Cloud vs. On-Premise CRM Software: Which is Better for Your Business?

Congratulations. You recognize the value in customer resource management (CRM) and have decided to invest in a CRM software system for your business.

But now you’re faced with yet another decision – selecting between a cloud vs. on-premise CRM software solution. Which one is right for you?

Determine Your Business Needs

When deciding between a cloud vs. on-premise CRM delivery model, there’s no one-model-fits-all solution.

It’s important to assess and understand what your CRM must haves are in order to determine which deployment method is best for your business. There are advantages and disadvantages to both, and the decision may involve a compromise.

Start by first identifying and assessing your business’s unique CRM requirements. Ask yourself the following questions:

  • Do I have the financial capacity to invest in new resources (required infrastructure, software licensing, support, etc.)?
  • Do I have technical know-how or a dedicated IT staff?
  • How important is it that I maintain confidentiality and control over my corporate information?
  • How do I anticipate my business growing and changing over time?
  • How much flexibility do I require?

Benefits of Cloud vs On-Premise Deployment

In a cloud CRM delivery model, your vendor houses the application and you access your data via the web. A CRM vendor provides all the updates, maintenance and storage of the CRM application. Since the vendor will provide hosting, cloud solutions are also known as hosted solutions.

Cloud CRM Benefits

  • Remote Accessibility: Data can be accessed anywhere, any time and any place (if the user has access to the internet)
  • Cost-Effective: For most companies, the cost of Cloud based CRM is usually much cheaper than On Premise CRM
  • Easy Implementation: Since there’s no hardware installation, cloud CRM is extremely easy to implement
  • No Ongoing Maintenance: Maintenance isn’t handled as ongoing like it is with On Premise
  • Support: Third party support and service is usually offered along with Cloud CRM plans, which allows you to have specialists to help manage upgrades, installation, testing and maintenance

Alternatively, on-premise CRM software is housed at your location and managed by your IT department. While the CRM vendor may provide technical assistance, support and training, your company is responsible for the updates, customizations, system administration and maintenance.

On-Premise CRM Benefits

  • Control: On Premise CRM systems gives your company direct and complete control of client information and data
  • Scalability: There’s generally no database size limitations getting in the way of your growing enterprise with an on-premise deployment
  • Upgrade Flexibility: You’ll get the flexibility to determine when you want to upgrade your solution to the newest version of the software
  • Security: Private or sensitive data is more secure in an on-premise CRM solution
  • Cost Effective: Sometimes it can be better to own than rent. If your company has many people who need to access the database, it may be much less expensive to host your own system than pay the per-user cost
  • Integration: In most cases, on premise CRM systems have greater flexibility in terms of what opportunities there are available for integrations across various applications


Comparing Cost

With cloud deployment, you are essentially renting the software from the vendor for an agreed upon period of time. For example, if you have 10 users at $100/month per user, your annual cost would be $12,000 per year.

Alternatively, on-premise software is typically offered with an upfront, one-time fee. You purchase the software outright and you own it for perpetuity. For example, if you have 10 users at $1000 per user, your cost would be $10,000 upfront with no additional licensing cost.

In the above example, it seems obvious that on-premise might be the lower cost option, however you absolutely must consider long term maintenance costs.

With cloud licensing, you pay your monthly fee and the vendor covers the IT cost, maintenance, and software updates. With on-premise deployment, you may need to make additional upfront investment in hardware and setup and will also need to have your own team to handle maintenance and upgrades.

Other Things to Consider

Cost will always be an obvious consideration, but it’s essential to look beyond price to make a full evaluation of which option is the best fit for your unique business needs.

For example, the low monthly subscription cost of a cloud CRM software may be attractive initially, but will it become expensive as your business grows and more users are accessing the system?

Alternatively, if you like the control of on-premise deployment, do you have the infrastructure to handle it? Is your internal IT team up to the task, or would you need to hire a third party IT team to manage this for you at an added expense?

You’ll also want to consider any regulations in your specific industry. For example, some government, financial, or healthcare regulations may require you to host your own data for compliance reasons.

Freedom and Customization

When you host the software yourself on premise, you usually need at least one dedicated IT person. But, if you go this route, the options to customize and make changes to the software to better fit your needs can be done at any time, as you see fit.

This can be both good and bad; if there are mistakes or problems, the CRM provider will not know all of the work you did to get it to that point. However, you will not have to pay to make changes or get approval like you would if you were in the cloud.

A Hybrid Approach

Want the most amount of flexibility? Since there are pros and cons to both CRM delivery models, in many cases it’s advantageous to consider a vendor that offers both a hosted and on-premise software solution. That way you can easily switch from a hosted to an on-premise CRM platform (or vice versa) as your needs evolve and change over time.

If you think this option might work best for you, be sure to discuss it with potential vendors to see how easy it is to switch from one deployment to another. For example, the OnContact CRM is built to make switching between cloud and on-premise crm very easy with no data loss.

Which is the Better Fit for You?

To better evaluate these options, start a list of all of the needs on your wish list, then compare them to the pros and cons of each deployment method. Since it is possible that neither method will be the 100% perfect fit, visualizing this can help you choose where to make concessions.

Once you have decided on a deployment, you can begin the process of choosing a vendor. A great place to start is by getting your hands on the application. Many vendors offer a free trial, so take advantage of this if you can.

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