Hosted CRM vs On Premise CRM: Which Is Right For Your company?

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Along with the introduction of CRM 4.0 a few years back, Microsoft began offering a Hosted CRM environment for customers as well as the On Premise CRM.  I wanted to take a few moments to educate people on the differences, including the benefits of each, and where a business might find value from one over another.

The Basics

Fundamentally, these options are based on whether your company wants to own or rent their CRM infrastructure. While there are pros and cons to both approaches, the driving force behind this decision tends to be the cost benefit and needs requirements. This model relates well to buying a house over renting an apartment. With the On Premise solution, the business is buying a house, and thus retains the ownership. The initial costs are greater but spread out over time, the value begins to set in. With that option, when the dishwasher breaks, its up the owner to fix it or to call the maintenance company to repair it, for a charge. Alternatively, when you rent an apartment, you pay the landlord a monthly fee. However, when the dishwasher breaks, you put in a maintenance request and the landlord will fix it without charge.

Of course, things aren’t exactly this black and white. Without oversimplifying, I’d like to explore the two options to help you make the right decision for your company.

Hosted CRM

Hosted CRM’s number one benefit is its nearly instant ‘time to value.’  A business could potentially have a CRM system up and running the same day they made their purchase.  Also, you won’t need much of an IT staff to use hosted CRM, nor will you have to buy hardware, software or innumerable upgrades for either, as this is all handled by the host as part of the monthly fees.  Licensing fees, per user, are generally much less than that of the On Premise option, making this a great solution for businesses needing that instant up and running time, or for those with smaller user bases.  The largest drawback here is the lack of ownership, because in fact, there is none; you are renting the server space.  While the data might be yours, the infrastructure behind it is not.  There is certainly some risk as things are not in your business’s full control.  The other drawback is limitations when it comes to extending the functionality of CRM.  Because the system is offsite and not in your full control, this presents a little more limited availability of  connections that can be used with CRM.  For those needing extensive customization, On Premise may be your only option.

On Premise CRM

On Premise CRM solutions excel in several areas such as enhanced integration capabilities with other systems, especially when real-time integration is crucial.  Because a Hosted option would generally not give your business access to the SQL database in which CRM resides, you will be limited in many regards to the level of integration.  The On Premise CRM, on the other hand, gives a business full control over every bit of data.  Most companies choose this method for its integration enhancements or its level of security and control.  On the flip side, the largest drawback to the On Premise solution are the up front costs.  The per user cost is substantially higher than that of the Hosted solution.  That’s not to say the Hosted solution is cheaper; depending on the number of users, businesses may begin to have savings within a few years.  If you take costs over a longer period, such as 10 years for example, the licensing savings should be substantially.  Keep in mind that this option still requires maintenance for issues, service packs, upgrades as well as the hardware infrastructure. Having a skilled IT staff will help defray costs.

What to Choose?

While I wish I could list every scenario and best approach, what it ultimately boils down to is what will work best for your business, both from a process standpoint and a financial standpoint.  One thing I would urge all businesses to consider prior to committing to one method, is to really examine what CRM will offer them and to what extent they will use its functionality.  Also consider what level of customization will be needed, and do you already have hardware in place or will you need to purchase a new server, for instance. These are good starting questions to aid in your decisionmaking.

One closing thought is a third option and relatively new concept…. a hybrid solution.  That is, having both an On Premise CRM  for large user populations with complex business processes and supplementing with a Hosted solution to fill the needs of remote or specialized business units.  Whichever you choose, spend the time doing the homework; it will make your decision that much more rewarding to your company.

If you’re looking for specific CRM software information, check out the resources on the ERT Group website. You can also contact ERT Group for assistance in determining if a technology solution can help your organization better serve your business needs.

By ERT Group, a Florida Microsoft Gold Certified Partner– offering Microsoft Dynamics ERP and Microsoft CRM.
ERT Group has offices in Boca Raton • Miami • Fort Lauderdale • West Palm Beach and more.

1 thought on “Hosted CRM vs On Premise CRM: Which Is Right For Your company?”

  1. I prefer hosted CRM. Ihave been using my online database for past 5 years and I would not make any changes. It is very convenient for me, the cost is great and i do not have to worry about my data being lost if my computer crashes - which happened 2x just last year.

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