Gartner Says That 30 Percent of New Customer Service and Support Application Investments Will Be Through the SaaS Model by 2012

Customer Satisfaction May Suffer as ESPs Play a Diminished Role

STAMFORD, Conn., Organizations are experiencing project savings of 25 to 40 percent by deploying CRM applications in a software as a service (SaaS) model, according to Gartner Inc. Gartner said that its clients were making these savings from reduced application expense and lower implementation costs.

Much of the savings that organizations are making is a result of a lesser dependence on large external service providers (ESPs), which typically help businesses improve customer processes as part of the CRM engagement but which play less of a role when SaaS is involved. Among the top 100 SaaS deployments in 2007 and 2008, fewer than 10 percent involved a large system integrator or an external enterprise business consulting team. This would indicate that the role of ESPs in designing, measuring and driving CRM process improvements will diminish at enterprises deploying SaaS solutions for CRM through 2012.

“Due to the increasing use of SaaS for CRM, ESPs — which include business consulting and system integration services — will have less influence on CRM processes as SaaS accelerates,” said Michael Maoz, vice president and distinguished analyst at Gartner. “This could result in an erosion of customer satisfaction among large enterprises that invest in SaaS solutions unless they invest their own resources to measure and manage long-term CRM process improvements.”

Gartner expects a similar drop in customer experience scores from midsize businesses. They’re a stronger target for SaaS offerings, and they rarely use ESPs for business consulting skills.

Mr. Maoz said that many projects that involve complex customer service contact centers are reported to be “on hold” until better references are available from the large enterprise application vendors that are in the process of releasing a new generation of their products. However, he said that SaaS is the deployment model of choice for an increasing number of projects. Gartner predicts that all forms of SaaS-delivered customer service applications in the call center will grow by more than 20 percent per year through 2012, and this will deliver significant savings. By 2012, 30 percent of new customer service and support application investments will be through the SaaS model.

Because SaaS applications lack sophistication in BPM and process design, and due to the absence of ESPs offering business process advice, the growing spread of SaaS CRM applications threatens CRM efforts. “There will be significant savings in infrastructure and resource costs in migrating to SaaS, but to put that money to work in customer process improvements, careful performance measurement of ’before’ and ’after’ project spending will need to be performed,” Mr. Maoz said. “If this does not happen, then the savings will be shortsighted, as they will not improve the relationship with the end customer.”

In a difficult economic climate, it stands to reason that many businesses will make similar choices and choose not to measure the benefits of the SaaS model. Gartner’s advice to organizations deploying SaaS for CRM is to ask the software solution provider for its CRM process credentials and those of its ESP partners.

Additional information is available in the Gartner report “SaaS CRM Reduces Costs and Use of Consultants.” The report is available on Gartner’s Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=778215&subref=simplesearch.

About Gartner:
Gartner, Inc. (NYSE: IT) is the world’s leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the indispensable partner to 60,000 clients in 10,000 distinct organizations. Through the resources of Gartner Research, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,000 associates, including 1,200 research analysts and consultants in 80 countries. For more information, visit www.gartner.com.