integrated best-of-breed packages while 26.3 percent built CRM applications internally. Further, Gartner predicts that by 2006, 25 percent of small and mid-sized businesses will use a hosted CRM service.

The following tables summarize the advantages and disadvantages of the three options.

Advantage

License

Build

Hosted

  • Fewer dedicated resources needed for Application Development (AD)

  • Contract protection if vendor fails to deliver

  • Possibly more cost effective for large and midsize companies

  • Past vendor project successes to build on

  • Use own skills for management, development, and integration

  • Can customize

  • Possibly more cost-effective for small companies

  • Can develop system components as needed

  • Shorter time to implement

  • Cheaper—pay only for what you use

  • Vendor provides operational support, training, and help desk

  • Vendor responsible for upgrades

  • Very scalable

Disadvantage

License

Build

Hosted

  • Reliance on vendor’s expertise

  • Client resources must manage project to ensure success

  • Components delivered may be unnecessary, or may be developed in subsequent releases

  • Dedicated resources needed for AD

  • No protection if AD or project fails

  • No past experience to steer in right direction

  • Growth strategy must be clearly mapped out

  • Reliance on ASP (need a good partner)

  • Minimal customization available; limited back-end integration

  • Security implications for data and proprietary business process

Before making a build, license, or hosted CRM decision, enterprises must scrutinize their functional requirements and core competencies to determine if the needed resources and skills are available in house.

Enterprises that build applications generally do so to take advantage of a new cutting-edge technology or business model for which there is no supporting application. Such enterprises use the build model to differentiate themselves and to gain a competitive advantage. Others use it to save money, but they often underestimate the quantity and quality of the resources needed, thus exceeding the allocated budget

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