Open-source CRM and ERP: New kids on the cloud

Users report significant ROI

When Nikon decided to merge and consolidate customer data from more than 25 disparate sources into one system, officials didn't want the burden of maintaining it in-house, yet whatever they went with had to meet all their requirements and work picture-perfect.

Flash forward to the early 2000s: The camera and imaging company decided to host its entire CRM needs with RightNow, a cloud computing CRM provider based in Bozeman, Mont. The vendor builds its wares with open-source technologies including MySQL database software, the Linux operating system, Apache for its Web servers and PHP for a lot of the coding.

In moving the application maintenance and support off-site, Nikon has achieved significant ROI, says David Dentry, general manager of Nikon's technical support and based in Melville, N.Y. Nikon had been using at least three systems for CRM-like functions, which included e-mail, product registration and customer call tracking.

When the company was looking for a new Web-based FAQ system -- a way of answering questions via published support articles -- company officials came across RightNow, which also had other CRM features they were interested in. They decided they could consolidate outbound e-mail, contact management and customer records into one system.

Most functions were moved to the RightNow cloud some five years ago.

A study Nikon did two years ago revealed a "ridiculous, 3,200 per cent return on investment figure,'' says Dentry. That figure considered the amount of money Nikon had invested in RightNow -- specifically in end-user support -- and calculated how many calls Nikon staffers were able to deflect because customers had found information for themselves on the Nikon Web site, he explains. The number also took into account how many e-mails Nikon's customer service people could answer without having to generate a phone call.

That translated into a cost savings of over $US14 million after the first three years of the RightNow implementation; a 50 per cent reduction in call response times; and a 70 per cent reduction in e-mail response times.

"The percentage seems so high that it almost feels like it couldn't be true," Dentry acknowledges, "but I implemented the system and generated the numbers, and I know they're correct."

The ROI of on-demand cloud computing

* No upfront capital costs

* Low ongoing subscription fees

* Pay only for what you use

* Reduced internal IT support/maintenance costs

* Cloud computing is quickly provisioned and easily expanded; you can decide to work with a cloud provider in the morning and be up and running the same day

Although Nikon still hosts its SAP ERP system internally because of the "complexities of the system," says Dentry, he feels strongly that Nikon was right to move its CRM applications out of the data center and into the cloud. Nikon uses RightNow for its entire CRM system globally, including modules for service, outbound marketing, sales, customer database, analytics and customer surveys.

RightNow wouldn't disclose what Nikon is paying, but a company spokesperson said the Enterprise Package starts at $US140 per user, per month and the Enterprise Contact Center Suite Package starts at $US250 per user, per month.

"If I was starting a new system I wouldn't consider doing it in-house," says Dentry. "There would have to be very specific requirements to make me consider doing that."

ERP, CRM on the cloud: A 'significant' trend

Moving CRM and ERP applications to the cloud is a pretty significant trend, says Rebecca Wetteman, vice president of research at Nucleus Research, Boston. "We talk to lot of folks and see broad adoption of cloud computing and open-source tools out there," she says.

Rather than pay someone to support a packaged application internally, cloud computing in general allows enterprises to take advantage of applications that they can tweak to address their specific requirements. Leveraging economies of scale, cloud computing providers can make support costs less expensive, and it's generally less costly when it comes time to upgrade as well.

"The cloud is about having a custom-developed application versus something everybody else is packaging,'' Wetteman says. She says, for example, two years ago, everyone was using the same applications for sales force automation. Now with something like Salesforce.com, companies are creating custom HR or e-commerce applications.

Adding open source to the equation allows customers the added benefit of being able to tinker with the code, although only a handful of application vendors are offering an open-source cloud model, she says. (See sidebar, below.)

Of course, flexibility is at least somewhat in the eye of the beholder, observers acknowledge. "The definition of open source differs" depending on who you talk to, explains Saurabh Verma, global services director at Acumen Solutions, Inc., which does both cloud-based and traditional systems integration. Even if CRM is developed with open-source technology, "that doesn't necessarily provide the flexibility to the client of truly using open-source power,'' he says. In other words, "you can tinker with the code to do some customizations based on the model, but you cannot change the way their tool is built."

That's fine with Dentry, who says he's more focused on the cost benefits than on the open-source issues.

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