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

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.

David Dentry, general manager of Nikon's technical support, says his firm has seen 3,200% ROI since moving to open-source cloud CRM software.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% 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 $14 million after the first three years of the RightNow implementation; a 50% reduction in call response times; and a 70% 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.”

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 $140 per user, per month and the Enterprise Contact Center Suite Package starts at $250 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.

Get off my cloud

Chuck Schaeffer, CEO of cloud-CRM provider Aplicor in Boca Raton, Fla., says he recently “seriously” considered going with an open-source business model and spent a fair amount of time and energy researching it. In the end, though, he concluded the timing wasn't right for two reasons.

The major players so far

Cloud computing isn't yet supported by most of the key corporate vendors, according to Forrester Research, but many vendors have still jumped into arena offering open-source applications. In addition to Compiere and RightNow, they include:

SugarCRM

Concursive

CentraView

Red Hat

Zoho

Jaspersoft and Talend, two open-source business intelligence (BI) and data integration vendors, announced in August 2009 a joint partnership with Vertica and RightScale Inc. for cloud-based application deployments. The four companies released a self-service, pay-as-you-go cloud stack that will allow users to implement BI applications from Jaspersoft, Talend and Vertica on the RightScale Cloud Management platform. During the same timeframe, VMware announced it was acquiring SpringSource, an open-source Web application provider.

“Customers are quite willing to pay for mission-critical business software,” and his key customer base — midmarket global firms — are not yet ready to make the leap into open source for their key systems. The second major consideration was how to make money. “Show me one successful open-source mission-critical application software vendor,” he says.

Still, the door to going open source isn't closed forever. “I think this is something we'll come back to, but not in 2010,” Schaeffer says. Most companies are running open source somewhere, and after some successes in the enterprise application field, there might be more comfort with the notion.

In the meantime, the open-source cloud computing approach is more of a hit among small companies and startups, which Forrester Research says are the main users of cloud computing at the moment. They don't have a complicated infrastructure of IT investments to manage. Right now, many enterprise-level deployments are experimental and consist of non-business-critical projects.

There are concerns about a lack of control over the data and about security. However, cloud hosting companies maintain that security is one of their core competencies.

Aplicor's Schaeffer explains that most cloud software providers fall into one of two security camps: multi-tenant or isolated tenant. In the first, all customers share one large database and security is provided by the database row or field. In an isolated-tenancy setup, each customer has its own database, kept completely separate from all other customers.

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