Small businesses increasingly have been turning to hosted applications for their customer  -relationship management, seeking to save money and ease the burden on understaffed I.T. departments.
Other factors, such as deployment speed, are driving small businesses to adopt hosted CRM applications. Many adopters cannot say enough about the convenience of deploying software by merely attaching a connection to the vendor providing the service .
What's more, some analysts see a trend developing in which employees more readily use CRM features when access is hosted. Traditionally, one of the drawbacks of CRM software has been a reluctance by staff to use sales-automation programs. But the use of hosted services by companies in the 250-to-999 employee range has been gradually gathering favor over the last five years.
"The total cost of ownership for in-house applications has gotten higher over the last three-to-five years," said Sanjeev Aggarwal, Yankee Group senior analyst for Small and Medium Business Strategies. "Hosted applications are definitely a money-saving proposition because companies can start out slowly and grow their business around it."
Clearly, the hosted-CRM train has pulled out of the station and many small businesses are considering hopping on board. But will hosted CRM remain a viable option for them, or will a majority continue to buy and run their own software?
Hosted Cost Advantage
Aggarwal said that, for many small companies, money will decide the issue. Renting software services is generally more kindly to the operating budget than is a capital expense that requires continual hardware upgrades and new-release purchases. He said he is convinced that more small businesses will adopt hosted CRM applications in particular and other hosted services in general.
A growing user base of hosted CRM products already is well established. "Software services on demand has been growing in importance for the last five years," said Yankee Group analyst Sheryl Kingstone. "Products like Salesforce.com as a CRM application paved the way for this category of service."
A recent study by AMR Research confirms such a trend. According to Robert Boise, research director at AMR's customer-management practice, 45 percent of small businesses are doing some type of CRM activity with hosted services. "This is the highest penetration yet," Boise said. Another 40 percent of small businesses have plans to host some of their CRM needs, according to the study. (continued...)
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