CRM on an Installment Plan

Updated: April 30, 2009

Every month, the bills roll in: utilities, rent, VoIP service provider , office machines, vehicles, CRM. CRM? Yes, indeed. A growing number of CRM application vendors are banking on the idea that a pay-by-the-month (or quarter, or year) billing strategy will make CRM more affordable — and appealing — to a greater number of businesses.

Paying a regular subscription fee per user seat is, for many companies, an attractive alternative to purchasing a traditional CRM product. The subscription approach relieves businesses of the need to install and maintain software on site. The pay-as-you-go method has been around for some time, and it has been used by various CRM software vendors such as Microsoft Corp ., Inc ., Inc . NetSuite Inc .

Yet for SMBs (small and medium-sized businesses) , subscription plans can be risky. Such companies often wonder how many employees will actually use the system and whether there will be any hidden costs. They also worry that subscription prices may gradually rise, making the software unaffordable and potentially tossing their CRM operations into turmoil.

On the other hand, a rented application — delivered directly to staffers' desktops via the Web — reduces the need for IT staff. And monthly subscription fees are relatively cheap — at least when compared with on-site software license deals (and a 20 percent annual maintenance charge).

With so many points for and against rented CRM applications, here are some things to consider before signing up with a service:

Budgeting: Unlike on-site solutions, subscription software comes with no massive up-front licensing fee. Payments are spread out over time, divided into smaller and more easily digestible chunks. Additionally, with some vendors (such as Microsoft), customers pay for not just the software but also for partner services like integration.

Deployment: On-site CRM applications must be carefully tested for server compatibility, performance and other hardware-related issues, which can potentially chew up months of preparation time. By contrast, a subscription-based application can often be deployed with only a few days or weeks of planning .

Maintenance: The subscription approach takes much of the hurt out of updating software. Important fixes and new releases are typically made available to all customers simultaneously. Also, since installation is usually automatic, there's no need to plan a rollout strategy.

Compatibility: While adopters of hosted software don't have to worry about their new application meshing with their on-site servers, they still need to take care that the solution will play well with their other applications. Data compatibility is another issue, since a particular subscription offering may not be able to read data generated by some types of competing CRM applications , ERP (enterprise resource planning) systems or other programs.

Customization: Absolute vendor control means that customers lose much of their ability to tweak CRM software to meet their own specific needs. While most subscription-software providers offer an extensive menu of service and feature options, the choices still may not be sufficient for businesses with unique requirements.

Data Storage: With subscription software, data is stored at the provider's site. This attribute can raise accessibility and security concerns for some organizations. It's important to discuss these issues with the provider before committing to the service.

Subscription software is generally a good choice for businesses that want to spread their CRM costs out over time. Yet adopters must take pains to ensure that the solution meets their business requirements and that they can easily integrate the subscription software with their other applications.

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