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This 5/22/09 article from Outbound Call Center does a nice job of explaining the differences between On-Demand vs On-Premise CRM solutions as well as outlining four key considerations to aid in making this important decision.

– On-Premise: Your data and software applications are held in-house by your company where servers, connections, access, and data are all controlled by you and housed internally.
– On-Demand: Your data and the CRM or SFA application are available via the web where servers and data are housed by the application vendor. Often called software-as-a-service (SaaS).
– Hybrid Solution: Some vendors and partners are starting to offer a combined solution with some of the best of both worlds—data and applications are hosted by a third-party, but ownership is still held internally.
To help you narrow down the vendors, consider your business’ position with these four questions:
1. Is customer data an important asset to your business?
Your accounting and order information is certainly critical for your business. But what about your customer history, profiles, and analysis, as well as your customer service processes? Not to mention, your sales methodologies and forecasts. If your business lost part of this data, how would the future of your business be impacted? Some companies place more value on transactions rather than relationships with customers and customer-facing processes. But if customer information is a key asset to your business, ensure that data receives top priority. For example, if you were to leave a vendor after five years of customer and business history, how could you port that data into another system for future use?
An on-premise application enables you to have the most control over your data because you hold it in-house. But if you don’t want to dedicate resources system maintenance such as back-ups and security, a hybrid solution may be an attractive option. This enables you to have complete ownership of your information and the software application, while utilizing a third-party partner for hosting, back-up, extra security and other services.
2. What is the total cost of the solution over five years?
The cost and scope of CRM go beyond the software alone. Successful CRM is achieved by using a solution to optimize processes and training the staff to properly use it. That said; ask these cost-related questions of your vendors when planning your CRM solution:
  • Licenses: If I am charged on a monthly basis, what’s the commitment? If it’s a perpetual license, are there extra annual maintenance fees? Do my field and mobile staff receive online, offline, and mobile access for that price?
  • Extra Functionality: Are all features included or will I need to purchase additional third-party applications and licenses? For example, email marketing, industry-specific interfaces, and data cleansing tools are often desirable features to support and extend CRM business processes, but may not be included in the base fees. 
  • Hardware or Hosting: Will I need additional server hardware if bringing the solution in-house? If hosting outside, are there additional hosting fees beyond the licenses, such as services for back-up, data exporting, extra data storage?
  • Support: What will it cost to get the phone and email support I need? What are the charges for on-site support?
  • Configuration & Process Mapping: What resources (from the vendor or partners) are available to help configure our processes into the CRM software? How long will the process take and what are the fees?
  • Training: What training options are available, and what is best suited to my users – out-of-the-box online training – or customized user manuals and face-to-face classroom-style training?
Whether it’s a capital expenditure or operational expense, understanding the total cost over the next five years will ensure that you’re focusing on the total ROI of a CRM solution.
3. Will this be available in the field where business takes place?
Consider how your field and mobile professionals and executives will actually use the CRM solution in the field. If CRM is meant to benefit the staff, it needs to be easily accessible.
For example, will they boot up their laptop in between sales calls to update meeting notes and look-up information for their next call? Will they do these tasks at home at the end of the day? Or will they use mobile devices such as BlackBerry smartphones to update and retrieve information on-the-fly? In each of these scenarios, consider what type of information the sales people need, what information their managers need, and whether they are operating online or offline. Also, consider whether these professionals need access to viewing and updating information in airports and planes, as well as whether they are usually operating within the city or are in rural areas where full wireless connectivity may be difficult to secure.
When you’re evaluating CRM solutions, consider the fastest and most convenient method for the mobile workforce to access their key information, while keeping them in front of customers selling and minimizing time spent on administrative tasks. Go with the field reps on a “day in the life” trip to fit your CRM or SFA application into their work style, and even better – to improve the productivity of their current work day.
4. How can I customize or integrate CRM with my processes & back-office information?
Oftentimes, having back-office information accessible to customer-facing staff on the front lines is critical, including credit balances, outstanding invoices, shipment status, and product details. At the same time, you want to shield your customer-facing staff from full access to accounting or ERP systems that hold this information. Essentially, you need to bring key pieces of relevant information into a CRM or SFA system for sales and service staff to use.
It’s often easier to make your CRM work with your back-end than the other way around, since a migration of accounting or ERP software isn’t an easy task. But similar to roadblocks for renovating a rented apartment, it may not be feasible to customize or integrate a hosted CRM solution. Ask how the solution is hosted and how it affects your ability to customize or integrate it with your back-end solutions—whether you approach it through batch synchronization or real-time data feeds.

These are all great points to consider.  I want to add a couple things that I think are very important in making this decision.  In my 11+ years of working in the CRM industry, I have witnessed item number two being overlooked many times when companies choose an on-demand solution.  Make sure you do your homework and read between the lines.  Because like the old adage goes…if it sounds too good to be true it probably is.  Calculate your ROI over five years, not the first couple of months.  You’ll often be surprised at what the actual cost of ownership is for on-demand solutions (higher than you initially thought).  I’ve also learned (the hard way as a CRM developer) that item number four is critical if integration with other systems is desired.  Take the time to understand the flexibility and limitations of the environment if you choose an on-demand solution.  Let IncorTech help guide you through the decision making process and find the best solution for your company, whether it be on-demand or on-premise.

DISCLAIMER: The content provided in this article is not warranted or guaranteed by IncorTech. The content provided is intended for entertainment and/or educational purposes in order to introduce to the reader key ideas, concepts, and/or product reviews. As such it is incumbent upon the reader to employ real-world tactics for security and implementation of best practices. We are not liable for any negative consequences that may result from implementing any information covered in our articles or tutorials.
Category : CRM / SAAS

One Response to “CRM On-Demand vs On-Premise”

Hana September 4, 2009

This is a really nice article about hosted CRM vs. in-house solution. Every company should definitely do the homework before making the decision and also you should make a list of what you are expecting out of the hosted solution. Many hosted CRMs have hidden cost based on the features you want, just be aware

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