Buyer Beware: Tips for Getting the Best Agreement from Hosted Application Vendors
Natalee Roan, Chief Marketing Officer, Entellium
More and more businesses are choosing hosted applications in general, and CRM applications in particular, to help them meet their business technology needs. In fact, JMP Securities, an investment firm, predicts a compound annual growth rate of 37 percent for hosted CRM through 2009, compared to just 1 percent for on-premise during that same period. Microsoft Chairman Bill Gates recently went so far as to call this shift toward software delivered over the web as a service a “sea change.”
Unfortunately, most hosted CRM buyers spend 95 percent of their time focusing on the features and functions that a solution contains, and nearly no time on what happens after the sales contract is signed. This fact is surprising given that the vast majority of businesses enter into long-term contracts with their chosen vendor.
While a majority of the terms and conditions in hosted CRM service agreements are boilerplate, some stipulations may end up restricting your ability to access your own company data, secure reimbursement in the event of service interruption, ensure adequate data back-up, or skirt hidden charges.
To help you see through the tedious legalese and technical jargon that permeates the typical service agreement, here are four key areas you should ask your prospective hosted providers about before signing a long-term contract.
1) Technical Support & Training
Just about every industry - except software that is - provides customer support at no extra charge. Service-based providers, who often have to earn customer loyalty on a monthly basis, have a unique incentive to make sure customers are happy. Yet in the hosted CRM arena, somehow it has become acceptable to expect customers to pay for a relationship with the provider.
Exactly how a “Customer Relationship Management” company can get away with charging customers for that relationship escapes me, but in fact many do. Several offer some minimal level of “free” support, but then promote pricey service or support packages to “ensure you get the level of support you require”. In some cases, these “extras” jack your monthly bill up by nearly 50%.
The other substantial hidden cost reveals itself when it comes to training your employees on the vendor’s products. Make sure you know if there are any additional charges for live, web-based training. Do not allow your employees to be relegated to a self-help website only – users will abandon the initiative every time if this is their only option. And given the level of turnover among sales and service staff, make sure you know if there will be additional charges to bring on new users past the initial deployment of your product.
What you should look for: A provider that services all of your users, all of the time, because they value the relationship - not because you pay them to take your calls. In addition, live training should be free to all of your employees regardless of when you hired them.
2) Service Level Standards & Guarantees
When you choose a hosted option, you are also choosing to hand over your most valuable asset – your customer data. But the Service Level Standards offered by each vendor vary dramatically, and some of the largest vendors don’t offer any Service Level Standard at all.
You’re trusting your data and making monthly payments to them, so you deserve to know what their responsibilities are to you – in writing. For example, make sure you get written answers to the following questions:
* How often is my data backed up?
* How long are the backups stored?
* What are my rights in terms of full access to my data – can I get to it any time?
* Is there a charge for data backups?
* Is my data hosted at a Tier 1 facility with full security protocols?
* What is the provider’s responsibility to inform me of down-time and maintenance prior to their site going down?
* Do they have a rebate for excessive downtime to ensure they have a reason to minimize it?
Most providers protect themselves from legal liability and indemnify themselves from damages claims resulting from interruptions – that’s fair. No one can control a blackout or a natural disaster (or worse). But beware of overly exculpatory agreements or guarantees with no teeth.
What you should look for: Make sure your hosted CRM company has a written Service Level Standard that covers all customers – at no extra charge. Also ensure that the Service Level Standard guarantees a minimum of 99.5 percent “uptime” and that the provider will offer refunds, rebates or other financial consideration if that standard is not met. And make sure you know your rights concerning data back-up and data access.
3) Long Term Commitments & Contracts
Many hosted CRM providers entice you with a “free trial” (that you never fully deploy, let’s be honest) and then look to move you as quickly as possible to a long-term contract. With your company now locked into a long-term agreement and no written Service Level Standards, what motivation does your vendor have to take care of you compared to focusing their energy on their next sale?
With so much competition among vendors, it is possible to reduce this risk by looking for vendors that have a voluntary contracts policy. In this scenario, you are getting something of value in exchange for a long-term contract – usually a price incentive.
What you should look for: Find a company that’s willing to earn your business every month, and you’ll find a provider who has the ultimate incentive to offer outstanding service at a reasonable price. Long-term contracts still may be a great idea because of the mutual commitment it shows and the discounts you receive, but this should be your choice. But, above all, make sure you have a written Service Level Standard in the event you choose to sign one.
4) Access to Data
What would happen if you decided to switch banks, and you went to withdraw your money and the teller said “Sorry, I can’t get the money in your account to you for a few weeks, and it will have to be all in pennies.” You’d blow a gasket - and rightfully so.
Believe it or not, hundreds of companies have similar experiences trying to export data from the servers of some hosted providers - whether it’s emails, files or even customer data in a CRM solution, because they neglected to understand their rights in this area. Some providers may hold onto data until all billing issues are settled. But in many cases, it’s standard procedure to take a few weeks to extract and export data (for the convenience of the provider, naturally), and sometimes the format it’s returned in is difficult to port into another solution.
What you should look for:It’s best to get this out in the open before you sign a contract. If a provider won’t guarantee immediate and full export of data on-demand for next to nothing, you’ve got the wrong provider. Also, make sure you know what format you will get your data back in. Do you homework - after all, it’s more than just your data – it’s your business at risk.
Conclusion – Ask tough questions
There are many benefits of going the hosted route for CRM. But before you choose, ask the tough questions about what happens after the sale. Don’t let the vendor control the sales process. It’s the best way to make sure the vendor doesn’t let you down at the most inopportune time – or stick you with an unforeseen support bill down the road.
