Written by: Rich Ackerman, CRM Sales Consultant

Much debate is taking place today with respect to hosted “On Demand CRM.”  The differences between “on premise” and hosted CRM are becoming fewer as each week passes.  In this article I hope to clarify some of the issues and differences between hosted and “on premise” CRM solutions.  Much has been written and is available about this subject; I hope this article can help guide you through your decision process.

Whether your business decides to manage and control CRM in house or utilize one of the many hosted versions of CRM will be determined chiefly by how far you are in your existing customer management process.  If your organization already has some type of “on premise” customer management process and software solution – say in your sales department, it may make more sense just to evolve and expand this solution into marketing or customer service.  If your business is looking at beginning the customer management process and you desire shorter learning curves, quick deployment and rich functionality across sales, marketing and customer service, then a hosted CRM solution may be the better choice.  Here are some of the common issues voiced today:

Issue 1- Hosted CRM only addresses sales requirements.
Not anymore.  Hosted CRM started out with very basic lead tracking, calendaring and forecasting.  Hosted CRM has evolved, in just a few short years, into a tool providing a single view of customer data and activity at a very low initial “get in the game” investment.  Hosted CRM now provides advanced functionality in opportunity management, marketing campaign management, and customer service and help desk requirements – rivaling the bigger enterprise CRM solutions.

Issue 2 - Hosted CRM does not need to involve my IT department; I could be up and running in no time.
Slow down!  While this is true to a great degree, good practices dictate that you think your customer management technology strategy through both for the short and long-term.  Issues such as; integration with your current company e-mail solution, or tying into your backend accounting solution, will require the technology guidance of your IT people.  While most hosted solutions offer integration to Outlook or “hooks” to your backend accounting system, make sure you can achieve the level of functionality desired short and long-term.
Conversely, while an “on premise” solution might provide slicker, more seamless backend integration, the cost may outweigh the benefit.  Further, is it worth tying up IT resources to configure a solution, while a hosted solution gives the necessary functionality for far less cost?  Most of the more mature hosted players now provide fairly complete data mapping and integration capability, requiring little if any IT involvement.  The key here is -- do your homework.

Issue 3 – Hosted CRM may help me get off the ground quickly but what about long term TCO?
Good point.  Hosted CRM for the first and possibly the second year provide a lower total cost of ownership then “on premise” solutions.  Near the end of the second year and through the third year, “rented” CRM cost continues north while an “on premise” solution has already started to pay itself back and implementation costs have depreciated.  SAGE CRM (formerly ACCPAC) perhaps offers a better idea – “rent to own”.  Sage affords your business to host initially and then convert to “on premise” applying a portion of your rental investment toward the cost of the “on premise” version.  This is the best of both worlds - low initial buy in and the ability to own and expand a fully functional, no learning curve, across the customer CRM solution.

Issue 4 – How secure is my data going to be if hosted by someone else?
This is pretty much not an issue.  The recent spate of data piracy stories are about companies that maintain their own data, and still get ripped off.  So whether you host or go “on premise” it won’t make a difference.  If people want your data, they’ll figure out a way to get it.

The question here really pertains to data security in the backup and staying online sense – again essentially not an issue.  What if Salesforce.com’s network takes a hit, what backup procedures do they have?  How quickly can we get our data restored?  Hosted CRM vendors have taken great pains to make sure this doesn’t happen through redundant backup and failover systems.  In the past three years (since hosted CRM’s popularity accelerated), we have heard of no major issues of data loss.  Hosted CRM vendors saw this as a potential early inhibitor to success and addressed the issue by providing highly secure, dependable networks and redundant backup procedures.  Again, if you are considering hosted CRM, verify each vendors data and network security policies, they are available for the asking.
Here are a few other items to consider:

• The size and scope of your business – will hosted CRM scale to your business needs?
• Are most of your customer-facing people working remotely?
• How critical is the need for instant access to customer data?
• Is this just for the sales and marketing department?
• Does our company have IT resources to spare?
• How quickly do we need a solution to get us on the customer page?

Finally, CRM solutions - hosted or “on premise” - are only going to become more powerful, more vertically oriented, and faster to deploy.  So the real issue is not going to be how the solution is delivered, but rather a solid understanding of the business problems the solution can resolve.  Most important, have a clear understanding what the solution will give back to your company in terms of customer insight and the ability to get them to purchase more of your products and services.  Keep your customers loyal, profitable, and customers for life.  

For more information on this article, please call 815.636.1499 or Email us at This email address is being protected from spam bots, you need Javascript enabled to view it