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Will on-demand CRM eventually replace on-premise CRM?

In your opinion, in the future, will on-premise CRM be completely replaced by on-demand CRM, or will on-premise implementations always have a place in the CRM market?

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When I think about on-demand CRM and this question my mind goes naturally to … radial tires. Yup, radial tires came on the market in the 1960s or 70s, I believe. At first they were only available on imported cars — my brother's MG had Pirelli's and I will never forget the experience of taking my first corner in a car with rack and pinion steering and radials. Wow! It was better in so many ways. Old bias-ply tires were the norm and for a while it seemed like there would always be a division and the two types would co-exist. Then, the inevitable tipping point occurred. Radials lasted longer, gave a better ride, used less fuel and wore more evenly — over night we all went to radials.

We've been through the same kind of transition in the last eight years with on-demand computing. We've seen the superiority and the the ease of use associated with on-demand CRM. In my mind, the question is this: When will vendors wind up their on-premise businesses and go completely on-demand? This change-over is a business model issue and very complex — more complex than changing the tire-making technology.

The other thing to keep in mind is that tipping points are very specific. For example, on-demand sales force automation (SFA) is a "no-brainer," but using on-demand software in the call center is a different matter. There is still a legitimate reason for a large call center operator to operate an in-house call center despite the fact that on-demand call center solutions already exist. The issues are cost, complexity and control. So, for the time being I think we are in a transition state. The real question is: How long will the transition last?

This was first published in December 2007

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