Don't coast into CRM hosting

Hosted CRM is hot — well, as hot as this perennially lukewarm field can get. Salesforce.com has been the conspicuous leader here, reaching new SME customers and shaking up the old incumbents. Now Microsoft is taking the hosted model seriously, promising an on-demand option for its forthcoming CRM 3.0 product — the company's first hosted enterprise application.

A combination of circumstances and technologies makes CRM the exemplar for hosted services. Companies have been burned in the past by big ERP investments that didn't pay off, and are reluctant to make big capital investments in related areas — hosting is much more budget-friendly, at least in the short term. People are comfortable and experienced with Web service ideas, and receptive to their immediacy and apparently painless adoption.

Yet these positive factors work against the long-term thinking necessary when considering any significant new enterprise IT. It's important that a service be easy to adopt and be quick to provide returns, but that's no guarantee that it will continue to be the best option in the future. Low initial costs are tempting, but without a reasonable expectation that they will continue to be controllable they may conform more closely to the drug dealer's special offer. The first taste is always free.

Any hosted service provider must be able to answer two important questions — how flexible is the product, and how do its customers leave when they want to? Both questions are best answered by open standards: with these, other companies or the customers themselves can add new features or integrate other products as they wish. Lock-in is similarly circumvented. Provided you can get your data out when you need to and move it where you wish, you maintain the essential element of control that keeps your options open and your suppliers honest.

So it is significant that real interoperability and real open standards — the sort agreed across the industry, not imposed by a major player — are not high on the list of important features trailed by the new breed of CRM suppliers. Security, reliability and usability are necessary but not sufficient: customers need guarantees that are not dependent on the good will of the service providers.

If hosted CRM in particular is to fulfil its promise — and demonstrate the long-term viability of hosted services in general — it must be built on strong principles. We cannot afford to abdicate our responsibilities to make it so, no matter how tempting the immediate reward.