CRM systems: IT in the cloud or the office?

On-premise solutions are still a valid option despite the hype around the cloud

Whether organisations opt for an on-premise or cloud solution, analysts from both Gartner and IDC agree the CRM systems market continues to be buoyant.

The market was worth $1.06 billion in Asia-Pacific and Japan last year, after having grown 21% year-on-year, says Praveen Sengar, principal research analyst, e-commerce and CRM at Gartner.

Locally, IDC is seeing a continued focus on customer-centric initiatives and this includes leveraging mobility, collaboration, BI, social networks and CRM to drive the next level of customer experience, says Rasika Versleijen-Pradhan, senior services analyst at IDC New Zealand.

"This continues to be a key area of investment for many organisations," she says.

An example is the manufacturing sector, which will look to automate customer service and sales processes to improve customer interactions and profiles, she says. For the banking sector, it is all about gaining a single view of the customer.

Gartner's research shows there has been much investment in loyalty management, multi-channel, web and interactive customer solutions in Australia and New Zealand, particularly in the banking, telecoms, financial services, insurance and airlines sectors, as well as government, says Sengar.

A recent IDC survey across the two countries showed 28% of respondents would be looking to increase the level of deployment of CRM applications, with a higher proportion in companies with less than 100 employees, says Versleijen-Pradhan.

"This is relatively similar to last year's results, although the increase was seen evenly across all company sizes. So adoption levels have somewhat stayed the same, only that small-sized companies see it as being more relevant and important for their business," she suggests.

From the same survey, seven percent would leverage a Software as a Service (SaaS) model, however it was the mid-size market (100-499 employees) that would be more inclined to adopt SaaS, she says.

"We expect to see the cloud ecosystems evolving for CRM-type solutions, and the rate of adoption by organisations will largely depend on the availability and integration flexibility of these offerings. So for the time being, the majority of organisations' preferred choice is on-premise."

According to Gartner's Sengar, SaaS adoption is showing healthy signs in Australia and New Zealand, with Salesforce.com growing by 35-40% in this area.

The risks of placing CRM in the cloud are fairly similar to most other common workloads going into the cloud, says Versleijen-Pradhan. The risks include security, performance and availability -- especially latency issues, as well as inability to integrate with existing systems. CRM is about dealing with customer information, so privacy and data sensitivity issues may be a concern, she adds.

Sengar points to potential reporting issues if an organisation keeps some applications in the cloud and some on-premise. Integrating and updating on-premise and cloud applications in real-time is a challenge, he says.

Gartner has found that many companies don't do real-time syncing. Instead they operate in "batch mode", getting some data from the cloud-based systems, integrating this with on-premise data and then running reports, he says.

Another thing to keep in mind is vendor lock-in. How easily can you get your data back from the cloud vendor, should you wish to, asks Sengar.

"It is usually not as simple as 'switch-on, switch-off'," he says. "It can take some time to migrate from a cloud vendor to another vendor."

Gartner is also seeing growing adoption of mobility in the CRM space, particularly in two areas -- sales and customer service. Sales reps on the road can access customer information, as well as share and update data in real-time and sync with the core systems. In customer service, there is increasing uptake of mobile CRM for field service reps, working across different locations, says Sengar.

* Tomorrow Computerworld looks at two very different CRM implementations. Unitec's on-premise Oracle/PeopleSoft CRM system and Localist's adoption of cloud-based solutions.

This story, "CRM systems: IT in the cloud or the office?" was originally published by Computerworld New Zealand.

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