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Hosted CRM vs. In-House: Which Direction Should Your Company Take? - Page 2
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Who, What, When and Where

Indeed, such personnel considerations play heavily in the choice of a CRM model. If you’re a large company where IT is a key competitive differentiator, it’s more likely that you’ve got IT workers with sophisticated and multifaceted skillsets who can handle the integration work and custom programming needed to achieve ROI from an in-house CRM implementation. However, if you’re a midmarket or smaller company with little or no IT staff, you’re probably better served by outsourcing customer-related processes to an ASP. The provider handles upgrades and support, and offers easy-to-use tools for some customization.

Another personnel issue affecting CRM decisions centers on the workforce actually using the applications — salespeople, marketers, customer service agents, administrative people and other knowledge workers. If an organization has a widely distributed workforce, whether it be because of mobility requirements or due to geographically dispersed offices, an outsourced model can make a lot of sense, as users can use a browser to log-in to applications. To provide secure access to in-house applications, many companies run virtual private networks, but these sometimes experience performance problems. Field salespeople, for instance, have experienced problems logging into VPNs at customer sites due to firewalls and tunneling issues. However, says Herbert, for companies’ whose field workforce need to have complete application functionality while working offline, in-house licensed options are the better choice.

The ease with which upgrades are rolled out is another benefit of hosted offerings: They’re automatically performed centrally, obviating the need for an IT staff to distribute upgrades to individual desktops or portable devices. Still, while touted as a key feature of hosted offerings, frequent, automatic upgrades bring their own problems. While it’s true that developers may have to redo customizations when upgrading their in-house suites, upgrades aren’t as frequent as they are with outsourced models, and companies have the option of not upgrading when new versions are released. With hosted offerings, there’s no real control over when an upgrade is rolled out and what new features are included. This frequency, says Herbert, makes it all the more important that businesses stay current with end-user training to ensure against the input of dirty data.

Another personnel consideration is the number of users that need access to CRM applications. At some point, the number of users that should be included in a hosted licensing contract reaches a state of diminishing returns. Because you license hosted software on a per-seat basis, there’s a point where it makes more sense to bring the entire thing in-house and run it yourself, say experts.

Secure in the Knowledge

Network security’s long been a hot button in arguments over which CRM model is the better choice. Those who favor an in-house approach over outsourced models often decry what they claim is a lack of control over the security measures ASPs put in place. There’s no question that in verticals working with extremely sensitive data — financial services, for example — keeping applications in-house due to security concerns is a common strategy, if not a mandate. Kolsky cites compliance issues, government regulations and other reasons that an outsourcing arrangement simply won’t work for some businesses.

However, many experts say that security concerns over hosted solutions are largely overblown today. “In many cases vendors host through [providers like IBM], so security is good if not better than what in-house can do,” says Herbert. She says customers need to ask providers where their applications will be hosted, what security measures are in place, what back-up procedures they follow and whether they have a back-up location in the case of catastrophic events.

Whatever options customers choose, CRM deployments are moving beyond the less-than-stellar early years to deliver some real, provable ROI. These improvements are due to a number of factors, including the success of on-tap CRM and a more incremental, modular approach to on-premise implementations. Both traditional suite vendors and hosted service providers are adding analytics functionality — through development, acquisition and third-party partnerships — that’s becoming critical to getting more from operational CRM investments. Both camps are also continuing to add vertical-specific functionality to their applications, providing individual industry segments with functions and business process automation specific to them.


Outsourcing Customer Service Processes?
Avoid These Mistakes

While the promise of reduced costs and other benefits continue to drive CRM outsourcing agreements, companies need to consider a few things before going with a hosted model. Through 2006, according to Gartner Inc., 60% of companies that outsource customer-facing processes will experience customer defections
and unexpected support costs that outweigh any savings they’ve gained from the arrangement. Gartner cites the following challenges as contributors to customer
service outsourcing problems:

  • Failure to Manage Customer-Facing Intersection Points
    According to Gartner, companies often neglect to map customer processes from a customer perspective, particularly the intersection points between outsourced and in-house processes. This fragmentation can cause frustration for customers who need to interact with the business, and in the worse case, encourage them to defect. Gartner recommends that companies sit down with outsourcers to map the process to be outsourced, defining individual entry and exit points and integration models.

  • Proof of Concept Testing
    Pressures to leverage newly signed BPO (business process outsourcing) deals can cause companies to cut corners. Pilot tests, or proof of concept exercises, are common victims. Reference checks simply aren’t adequate for determining whether an outsourcer can do the job, says Gartner, as BPO arrangements vary between industries and even individual customers. The research firm recommends that companies conduct pilot tests of the business processes to be outsourced for three to six months prior to signing an agreement.

  • Inadequate Knowledge Management Processes
    Customer service knowledge specific to a business doesn’t just sit in knowledgebases; it’s lodged in agents’ heads as well. And if agents think their jobs are getting outsourced, it’s not necessarily an easy process to get them to “share” their insights so the knowledgebase can be optimized. The best situation, says Gartner, is to have in place a reliable knowledgebase — including the knowledge gained from individual agents — prior to any mention of an outsourcing arrangement.

  • Lack of a Well-Defined Exit Strategy
    Despite the benefits, any outsourcing strategy that includes the outsourcing of personnel can result in loss of control over critical knowledge. This, according to Gartner, reduces a company’s leverage during contract renegotiations. To avoid the loss of key process knowledge, some companies retain in-house staff to work with outsourcers, or negotiate to keep some of the outsourcing staff if the contract goes awry. Gartner recommends that companies entering into customer service outsourcing agreements establish procedures for retaining process knowledge.

 


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