A pure-play vendor argues traditional CRM software vendors still don't get it.

The changing face of business is driving more — and bigger companies — to embrace software as a service options.

"In a very real sense, the rules of business have changed," says Greg Gianforte, CEO of SAAS vendor RightNow Technologies.

Credit the Internet-powered consumer, who's demanding more and more informed interactions with the vendors whose products they buy — even though it's rare that they buy the products direct from those vendors themselves. If service is not up to snuff, those vendors can kiss these customers good-bye.

Gianforte cited a recent survey indicating that more than 50% of buyers count service as the main reason they continue to buy from a company, but more than 80% of respondents said they stopped doing business with companies who delivered bad service.

RightNow delivers on-demand CRM software including artificial intelligence technology that learns how customers and contact center staff search for information and automatically applies that to knowledge bases to enhance the customer experience. That capability, Gianforte says, means more and more to companies now that buyers are unlikely to go to the retailer to get their questions and concerns addressed.

"Fifteen years ago if you wanted to buy a Nikon camera, you went to a local retailer, spent $2,000 and if you had a question you went back to the retailer to ask," he says. "Flash forward and today we pay $200, not $2,000, buy online or at Costco or Wal-mart, and if we have questions, our expectation of asking the retailer, is zero."

To Nikon, one of RightNow's customers, that means the costs of supporting a client goes through the roof.

"The distribution channel is cut and if Nikon doesn't answer the question the consumer goes to Sony. Without the ability to deliver a great customer experience, brand equity is eroded."

At the root of most bad customer experiences, he says, is a lack of knowledge. Gianforte says that with smart Web-based self-service, Nikon was able to eliminate 50% of its calls, and reduce those costs. Today, RightNow serves Nikon globally.

But what makes SaaS better at helping businesses achieve this than traditional on-premise CRM? Gianforte argues that the answer is that most organizations want a simple solution and they want an offering that focuses on customer needs.

"Traditional CRM can't get it, one, because it takes too long and two, because it is internally focused," he says. "Traditional CRM is focused on internal business process issues. And it is B2B-focused [business-to-business], not B2C-focused [business-to-consumer]. And it takes too long to deploy."

He might be onto something. A recent Gartner report indicates that the SaaS market will hit $19.3 billion by 2011 — it already reached $6.3 billion last year. CRM and HR have been traditional hotspots, but it is broadening out to include areas such as procurement and compliance management.

Gartner says that new technologies used in software development and improvements in the underlying development business processes are making software development a more industrialized process, which will have profound consequences on the types of IT services that are sourced by enterprises and the types that can be profitably delivered by suppliers.

In a statement released at the time, Ben Pring, research vice president for Gartner, said, "There is now a widespread consensus among the movers and shakers of the IT industry that SaaS is an important and meaningful issue which can no longer be regarded as the 'lunatic fringe.'"

Adapted from The CIO Information Network