The State of Hosted CRM

By Heather Baldwin

The demand for hosted CRM has grown to such a level that it is becoming a mainstream business solution. The shift from early adopters to mainstream users, however, means enthusiasm may be slowing down as purchasers take longer to weigh their buying decisions, says a new report by Boston-based Beagle Research Group. Beagle collaborated with DCI on the development of a survey questionnaire to evaluate the current state of the hosted CRM market and then worked in conjunction with CustomerSat, Inc. to prepare and host the survey. The 140 completed responses came from small to very large companies and the job titles of respondents ranged from managers to C-level officers.

Beagle’s research indicates end users now expect hosted solutions to be nearly identical to conventional software in functionality and thus they are evaluating both types of solutions equally. These expectations are a change from those of past, hosted CRM buyers. Early adopters of hosted CRM technology had reservations about the technology but were willing to overlook their concerns and concentrate on the perceived benefits – usually lower cost and faster implementation. Today the benefits are still there, but “end users have tempered their enthusiasm and are more realistic about the potential pitfalls of hosting,” says Denis Pombriant, managing principal of Beagle Research. Integration and customization issues are top of mind for potential hosted CRM users, he adds.

This tempered enthusiasm means buyers are acting less quickly to make a purchasing decision and are more prone to see the downside of hosted CRM. “These two conservative indicators are more typical of mainstream buyers than they are of early adopters,” says Pombriant. Still, the shift isn’t bad news for hosted CRM vendors. Pombriant points out that the pool of mainstream buyers is larger than that of early adopters and that 57% of people going into the market indicate they will consider a hosted CRM solution. That’s up slightly from Pombriant’s research figures in the first quarter 2003.

For end users, these findings mean hosted CRM solutions are reaching more functional parity with conventional software so they won’t have to sacrifice functionality for the benefits of a hosted solution. It also means they’ll have more vendors to choose from as several new companies – including conventional CRM vendors looking to enter the hosted market – emerge in the hosted sector.