KEY POINTS:
Auckland-based kitchen appliance importer Providence Marketing is following an IT trend more and more small businesses are embracing: it has decided to hire, rather than buy, a key piece of business software.
Software-as-a-service, also known as the "on demand" model of providing access to software over the internet for a monthly fee, is an increasingly popular way for companies to access software applications.
IT research firm Gartner predicts a quarter of new software will be delivered via the on-demand model by 2011.
For Providence Marketing, the decision to rent rather than buy came at the end of a six-month search for a customer relationship management (CRM) software package.
Providence sells appliances to stores in the Mitre 10 and Noel Leeming chains, and runs an 0800 after-sales service hotline for its products. With strong growth expected to result in annual turnover jumping from $10 million to $20 million this year, chief executive Henry Cassin wanted to improve 0800 call-handling efficiencies by cutting the average call time from 15 to three minutes.
Like many small businesses (and even a surprising number of large ones) Providence has relied on spreadsheets as a method of logging, tracking and analysing customer calls.
"We were having problems getting this information out of our Excel spreadsheets, it was too time consuming," says Cassin.
Again, Providence is following a growing trend with its need for a more sophisticated way of doing CRM, a path which increasingly leads businesses to consider an on-demand CRM solution.
The benefits of the on-demand model include cashflow-friendly monthly payments as opposed to a hefty outlay to buy the software, the simplicity of an application which runs through a web browser, and the convenience of letting the on-demand company take care of data storage issues.
Spearheading the CRM on-demand revolution has been a fast-growing company called Salesforce.com. But the market has become increasingly crowded as the large software companies muscle in.
Will Bosma, CRM vice-president for Oracle Asia Pacific, was in New Zealand this week to promote his company's on-demand offering, the US$70 ($87) per-user-per-month package Providence eventually settled on.
Bosma says the on-demand revolution has opened up the small-to-medium business market for a product that was previously too expensive for anyone other than large corporates.
"A lot of small organisations liked what they saw but for reasons of affordability or complexity just didn't get into that space," Bosma says.
"So they got by on spreadsheets, Filofaxes and email without really having something that could pull together a single view of customers. Today it's affordable for any company on the planet. And that's key because as markets open up, as they become more competitive, everyone is competing for customer acquisition, and probably more importantly, customer retention."
Cassin agrees customer retention is one of the compelling reasons for having an effective CRM system. In the competitive appliance market, where other importers are constantly "knocking on the door" of his retailer customers, being able to offer an efficient after-sales service allows Providence to keep its business.
Don Sykes, chief executive of IT consultancy Asparona, a local reseller of Oracle products, says he has been pleasantly surprised by the high level of interest in the CRM on-demand option from New Zealand businesses of all sizes.
The good news for businesses interested in buying CRM on-demand is that the push by the large software companies, including Microsoft, SAP and Oracle, into the market has sparked a price war.
It has also encouraged some corporate sniping. When Microsoft undercut Saleforce's monthly subscription rate, Salesforce founder and chief executive Marc Benioff hit back, saying: "When you have an inferior product you have to have an inferior price."
Concerns that access to the software is dependent on a working internet connection still discourages some businesses from going down the software-as-a-service route. Others stay away because of jitters about having vital company data stored off-site.
Others, however, welcome the chance to escape the demands of having to manage their own database.
The web-based nature of the software means users can log in anywhere and any time. This could be seen as a pro or a con, depending on your attitude to accessing work away from the office. Cassin says he has so far managed to avoid the temptation to tinker with his new CRM from home on the weekend.
