SaaS CRM or CRM in the cloud: Sage and Consona add to the dilemma

Sage and Consona are both offering cloud-based CRM software "in the cloud" running on Amazon's infrastructure, but there are differences between this and the SaaS model.

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The availability of low-cost, high availability computing via cloud infrastructures like Amazon EC2 is about to change the CRM market.

While the on-demand or software as a service (SaaS) model of delivering applications has until now been the domain of companies that build and maintain their own massive data centers -- companies such as Salesforce.com, Microsoft, Oracle, RightNow and NetSuite -- the emergence of Amazon and other cloud-based infrastructure providers is allowing others to get into the game quickly and easily.
Sage Software and Consona Software are both readying cloud-based versions of their on-premise software which they plan to release in early 2010. The cloud CRM software is the same as their premise-based version, only Sage and Consona will manage the application, Amazon will host and manage the infrastructure, and customers will use it via a Web portal.

While the end result and method is similar, it is not the same as SaaS CRM, in which the vendor operates the data center and the application is multi-tenant, and customer data is kept separate but shares servers and databases. In fact, it's better, according to Tim Hines, vice president of product management with Indianapolis-based Consona.

In a blog post, Hines refers to the Consona/Amazon approach as SaaS 2.0. Larry Ritter, senior vice president and general manager of CRM applications with Sage -- not surprisingly -- agrees. Amazon's services, he said, allow application vendors to focus on the application.

"When I look at the first generation and vendors like Salesforce, for example, you really needed an aggregated competency," Ritter said. "You had to know the application; you had to have the delivery infrastructure, the data centers, etc. Then you needed to wrap that around a billing and provisioning system. With the new developments in virtualization and Amazon Web Services, they've taken their competency in delivering a data center and provided that as a service. What I think the real disruptive thing is, it allows an independent competency. Up until these high-availability, low-cost virtualization environments came along, I was stuck in the first generation. I can be really good at my application, but if I don't have a data center, I'm stuck."

The difference between SaaS CRM and cloud-based CRM

Yet, while the differences between CRM delivered from a vendor's own data center or from Amazon's may appear to be only the vendor's concern, there are things that CRM buyers need to be aware of.

"Already we can talk about the trade-offs," said Liz Herbert, senior analyst at Cambridge, Mass.-based Forrester Research. "It's maybe a shorter route to offering some of the elasticity that SaaS offers. There's some scalability, but it's not going to be software as a service. When we talk about automatic upgrades, the overall economy of scale you see in the SaaS model, it won't be the same."

And, warns Mini Peiris, vice president of marketing for San Mateo, Calif.-based NetSuite, buyers need to understand who to go to if they have problems with their software.

"You're dealing with multiple vendors that own the ultimate service level, so when it's not your infrastructure, you certainly want to be aware what the service level would be," Peiris said. "Do you go to Sage or to Amazon for downtime?"

Also, applications that are not built to run in a multi-tenant environment don't offer the same advantages.

"If you're taking client server application into a hosting environment, at the end of the day you're not getting as much as a customer in terms of performance, how quickly the vendor can get upgrades to you," Peiris said.

Yet both Ritter and Hines say the multi-tenant argument is no longer pertinent.

"I think that phase is kind of ending," Ritter said. "As we get into the mainstream -- and I think you see this in the market today -- there's more of a combination of on-premise and SaaS-based delivery. You can see that message change with the talk of hybrid [deployments running both on-premise and on-demand applications]."

Multi-tenancy provides economies of scale, but it also requires the vendor to keep customers’ data separate, and that means less customization.

"The amount of customization depth is typically less than what you give someone the opportunity to do in a single-tenant application," Ritter said.

Besides, he said, running on Amazon means running on standardized systems like Microsoft and Oracle, not on a vendor's proprietary set-up, facilitating integration.

Consona in fact has an application built to run in a multi-tenant environment with its Onyx application, Hines said. It just hasn't run it in a SaaS model.

"We have not found that to be an attractive offering because of issues of having customers share database layers," Hines said. When running on Amazon, multi-tenancy is at the infrastructure layer, not the application, he argues.

This method does not force upgrades on customers but rather lets them take it when they want it. There's also the benefit of portability. Customers may, at some point, want to take the application out of the cloud and bring it into their own data center. They can do that with the Amazon model.

As for service issues, customers can go straight to Consona and not worry about Amazon, Hines said.

"We're probably going to see any issues before they do," he said. "We're building a lot of technical infrastructure to monitor the applications in a SaaS-like way. They contact us; we'll determine whether it's an application problem or infrastructure. If it's infrastructure, we have an arrangement with Amazon with specific SLAs."

At Sage, Ritter said, customers will be able to go to their local Sage partner or to Sage itself if they run into any issues.

Yet service issues should still be a concern, Herbert warns.

"The contracts get more complicated with who's taking responsibility for areas of support," she said. "I assume they're making it a 'one throat to choke' situation, but it's still more complex because there's a third party under the covers."

However, she said, the potential customization benefit is definitely an attraction.

"Particularly for something like SAP, where sometimes there's an advantage in that you can maintain some of the customization," she said. "You retain the ability to have command and control."

So why don't customers just buy the software and move it into the cloud themselves? Someone like Sage can negotiate better deals with Amazon, Herbert said.

In addition, Consona is providing more than just putting its software on Amazon, Hines said.

"It's not just the hosting and the bandwidth in the cage," he said. "We take over things like SQL server patches, Microsoft Windows patches. We do maintenance and hot fixes, update the machines."

Both Consona and Sage are still formulating their offerings.

Consona is in the process of testing the model for its eight different CRM products and will launch them all in the first quarter of 2010. It plans to offer multiple pricing models, including subscription-based, usage-based (for some of its self-service software) and even perpetual licenses, with customers paying Consona for the hosting service.

Sage is in what it calls phase 0, Ritter said, educating its partners about the offering. The next step, phase .5 will be bringing some live customers up. Phase 1, putting new customers up on the service, will start at the beginning of the next year.

Both Ritter and Hines said they were happy and confident in Amazon's delivery model, though the deal was not exclusive and they could at some future date consider another cloud infrastructure provider. Neither vendor has announced pricing.

Both agree, however, that Amazon has allowed them to offer an on-demand option more quickly and more cheaply.

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