Four Reasons Why SMBs Do NOT Deploy SaaS CRM

OK, this is really unscientific and based mostly on my years of experience in the CRM world, some data I’ve skimmed through, a few choice Twitter interactions, and gut intuition…but I think it’s pretty accurate in some way. Basically, I believe that not only is on-premise software alive and well (SugarCRM being a great example) but that also in the SMB space, there are at least four distinct reasons why organizations do not purchase and deploy SaaS solutions for their CRM initiative.

1. Ignorance

In a recent survey (actually compiled for a downmarket competitor) only 9% of the SMBs surveyed claimed that they absolutely knew what SaaS meant as a term. That’s not a great number. And even if you know what it is, it doesn’t mean that you’re gonna buy it. I would argue that depending on who gets there first in terms of a direct SaaS vendor, or on-premise channel partner – the SMB decision maker just wants something that works. The opportunity in this set is wide open.

2. Policy

Even some small businesses have cultivated a model for their IT procurement and management – and SaaS may or may not fit in to the mix. I would argue that if a small business has any policy in place – it lends towards opting for more control over the IT assets – which can leave SaaS out in the cold sometimes.

3. Technology Shortcomings

Similar to the above point – sometimes SaaS will not suffice even for very small businesses. Some SaaS solutions that are more point products (just SFA or a customer service/email management tool) cannot handle the types of integration needs of more complex small businesses (and we’ve all learned that many small businesses’ IT stacks are just as complex as Fortune 500 companies) or are simply lack the customization capabilities of a premises-based solution.

4. Regulatory/External Issues

Some SMBs in various geographies and industries are held to external regulatory concerns and mandates. For example, in some industries where they tend to deal with highly sensitive customer data (health records, financial data) it is difficult to get around mandates concerning privacy and security if you have data flowing in and out of your firewall. Many SaaS products are more secure than on-premises solutions one could argue, but at times the stigma around SaaS has yet to be dismissed, and the buying decision follows as such.

So, that’s just four reasons why – in the SMB space at least (and I’m sure a lot of these are mirrored up market) – on site software will never go away.

I think a lot of CRM vendors got too caught up in the SaaS hype, believing the marketing buzz of competitors and the hollow predictions of analysts. True, SaaS is a huge growth area and one that even SugarCRM takes very seriously. But in the end, customer choice and customer success should be the real focus, not where the CRM app and data reside.

4 thoughts on “Four Reasons Why SMBs Do NOT Deploy SaaS CRM

  1. I agree with the points; a fairly sage perspective. Cost is expected to also be up there, but when it comes down to it, as long as it’s reasonable, I don’t think money actually influences the decision. More relevant is that staff working at SMEs have strong “personalities” and often bring their own process and tools to the job – there is no person “appointed” with the responsibility to plan, advocate, lead a company-wide solution. It’s sometimes challenging to develop agreement in this area (even for a very small company). The only advocate is the owner-manager who is to often busy tackling the “fire of the day” i.e. priorities and decisions are based on day-to-day tactics and not strategy.

    In defense for small businesses everywhere we (as the industry) need to work harder to educate and differentiate solutions. CRM is a huge topic with at least 80 differenent classifications. What is the difference between a traditional (transactional) system and a operational (collaborative) system etc? A bit of organization up front could benefit everyone. This is not a one brand serves all contest.

    BTW only 8% of people surveyed apparently know what a web “browser” is too http://is.gd/16nHS

  2. While I am sure your data is accurate, I believe the next few years will continue to see more and more SaaS use for all types of applications, CRM included. One of the biggest changes SMBs need to make is to be sure that they don’t confuse their messages. INVESTORS may care that a company is a SaaS — because they cut out reproduction & storage expenses, or lower the time to market but CUSTOMERS care about the “BENEFITS” of a SaaS. And the benefits include not worrying about high availability, not investing in new servers, not having to add new features. Done right, SaaS can provide more control than on-site software, not less. SaaS is a great way for SMB’s to get enterprise class service at an affordable price!

  3. Martin
    Good post. I’d like to add a reason to your list.

    5. It’s just not that hard anymore
    In the past one of the key selling points of the SaaS vendors has been this smokey/vague issue that they are somehow better at managing the servers etc. Many SMB’s already have the right infrastructure in place without realising it as they’ve invested in IP telephony and better internet access. When you add to this the low cost services offered by Amazon and how this has led to growth in niche, cost-focused service providers, many of the technical/maintenance barriers have been reduced or eliminated.

    I’d also say that point 3 is a double edged sword. Yes in many cases the SaaS offering has been lacking, but in other cases the SaaS offering has been far too complex. This complexity is often misguided and whilst theoretically brilliant, creates its own set of assimilation issues.

    Finally, your point about the hype is really valid. A number of your CRM peers need to stop spending so much money on marketing and more on product development.

    Cheers Mark

  4. -Thanks all and Mark especially for the great comments. I agree 100% – it is easier than ever to download and install even complex hardware. We have worked hard to make our stack installer a breeze for our Community Edition – and it’s the same for the commercial editions. Look, if thousands of companies and hundreds of thousands of users around the world love to install and run the free version of Sugar – it proves there is a HUGE market for premise-based (or private cloud if we’re gonna get fancy) software…

    Thanks and keep reading…

    -MS

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