Hybrid CRM deployments trickle in

Despite the benefits cited by analysts and vendors alike, companies deploying both on-demand and on-premise CRM are few and far between.

SAP's messaging over its release of an on-demand CRM application sounded familiar to CRM industry observers.

The company, based in Walldorf, Germany, sounded many of the same themes that Siebel did two and a half years ago when it rolled out Siebel OnDemand, its belated entry into the hosted CRM market. Like Siebel, SAP touted the advantages of a hybrid deployment model, where companies can run the functionally rich, on-premise versions of their CRM software, while smaller divisions that need to get up and running quickly, or that may need only a simple tool, could opt for the on-demand version, thereby providing the best of both worlds.

Yet large, successful hybrid deployments have been slow to materialize despite the efforts of Siebel (which was purchased by Redwood City, Calif.-based Oracle this year) and now SAP. Last week, SAP announced that Capita Insurance Services, a U.K.-based division of the Capita Group plc, was extending its SAP for Insurance application portfolio to include SAP Sales on-demand. Capita Insurance representatives could not be reached for comment. American Standard and DuPont Chemical Co. were two existing SAP customers highlighted at SAP's on-demand announcement that are extending into the hosted arena.

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Siebel has seen a significant hybrid deployment at manufacturing giant Ingersoll Rand, and company representatives spoke at Siebel's CustomerWorld last fall, but Oracle could not provide a reference hybrid customer for this story.

There are hybrid success stories out there, however.

"I've been checking behind the scenes and a lot of them aren't public," said Sheryl Kingstone, CRM program manager with the Boston-based Yankee Group. "It's a different sales cycle, similar to traditional enterprise software. They're not going to have the constant momentum that Salesforce.com has."

Additionally, Siebel has lost some momentum and communication has suffered because of the Oracle acquisition, which has loomed since it was first announced in September 2005, Kingstone noted.

"I'm surprised it's taken this long for companies to deploy hybrid CRM," said Liz Roche, managing partner with Stamford, Conn.-based Customers Inc. "I've always believed that hybrid deployment architectures were the only way to go. It's taken the software vendors three to four years to figure out it's not an entirely hosted or an entirely on-premise world. In fact, this is the promise of next-generation composite applications."

It's not just the major enterprise application vendors that are doing hybrid deployments either.

"That's a strategy we believe in," said Yuchun Lee, CEO of Waltham, Mass.-based Unica Corp., a marketing technology vendor. "We see hybrid all the time. Typically what you find is that on an isolated departmental level people are more willing to do on-demand. Eventually, when deployments become more complex, on-demand is a barrier."

Marketing professionals are familiar with on-demand, having outsourced their customer databases for years, Lee added.

However, SAP and Siebel, with their large customer bases, are more prepared to take advantage of hybrid deployments because they now offer an entry into on-demand deployment for organizations that might have been reluctant with a vendor that didn't offer an on-premise alternative.

"Large Global 2000 organizations have, by and large, felt uncomfortable with hosting all their enterprise software," Roche said. "This allows organizations to truly match need to deployment."

SAP's advantage is that it is building interoperability between on-premise and on-demand into the product, where Siebel always positioned its two options as separate products that were able to interoperate, Roche said.

SAP also has some catching up to do, however. The new product is not as functionally rich as Salesforce.com, which has done a nice job of giving customization tools to line-of-business executives, Kingstone said. Some SAP customers, including DuPont, have already installed Salesforce.com as their on-demand CRM system and they are going to be reluctant to rip it out.

"Once you get users on a system it's really hard to make them move," Kingstone said. "It's still going to take a long time, if ever, to replace Salesforce.com."

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