Software vs. Services: Establishing the Right CRM Mix

For the past four years, Salesforce.com has pursued the notion that services delivered over a subscription-based sales model is the best way to combat the bloat of past CRM implementations. "Customers are sick and tired of spending the money on software," says Salesforce president Jim Steele. "They're saying, 'Give me a low-risk, low-cost alternative that I can get value out of immediately, and if I don't like it, I can turn it off and send it away.'"

The problem with a straight software model, he says, is that the people selling it don't have any real incentive to make sure the customer remains satisfied once the initial transaction is through. "When you write a check to most companies that sell software, they go to their next customer and aren't interested in you anymore," he says.

Among Salesforce's competitors is Onyx Software, which advocates a software-services hybrid. "[The services-only model is] a great architecture for hosting, but if you just want to take one component, like tracking sales opportunities, from a bigger applications set, you can't do that," says Ben Kiker, chief marketing officer. "You have to take the whole application."

For VARs trying to decide which approach is best, there are no easy answers. According to Beth Eisenfeld, a vice president at Gartner, a services-only model would benefit companies that want to get jump-started on CRM or are too small to implement it themselves. But it wouldn't work as well for companies that prefer to have an in-house IT staff. One thing, she says, is for sure: "[VARs] have to understand how best to benefit customers with it first, then work backward from there. Technology alone is not a silver bullet."