Your Guide to Software Selection

Cloud-Based CRM or On-Premise CRM – Which to Choose?

Software deployment is like a boat trip — you never want to get too deep before choosing the proper vessel. Just as a canoe isn’t sufficient for deep-sea fishing, the wrong deployment model can hinder a business’ software solution.

This is especially true for CRM (customer relationship management) vendors. While evaluating the plethora of vendors available on the CRM market, one of the biggest requirements to keep in mind is which deployment you need. Some businesses need a cloud-based CRM (known to some as web-based CRM), while others require an on-premise solution. Most people say that the future of CRM is in the cloud, but each type of deployment has its advantages and disadvantages. It all comes down to what your users need from CRM software. As you make that all-important decision, there are a few critical criteria to keep in mind:

Get our CRM Software Comparison Matrix.

How Much Access Will Your CRM Users Need?

How much access will your CRM users need? Will they all use it exclusively in the office, or will they need your customer data on the go? The accessibility of a CRM platform is where you should start your deployment evaluation. Cloud-based CRM solutions provide practically unlimited access. They’re available on any device with an internet connection, so your users can access your customer data on any laptop, desktop or mobile browser. In addition, most cloud-based CRM vendors have developed, or are in the process of developing, mobile apps that provide a mobile-friendly CRM experience.

For businesses that employ travelling sales reps and/or CRM users who may find themselves in need of their customer data at any time, a cloud deployment is the right answer. If your CRM users only access the data in the office, however, an on-premise deployment may be the better fit.

On-premise CRM deployment is more tethered than its cloud computing counterpart. For the most part, an on-premise CRM limits your access to the office, where the servers are stored. Although this dictates where and when you can use the system, it also almost completely eliminates connectivity issues. Cloud-based CRM systems rely on the internet to work and provide access. If your WiFi suddenly goes belly-up, you can’t access your data, even if you’re working in the office.

On-premise deployment, on the other hand, only requires proximity to access your customer data. Nothing short of a power outage can stop your ability to work with and view the data you need.

What are Your IT Requirements for Deploying a CRM?

How big of an IT department do you have? What’s their budget? And how many IT resources do you already have on hand? The capabilities of your IT department is another major factor in choosing a CRM deployment.

For businesses with a small IT budget and few resources (mostly small businesses), cloud-based CRM is far more viable. They require little to no intervention from the IT department. Why? Because cloud-based CRM solutions are hosted by the company that develops them. They own the servers, they handle the updates and they’re responsible for the general management of the platform. If there are any issues with the system, you don’t have to try to fix them yourself; you can just reach out to your vendor’s customer service. This saves a huge amount of time and money that you can allocate elsewhere.

On-premise CRM applications, by their very nature, require a lot of IT attention. When you deploy any kind of software on-premise, you’re essentially taking over every aspect of platform management. This means that your IT department has to dedicate a large amount of time and resources to implementing and managing the system. Typically, large businesses have the amount of resources required, so they’re more likely to adopt an on-premise CRM.

On-premise IT management all starts with setting up the servers during initial implementation. You have to deal with loading data, taking care of the servers every day, and problem solving if/when the system goes down. Although your vendor can certainly help your IT staff with some issues, it’s ultimately up to your staff to get it up and running again.

Based on this, it seems like on-premise is simply a waste of time and energy. However, there are some pretty big advantages to on-premise deployment. First and foremost, it’s easier to customize. When you install the system yourself, you can make slight tweaks when needed to better fit your business and the processes you already have in place. One of those customizations could be easier integration, which is a powerful capability for interdepartmental collaboration.

While many cloud-based CRM solutions integrate with other types of software, such as a BI platform for performing Big Data analysis, you can integrate with pretty much any system you want when deploying on-premise. This is because you own the servers the CRM is hosted on, so you can more easily create gateways that allow your CRM to communicate with other systems.

What are Your Budget Requirements for a CRM?

One of the most obvious considerations of software buying is the cost. Most buyers look exclusively at the price of the system, whether it’s a one-time, upfront fee or a monthly subscription. However, there are too many buyers out there that don’t understand the dynamics of evaluating the cost of enterprise software. The downfall of these buyers is that they don’t take the hidden costs into consideration. These are usually upfront costs involved in implementation, but can also include occasional ongoing costs related to maintenance.

Generally speaking, cloud-based software is cheaper from the get-go. The main, and usually only, cost companies have to pay is the subscription fee. Most subscription fees are based on how many users can access the system, but some cloud CRM vendors have a flat fee no matter the number of users. This pricing model ensures that cloud-based CRMs have small upfront costs, which makes them very affordable for businesses. That’s why cloud deployment tends to be more popular with small businesses — because they can afford it.

Along the same line, the upfront costs are what make on-premise CRM systems less viable for small businesses, but popular with larger ones. Getting an on-premise CRM online can get pricey. Among the upfront costs of an on-premise solution are the one-time purchase fee to the vendor; buying and installing servers and other hardware; and, of course, paying your IT staff to make it all work.

Ongoing maintenance costs also be taken into consideration for on-premise deployment. These can be some of the most expensive hidden costs associated with on-premise deployment, as the maintenance of the servers and other hardware has to be done regularly. And when issues come up, it takes time and money to fix them.

Once again, despite some of the cost disadvantages of an on-premise CRM system, it’s not all bad. Because there’s only a one-time fee to acquire the software, as opposed to ongoing monthly payments for a cloud CRM, if you use it for long enough you may end up with a lower TCO. Despite the cloud’s lower short-term costs, after a given time, an on-premise platform can end up as the cheaper option.

Similarly, large enterprises commonly find on-premise to be the cheaper option because of their size. As we mentioned earlier, most cloud-based CRM solutions base their subscriptions fees on the number of users. Large businesses with hundreds or thousands of users may end up with large monthly fees that simply aren’t worth it. Since businesses of this size don’t have to pay per user for an on-premise solution, the one-time fee may be the cheaper, more appealing option. The fact that they have the resources for proper implementation and management of an on-premise platform only enhances that appeal.

How Does the CRM Handle Data Transfer and Security?

Using the above criteria, the average company would probably find more benefit from a cloud-based CRM. When it comes to data management, however, it’s just the opposite. On-premise CRM systems tend to have better data security than a cloud-based solution. The more networks data has to travel through, the more vulnerable it is. When your data is hosted on a vendor’s servers and transferred through the internet for your use, it’s at risk of being hacked.

On-premise solutions decrease the likelihood of a hack because the data only transfers from your internal servers to your device. Although cloud-based vendors have been closing the data security gap in recent years, on-premise solutions are still the safer deployment.

The higher level of security that on-premise software provides is why many industries don’t allow the use of cloud solutions. If your business is in one of these industries, you can’t even consider cloud-based CRMs because of the compliance standards. Even if your industry doesn’t require it, there are many that advise the use of exclusively on-premise deployed software. In this case, it’s still best that you stick with an on-premise CRM so that your customers know you’re doing everything in your power to keep their data secure.

Where a cloud-based CRM system has on-premise beat is in data sharing. As we mentioned earlier, cloud-based CRMs provide access to your sales reps and other employees no matter where they are. The true power of CRM data in the cloud lies in its shareability. Your sales reps, executives, marketers and even your external partners or customers can all have access to real-time data. Although you can share data from an on-premise platform, you don’t always get the most up-todate data when you’re out of the office.

How Do You Make Your Best-Fit Decision?

Every business strives to create great customer relationships while exceeding client expectations. With the help of a CRM, any business can achieve these goals. But doing so requires their best-fit software solution.

Although choosing the right deployment model isn’t the end-all-be-all, it can make a difference in how successful your implementation is. Whether you need a cloud-based CRM or an on-premise solution, it all comes down to your business requirements and the resources you have at your disposal. Carefully assess these before starting your search. Once you do, you’ll have a much clearer picture of what type of CRM you need.

Get our CRM Software Comparison Matrix.

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