IDC found that online merchants are quickly beefing up their self-help customer service features so their sites can best cash in on the 2000 holiday season. The survey also revealed that the percentage of business-to-consumer sites that offer interactive customer service would increase by 110 percent this year -- from 21 percent offering it in the spring of 2000, to 41 percent doing so in spring 2001.

This sudden interest in electronic customer relationship management (eCRM) solutions can be attributed to the beating many of these same businesses took last year because their sites failed to offer options for customers with questions or problems.

A recent report by market analysis firm Datamonitor estimated that e-tailers lost more than $6 billion in uncompleted transactions last year because of poor customer service. If this sounds dismal for a sector that already weathering a savage shakeout, try this on for size: Datamonitor forecasts that if the trend isn't halted, online merchants could suffer a cumulative loss of more than $173 billion in potentially salvageable sales over the next five years.

This could explain why so many companies are rushing into the marketplace in search of easy-to-use, scalable, and affordable eCRM tools.

"At stake is online customer mind share," says Erin Kinikin, an analyst with Giga Information Group, "Does your company's site provide value, or will customers click off to a site that does?

Moreover, the increased demand for these services from smaller companies with both limited budgets and IT resources has breathed new life into hosted, or application service provider (ASP), model of eCRM.

"eCRM ASPs offer faster deployment, minimal up front investment, and attractive 'pay as you use it' pricing models," Kinikin points out. " It's a low risk way to try out a new technology with faster deployment when internal IT resources have other priorities."

Offering an easy-to-install, affordable, hosted eCRM product is the goal of startup AskIt.com, according to president Ken Shapiro. "We took a sophisticated application and turned it into a simplified outsourced solution," Shapiro explains. "It can be installed within 24 to 48 hours."

Shapiro contends this can be accomplished because AskIt.com worked very hard to provide a robust and scalable solution, while removing any extraneous bells and whistles from its eCRM product.

Installation is accomplished via a wizard on AskIt.com's Web site -- setup involves a few general questions. Categories are then created for Frequently Asked Questions (FAQ), and you designate which individuals from the e-tailer or company will be allowed to access the backend data. Setup and configuration can be done by the user, or by AskIt.com for a one-time fee beginning at $500.

Monthly fees for AskIt.com's solutions range from $100 a month for its Small Business Pro service, to a few thousand a month for its corporate solutions. "Customization is available for a fee to firms wanting it," notes Raymond Blum, AskIt.com's vice president of systems architecture. "More importantly, AskIt.com's hosting is not farmed out."

The redundant system runs on a Linux multiprocessor server using an Oracle8i database. According to Blum, the system boasts cutting-edge security that encrypts the data "so no hacker can spy on it." Blum pointed out that such encryption technology has helped to ease security concerns some members the financial services industries had expressed about using outsourced eCRM.

Blum added that AskIt.com has already signed deals with two major financial institutions that wanted to outsource their customer services; however, he declined to name them.

Still, Blum believes that AskIt.com's main differentiator is that fact that its technology builds a customer's database from "real answers to real questions" instead of responding to static info on a Web site. For example, whenever a customer asks a new question about a product or service, the new answer becomes part of the site's evolving database. "The more questions, the more knowledge," Blum says.

AskIt.com's also offers clients real-time customer service through third-party e-chat vendors such as FaceTime Communications and HumanClick. Ltd.

Middle-Tier And Big Players Are Jumping Onboard

While the majority of hosted eCRM customers have been smaller companies up to now, Giga Information Group's Kinikin sees that changing.

"Right now, we're seeing some ASP uptake in mostly medium to large organizations," Kinikin says. "It's also still fairly difficult to integrate ASP eCRM applications with enterprise customer data or other applications. So eCRM ASPs are best today for applications that are fairly disconnected from core operations (billing, order management, classic CRM and SFA [sales force automation], etc.). While there are a few 'do it all' enterprise-in-a-box ASP providers, most of the implementations are still point solutions disconnected from the rest of the enterprise."

eGain Communications is a provider of customer service software for the Internet. Ian Duffield, eGain's chief information officer, agrees that there has been an enormous shift in the marketplace towards hosted eCRM services. "Six months ago most of our customers were small to medium-sized companies, Duffield says. "But now, 30 to 40 percent of our revenue is being generated by Global 2000 firms."

Currently, eGain hosted services are based on Windows NT using an Oracle8i database. But for larger clients that install solutions on site, eGain also runs on Unix and Solaris-based systems. "We also have used a Linux-based systems at a client's request," Duffield added.

Despite grueling competition, Duffield believes that bigger companies will be willing to pay more for what he labels "robust" eCRM solutions. eGain's monthly fees for its mostly middle-tier customers begin at about $4,000 a month (based on volume), for providing an integrated platform that also includes advanced customer profiling.

Security And Control Still Counts

Ask Jeeves Business Solutions aims to enable essential, human interactions providing relevant answers at critical points in the e-commerce cycle. Sean Murphy, Ask Jeeves' vice president of products, agrees that the ASP model is a viable model for eCRM -- but also has some reservations.

"For instance, the financial services industry is very sensitive about its data," he says. "Security issues would probably make them unlikely candidates for hosted eCRM services." Even if the security eventually becomes a non-issue, Murphy says some companies will still refuse to opt for ASP eCRM services because they want total control.

Ask Jeeves' minimum monthly subscription fee for its services is about $8,000, which includes the creation of a sophisticated knowledgebase and the expertise of an editorial team to prepare answers to your customers' questions.

Before Signing That Agreement...

Analyst Kinikin warns that before a company decides to enter into any ASP agreement, it should fully understand the following factors about the service:

"We recommend that companies start out with short term (one year or less) agreements, picking a solution that can show results quickly without having to load up all the customer data 'crown jewels,'" she concludes.

Chet Dembeck is an analyst and freelance journalist specializing in e-commerce technology and telecommunications.

This article was prepared for AskIt.com, a company providing affordable outsourced online customer service and support solutions targeted specifically to organizations seeking an easy to use and rapid to deploy solution for their Web sites or intranets. AskIt's solution allows companies to: reduce inbound e-mails and customer support costs up to 80%; increase customer service levels by offering 24x7 automated support; and, gain valuable insight into their businesses. AskIt's functionality includes: self-help; inbound and outbound e-mail management tools; and integration with live-chat.

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