On Premise and Client/Server CRM Applications
In the early days of CRM (the term was originally coined in 1992 when customer service and sales force automation were first automated and paired) the only delivery model available was client/server-based software. In this model the company purchased the licensed software and bought the hardware to operate it on. These systems, which as still in use today, place the burden on IT staff to install complex hardware and software programs in-house and deal with ongoing technical and user issues. In addition, companies would often choose "best of breed" software systems in which they would select different CRM vendors for sales and service and marketing and then have to integrate them to automate cross-departmental business processes and share information. The advantage of best-of-breed solutions was (and still is) that a business could take advantage of deep vendor expertise and product capabilities. The drawbacks were that the company had different software programs which required complex and costly integration, a tricky task that often had to be outsourced to an integration specialist. Client/server products such as Siebel Systems dominated the CRM industry throughout the 1990s and are still in use today.
The early 2000s gave rise to the Application Service Provider (ASP) model, in which a service provider would "host" the CRM application software on their own servers, thereby giving their customers access to the modules they purchased. ASPs are generally "out of the box" solutions that include sales, service and marketing modules that require no after-market integration. Because of shared infrastructure environments, they are sometimes less customizable than on-premise client/server systems.
While the client/server model gained fast momentum in the 1990's (mostly by large enterprises that have the necessary budget, IT resources and infrastructure), small and midsized companies began to embrace the ASP model for its lower initial cost, speed of implementation, ease of IT management (it places no burden on the IT department either to install or service the system), accessibility and instant information sharing.
Today ASPs have largely given way to (or actually spawned) the Software as a Service (SaaS) model in which the delivery of CRM application software is done over the Internet as a service subscription, rather than the traditional procurement model. CRMLandmark.com, an independent CRM research company, credits the CRM SaaS movement with having, "succeeded in altering the acquisition of CRM software from a capital procurement transaction to a rental or pay-as-you-go subscription arrangement whereby the application software is remotely hosted and delivered to users on-demand via their Internet browsers. The SaaS pricing model is based on utilization instead of ownership."
SaaS has taken root in the market primarily because it removes buyer risk and delivers software on demand. SaaS also has the advantage over ASPs of being web-native, browser-based, thin-client systems.
SaaS, On Demand and Cloud Computing
When evaluating CRM vendors expect to encounter different terminology that describes what seem to be similar delivery systems. SaaS, Cloud Computing and On Demand are three such terms that appear often in product descriptions and marketing copy. While there is overlap among them, there are also distinct differences. It's important to understand the exact meaning of each when shopping for a CRM solution.
The important distinction is between SaaS, which refers to a subscription payment model, and Cloud computing, which refers to system architecture. On Demand is a variant of SaaS.
SaaS is a software application that is provisioned and sold online via a web browser and paid for with an ongoing subscription fee. This differs from the traditional model of a license fee with annual maintenance. On Demand is a more business-focused variant of SaaS. A salesperson selling to an IT professional might talk of SaaS, but when talking to a business executive might use the term On Demand.
Cloud computing describes system architecture. A Cloud application uses public network infrastructure to deliver dynamically scalable applications anywhere an Internet connection is available. Both SaaS and Cloud Computing relieve companies of the burden of buying or building their own hardware and software infrastructure, instead relying on the web for delivery.
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