open source vs saas

8/9/2019 Open Source vs SaaS

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2010

OPEN SOURCE VS SAAS:

CHOICE OF CRM FOR SMBSCustomer Relationship Management Project Report

SUBMITTED BY:

ANAND OTA, U108

ABHISHEK BHARADWAJ, U108

SUJIT KUMAR SAHOO, U108111

UDAYA BHANU SATAPATHY, U108116


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O P E N S O U R C E V S S A A S : C H O I C E O FC RM F O R S M B S

INTRODUCTION

Small and medium businesses are enterprises with low level of employment, turnover and assets.

The number of employees is at maximum in three digit figures. SMBs form a major chunk of

organizations worldwide and thus are a good market for enterprise packages such as CRM and ERP.

Unlike large corporations having deep pockets and the capability to go for the costliest and the

most powerful packages, SMBs can go only as far as their limited resources permit.

Implementation of enterprise packages like CRM often come with issues of finding out the best

practices in the industry, retaining ones home grown best practices, finding a consultant, hiring-

firing people, creating and managing large data centers and efforts to customize solutions to onesown needs. Such issues may challenge the small organizations financially and inexperienced

companies may really find themselves in trouble if take any wrong step in the selection of the

package which suits them most.

While proprietary CRM packages rule the roost, by offering powerful and reliable solutions from big

companies, not all the in-built functionalities are needed or appreciated by small companies. But

still they may have to pay for them because they are included in the package. Vendors may also lock

them in for further upgrades in future.

Open source CRM and on-demand CRM (SaaS) are two new paradigms emerging in the market

which offer low cost avenues for SMBs. The market for both is exploding and companies are

realizing that a well-known and reputed software package is worthwhile only if they can be utilized

to their maximum possible extent, which often does not happen in case of SMBs. So, new options

can be looked at positively.

This report aims at the comparative analysis of open source and SaaS CRM and attempts to come

out with a slew of parameters on which both can be evaluated, before making a decision.

RESEARCH METHODOLOGY

The project involved secondary research from literature available on internet in the form of

company websites, computer & IT websites, online journals, unbiased white papers, researchreports by international organizations and blogs by renowned people in IT and Systems area.

OBJECTIVE

The objective of this project is to do a critical analysis of the CRM choices available, for small and

medium businesses, among open-source CRM and SaaS CRM. Both the choices have their own


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merits and demerits for SMBs and thus all positives and negatives should be properly weighed and

evaluated before making any decision.

OPEN SOURCE CRM

Open source as a technology driver in the IT landscape has been previously present in the form oftechnologies such as UNIX and Linux. But the true commercial value of open source software is

being achieved only recently. Open source CRM applications market has grown rapidly in the last

decade because of the following aspects.

y CRM has slowly become a necessity and a norm rather than a source of competitiveadvantage. Maturity of the functionalities of CRM has led to its commoditization and the

probability of quantum leaps in value proposition of CRM through new features is low.

y Increasing CRM awareness within the industry has transformed the enterprise CRM marketinto a highly competitive and well-educated one which needs value for money.

y Strong open source products utilizing the strength of the open source community are beingoffered today which specifically target SMBs and enterprise customers based on theirneeds.

y The consolidation happening among the proprietary CRM product vendors has createdapprehension in the minds of customers. For example, with e.g. PeopleSoft and Siebel being

acquired by Oracle, there is uncertainty regarding the degree of support being made

available to the existing product lines. Also, there are concerns regarding the migration

efforts possibly needed for compliance with future product lines.

CATEGORIES OF OPEN SOURCE CRM SOLUTIONS

Be it commercial proprietary CRM or open source CRM, there is no one size fits all approach for

implementing solutions. Depending on the scale of implementation, timelines, range ofrequirements, organizational coverage and integration needs, different approaches are required.

Basically, there are three categories of CRM solutions, depending on their design:

y CRM Package solutions: CRM Package solutions created by the open source communityoffer specialized CRM systems that cater to the core requirements. The solutions offered

here are of fairly low complexity and benefit the users through their easy installation, fast

implementation, and flexible deployment.

y Component-based CRM solutions: Component-based CRM solutions create an optimalassembly of components and provide solution to a comprehensive set of requirements,

sometimes with complex integration needs. Major benefits are the exceptionally flexible

nature of open source software, based on open standards, platform independence, theopenness of its source, modularity, and the freedom to download and experiment with

relevant products.

y CRM Point solutions: It involves the development of an integrated set of best-of-breedpre-configured solutions to help address typical business challenges in the CRM space (e.g.

Campaign Management). Benefits are derived from the efficiency of a proven technology

and the profound understanding of business and industry best practices, along with the


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high points of open source movement i.e. support for open standards, platform

independency and openness of source.

WHY GO FOR OPEN SOURCE CRM?

y Customer satisfaction: Many customers have had negative experiences in integrating,managing and using large functionality-loaded proprietary CRM packages (e.g. Siebel,

PeopleSoft, and SAP). Not all of the features of such packages are needed by the companies.

Some companies want to return to a flexible, manageable CRM solution that offers a high

customizability, low total cost of ownership, minimal vendor lock-in and an open

architecture which can be made to grow and change as the business does so.

y Open source and open standards: Open source and open standards render open sourceCRM great flexibility in terms of ability to modify and integrate. The basic functionality

needed can be implemented with a low cost and can be the beginning point of building

complex functionality over it.

y Application Assembly: The freedom for assembling solutions from pre-built componentsis one of the high points of open source. It enables the customers to evaluate products andcomponents hands-on.

WHEN TO GO FOR OPEN SOURCE CRM?

Implementation approaches are different for different business problems. The following situations

may find open source CRM implementation very competitive:

y A package-centric approach can be used for a front-office oriented solution when therequirements are reasonably standard, e.g. marketing & campaign management, sales force

automation, customer service & support

yAn application assembly approach is suitable when the requirements are non-standard &complex and tight integration is needed with mission-critical applications, or when the

company is addressing a very confined issue, e.g. partner integration, a highly integrated

multi-channel customer support platform, or additions into and modifications of existing

CRM infrastructure

DISADVANTAGES OF OPEN SOURCE CRM

KNOWLEDGE OF BEST PRACTICES

Because of their experience in the industry and the financial power to conduct in-depth research, a

lot of packaged software companies deeply understand what the best practices are. Theyunderstand the roles of embedded sales methodology. This may not be the case with a majority of

open source CRM packages. While customizing, even the customers are not aware of the best

practices. People have learned that CRM is not just about decreasing process automation costs. Its

about leveraging the information they have to Gain insight into their customer base.

TRAINING REQUIREMENTS


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Open source CRM definitely requires some degree of training. Even though training, support, and

help materials are available in open source communities, they are still scarce as compared to the

quantity and quality of training available for proprietary CRM packages. Instructor-led classes are

difficult to find and even when found, the instructor quality varies widely.

STRETCHING SUPPORT

Support professionals for open source packages need to understand the packages at a much deeper

level as compared to the general user. Getting them that level of training can be a big challenge.

Open source community support, though available, is sometimes disadvantageous as no one central

location for open source solutions and they are spread throughout different communities. For

different versions of the package, a "community" solution that works for one version may not work

for another. In many cases, the technical accuracy can't be guaranteed and customers may have to

take the risk of going for their own solutions.

ACQUISITION COST

Even though, open source solutions look the cheapest in terms of acquisition costs, it may cases the

acquisition cost in terms of time for training and support is very high. Extension of the packages

and additions to it can be a challenge. If the company does not want to go for an external

implementation consultant, it may have to hire an internal development team which can be a

burden. The actual acquisition costs can thus be higher.

CONTINUITY RISK

Most of the companies offering commercial open source CRM solutions are relatively very small as

compared to the packaged software giants. If any of these smaller companies go bust, obtaining

support for the current implementation can be a big challenge.

SAAS CRM

Software as a service (SaaS) is a model of software deployment whereby a provider licenses anapplication to customers for use as a service on demand. SaaS software vendors may host theapplication on their own web servers or upload the application to the consumer device, disabling itafter use or after the on-demand contract expires. The report discusses the application of CRM as aservice (also referred to as Hosted CRM or On-Demand CRM).

There are two main types of CRM solutions for Business: Hosted CRM and CRM on-premise or on

delivery. Hosted CRM (also known as CRM on-demand ") involves a company outsourcing all or partof its functions to a CRM ASP (Application Service Provider). Contrary to the licensed on premiseCRM software, hosted CRM tools will be paid on a monthly basis without the assistance of compleximplementations or in house IT team. The result is an affordable solution that promises to deliver aquick ROI (return on investment), while allowing a company to focus on their core competencies.

According to a study by Nucleus Research, more than 80 percent of companies who outsourcedtheir CRM activities achieved a positive ROI. The study reported that problems with the model of


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on-premise CRM were high consulting and software costs, ineffective user adoption, andmismanagement. Though seemingly very promising, the hosted CRM model has its weaknesses.

y On one hand, while on-premise CRM solutions can be tailored to the specific needs of anorganization, same degree of customization is not feasible with on demand CRMsolutions. Moreover, on premise solutions are easily integrated into existing businessprocesses and applications of an enterprise.

For small and medium enterprises, though pricing is a major issue when it comes to hosted CRMtools. By paying per user per month, a company can obtain access to a sophisticated application injust 30 days without charging the IT department much. And the good news for growing businessesis the fact that nowadays in demand CRM solutions are highly scalable and easily upgradeable.

A SaaS CRM solution thus is a software application that allows users access to key data, fromprevious purchases account balance client through a single online source in real time. Most majorapplications of CRM solutions are:

y Automation of Sales Force: It allows the representatives with an immediate view ofcustomer buying behavior, it helps administrators to better forecast future sales, enablingcompanies to increase production cycles based on sales in real time and to apply anaccurate assessment of the performance of sales team.

y Marketing: Helps executives better manage marketing campaigns and design budgets,monitor revenues to special advertising, monitor campaigns and evaluate the results of thecampaign.

y Service and support: Enables companies to accelerate customer service, product supportneeds, call center service and proactive IT support.

y Analysis: Real-time generated custom graphics and reports that by which companiesimprove assets, strategic information and optimize business performance.

GENERIC OFFERINGS FROM SAAS CRM VENDORS


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IMPLEMENTING THE SAAS CRM SOFTWARE

SaaS CRM software can take less time for the launch within the company than a traditional CRMsystem because the software is generally available online and buying & installing software andhardware is not needed. However, in SaaS platform development: the model is highly adaptable and

can take longer than previously thought.

The small and medium businesses (SMB) that want to sell and / or service best practices byintroducing the use of most out of the box instance of SaaS CRM can be run within a months time.However, for more complex requirements, users should ask vendors for references from customersrealistic deadlines.

Several factors may delay SaaS deployment

y Expanding the details of vendors data model.y Integration of legacy systems.y Data processing, and user adoption and training.y To move from configuration of difficult adjustments or heavy customization.

Preparing a service level agreement (SLA) for a SaaS platform provider is important for a company.SLA is dependent on business needs and how often the firm will require updates or changes to theCRM system.

The integration of data during and after a CRM SaaS application can also be a majorconcern. SearchDataManagement examined the case of storage vendor Brocade CommunicationsSystems Inc., which chose Salesforce.com for sales pipeline and lead management. Brocade had tocombine Salesforce.com data with data from its internal ERP and financial systems to compile trendreports. Eventually it had to turn to the demand data integration vendor Informatica Corp. tocomplete its new systems.

SAAS CRM ACCELERATORS BY TCS


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MATTERS SUBSEQUENT TO THE APPLICATION WITH SAAS CRM

Failure or downtime with the demand CRM can cause stress. Salesforce.coms outages made news

in late 2005 and early 2006. The company responded to angry customers by launching a new

website to let users know about any problems with the systems. The site showed the status of

coverage areas and a history of achievements in the past two weeks.

Salesforce.coms failure brought the issue of the SLA to the fore. The company does not offer

a standard SLA or contract that describes and provides performance criteria and service

commitments.

Data protection with SaaS CRM applications can also be a source of concern for businesses. It is

often thought the data is less safe with SaaS CRM, because it cannot be physically separated - as in a

multi-tenant model - and because users rely on the date given by the provider for updates or

patches.

However a point to note here is that CRM SaaS providers typically offer a very solid package of

measures for information security that often go beyond what a customer can be guaranteed if the

application is on-premise itself. These measures include data encryption, user authentication,

perimeter defense and security operating system and database, among many others.

Data security breaches are usually and do often originate within an organization, and with that in

mind, data security provided by SaaS makes sense from a financial standpoint.

According to a report in 2006, SaaS CRM is extending to remote support and can provide secure

access to data and transactions. The notion that SaaS vendors can offer greater security because

their data centers were larger and better protected than those of their customers helped clear the

security barrier hosted CRM.

THE BENEFITS OF HOSTED CRM

There is good reason for the adoption of the on-demand model. With its promise of lower costs and

easy deployment, today hosted CRM solutions offer numerous benefits to companies ranging from

startup companies to international companies.

These are just some of the biggest advantages:

y Rapid Deployment: Hosted CRM implementations can take as little as a few days andrarely more than three months.What's more, firms need not invest up front time in the

planning of hardware and software purchases with on demand CRM.A detailed on premise

CRM solution can take as long as 12 months to implement and install, which is an awful longtime to wait to get into CRM market.

y Updates easily: On premise solutions are often claimed to have a very slow life cycle ofproduct development, while on demand applications are faster to meet the immediate

introduction of new versions.In addition, for product improvements and updates to occur

instantly, hosted CRM applications can be set - and set - fast.


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y Lower Cost: With hosted CRM, there is no hardware to buy, or the need to install servers orto recruit expensive software engineers. One can forget the acquisition of expensive

equipment and ramping up the IT team with experts in highly paid software.

y Security Guarantee: If the current CRM vendors want to survive, keeping their datacentersecurity up to par is paramount. End customers on the other hand are known to skip

software upgrades and poorly manage their employees desktop installations all the morereason to trust global industry leaders with the security of your data.

ADVANTAGES OF SAAS CRM

Other important advantages are:

SAAS CRM DISADVANTAGES

SaaS is not a silver bullet or magic - and it does not benefit all users.

COSTS

Although the price of a premise CRM solution can easily run more than $ 500 per seat, companies

can subscribe to an on demand tool for as little as $ 50 per user. But a modest initial payment is

not the only factor helping companies save their hard-earned dollars on a CRM application.A study

by Gartner, Inc., which considered the total cost of ownership for enterprise applications, showed

Low cost of entry and lower total cost of ownership (TCO) - elimination of capitalexpenditure and drastic reduction in IT salaries

The interests of a seller/vendor is detrimental if the application fails. The seller loses

revenue opportunities for clients

Much lower risk - faster deployment and external experience significantly lower risk

A powerful and secure IT infrastructure - few organizations can match investmentinfrastrucure and security provided by SaaS providers

Some organizations find it very difficult to trust others and to give up control over theirapplications and data management

Some industry verticals require specific business applications that for which SaaSsolutions are not available

Organizations without clearly defined business objectives and processes do not benefitmuch from a SaaS solution


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that 80 percent of the cost of implementation and maintenance applications on the site is not due to

a licensing system, but additional costs associated with managing hardware and software.

According to Gartner Inc, in 2010, the on demand CRM will provide as much as 10 to 13 percent

lower five year total cost of ownership than on premise CRM software used for moderately

complex applications.

Whether the vision is long or short term, there are some areas where a demand CRM solution can

reduce costs.These include:

A comparison sheet of costs for a traditional Client/Server Pharma CRM and SaaS Pharma CRM has

been presented below to illustrate the cost differences attributable to particular headings.

Traditional Client/Server

Pharma CRM

Software-as-a-Service

Pharma CRM

Cost Component Year 1 Cost Ongoing Cost Year 1 Cost Ongoing Cost

Software Licenses/Subs $2,000,000 $400,000 $1,500,000 $1,500,000

Server Hardware

(planning, benchmarking,purchase, maintenance,

upgrade for

development, test,validation, andproduction environments)

$1,000,000 $250,000 Included Included

System/Server Software

(database middleware, OS

purchase, upgrades andmaintenance)

$250,000 $100,000 Included Included

SoftwareUpgrades/Patches


24/7 System Monitoring

and Disaster Recovery


Proactive PerformanceTuning


Initial commission: Theres simply no need to purchase hardware, software or added ITinfrastructure to accommodate the introduction of CRM technology.

Manpower: Implementing and maintaining a CRM solution requires the experience of highlyqualified IT Professionals. By turning to an ASP, however, a company can save thousands ofdollars on IT staff and boost desk support.

Personalization Mania: Although criticized for its one-size-fits-all approach to CRM, a standard

on-demand CRM tool can save a company the price - and problems - which often accompanyapplication customization.

Security: A CRM solution doesnt have to reside within a companys walls to be safe. Rather,todays hosted CRM solution providers go to great lengths to safeguard their clients data. Andthats good news to businesses unwilling to invest in costly security controls and experts.


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Application Configuration $500,000 $150,000 $250,000 $50,000

End User Training $1,000,000 $200,000 $250,000 $50,000

System Administration $450,000 $450,000 $75,000 $75,000

Totals $5,800,000 $2,100,000 $2,075,000 $1,675,000

Five Year Totals (Year 1

plus 4 Ongoing Years)

$14,200,000 $8,775,000

SOURCE: Getting SaaSy in Pharma -- how SaaS CRM technology offers a better a lternative forPharma/biotech companies, Verticals On-demand white paper

COMPARATIVE ANALYSIS OF OPEN SOURCE CRM AND SAAS CRM

For small and midsized businesses (SMBs), the number of low cost options for CRM has increased

manifold in recent years. There are two growing markets which offer low cost solutions:

1. Open source market2. Software as a Service (SaaS).

With limited finances, many SMBs like to avoid the costly installation and configuration cycles ofproprietary CRM. But choosing an option between open source and SaaS can be difficult and it

depends on the financial resources at disposal and tolerance for complexity. The following points

compare the two options based on some parameters:

COST

SaaS is definitely preferable for a small deployment or short-term implementation. With SaaS, the

rentals can go as low as $10 per user per month for some services. The overheads are low or none

for SaaS and switching costs are also low.

However, for long term projects, the fees can build up significantly. For example, the cost of rentingtwo applications from a tier-one SaaS provider can easily exceed $200 per user per month. For

SMBs planning to implement several applications or having more than about 20 users, open source

may be a cheaper alternative.

Open source packages have their own costs attached in the form of on-premise infrastructure.

Servers, security, software licenses may become cumbersome for inexperienced companies. People

will be needed for development and maintenance and thus bring with them the burden of a

competitive salary. Still, there will be a learning curve.

Hence, Open source may be cheaper only in the long term.

SPEED OF DEPLOYMENT

SaaS wins this battle hands down. The deployment is very fast, and in some cases, it can be

implemented in a couple of days. This is very attractive for new wary customers who want to

switch service providers later. Also, because all customers can be upgraded at once, SaaS providers

can easily roll out new releases.


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There are some open source providers who also offer their products as a service e.g. RightNow

Technologies and Cupertino, Calif.-based SugarCRM Inc. This gives customers the flexibility to use

the software as a service at beginning and then move on to a fully installed version later.

CUSTOMIZATION

Degree of possible customization has been limited in case of SaaS historically, though thats

changing. Most of the major hosted services companies now offer tools for customization, but their

features vary widely. In some cases, it may be required to learn a proprietary programming

language which then has HR issues of hiring and training. To take care of this, in addition to

development tools, many providers offer offshore programming relationships and professional

services and offshore that can keep costs low.

Open source is very flexible in this regard. Most of the applications support popular scripting and

programming languages. Community can provide a large library of available enhancements to

choose from.

One point to be aware of is that licensing terms in open source may require the developer todistribute any enhancements to the general public through communities.

RELIABILITY

SaaS market leader Salesforce.com has had several service outages recently, but still on an overall

basis, SaaS is quite reliable. All major providers have invested in hardened facilities, with

emergency power and frequent backups. But smaller vendors may pay lesser attention to these

details and thus proper appraisal of such facilities needs to be done before the deal. Performance

guarantees are now a common thing in this business.

Duplicating an on-premise highly reliable data center can be costly. For companies lacking suchinfrastructure, SaaS is probably a better bet.

DATA OWNERSHIP

One high point of open source is that data is kept under the customers control. One can never be

sure of data security and protection against its misuse in the premises of SaaS providers. Some

organizations may still compromise the data. If control of data is of critical importance, open source

is the right choice.

VENDOR VIABILITY

Intense competition in SaaS bracket will force some vendors to move out. Thus, customers may be

stuck with a dead-end application, and sometimes without access to their data. There is an

additional issue of integration of old data with a new SaaS provider.

Small providers are very often riskier. The bigger providers are more likely to be acquired. Their

customers may then will be supported or moved to a different platform.


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If stability is of extreme importance, then open source is may be a better bet, at least for the leading

packages. Even though a company goes out of business, the software would still work. But all said

and done, there are numerous trash open source products which were abandoned by users and

thus never achieved a critical mass. The doctors advice is to stick with the leaders.

CONCLUSION

Open source and SaaS both offer low cost CRM options to the customers, but whether one of them

will achieve the objectives of the company depends on a lot of internal and external factors such as

kind of business, core competence, goals, financial resources available, degree of control over data

and applications required, business continuity of vendor etc.

Companies must take a rational decision as to go for Open source or SaaS. There are vendors which

provide both simultaneously e.g. SugarCRM. That option can also be evaluated.

This report is not aimed against proprietary CRM packages, many of which are, no doubt, extremely

powerful in functionalities and time-tested & proven. Many such packages can also be explored and

the final decision must be taken after evaluating the costs and benefits weighted against their

corresponding risks.

REFERENCES

y http://searchcrm.techtarget.com/tutorial/SaaS-CRM-software-evaluation-and-implementation, last accessed on 12-Feb-10

y http://www.online-crm.com/saas_crm.htm, last accessed on 12-Feb-10y Hosted CRM Buyer's Guide Inside CRMy Getting SaaSy in Pharma -- How SaaS CRM Technology Offers a Better Alternative For

Pharma/Biotech Companies, Verticals onDemand white papery SaaS BasedCRM Solutions, TCS Offeringy www.wikipedia.org

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