Share what you know with millions of people
Focus is the best place to turn what you know into remarkable content
How to Choose between Hosted and On-Premise CRM software – a Guide for Small Businesses
Introduction
One of the most common questions asked by small business owners looking into Customer Relationship Management (CRM) software is “What’s the best deployment option for CRM in a small business: hosted or on-premise?”
The most common answer is “It depends!”
Analysis
Whether you go with hosted or on-premise CRM software is down to your preferences and business requirements: what you’re aiming to achieve, your objectives, resources, and what you need your CRM to do for your organisation.
With hosted CRM (often referred to as ‘Software as a Service’, CRM ‘on-demand’ or ‘in the cloud’), the application and data within it is held on secure servers kept in a remote data-centre. This means your software hosting provider takes care of the running and maintenance of the software and servers.
Hosted CRM software tends to be a good fit for small businesses because it can be up and running with ‘out of the box’ functionality very quickly. Your own staff and users won’t need detailed technical knowledge or development skills (although they will need training to use the product effectively). And arguably the main attraction of hosted CRM to small businesses is that there’s generally little or no financial outlay in terms of hardware and IT infrastructure, certainly at the start of the project. Costs are also straightforward – you pick your level of service, sign up and pay a monthly fee per user.
However, if you have more complex business processes and so need quite a bit of software configuration, if you already have your own servers (which is often the case if you have your own email or are also using an on-premise accounting or ERP application), or if you want to own your system completely, then deploying a CRM system in-house/on-premise is probably your best option. Return on investment is also an important consideration. Done right, CRM is a long-term business strategy and the money spent on hardware for an on-premise CRM solution will usually be regained fairly quickly, typically within 24-36 months
Conclusion
A common route taken by small businesses is to start off with a hosted CRM option, then, having established a ‘CRM culture’ and proven the system, to then move to on-premise deployment. This is effectively using the hosted CRM system to trial the concept (and often a particular product) with very little risk. Then, once the benefits have been established and demonstrated whether CRM software is a good organisational fit, an on-premise solution becomes a better option. In the longer term, on-premise will usually deliver a better return on investment. So for many small businesses planning for growth, starting off with hosted CRM and moving to on-premise is an attractive route.
I work for Concentrix Ltd, an independent UK business management, CRM and ERP software specialist. Concentrix provides a range of CRM products, but aims to be 'product agnostic' - not tied to any one supplier and helping clients choose the right solution for their business requirements.
Events
- HR & Recruiting Blues in the News May 22 @ 3 pm PT
- Marketing Thought Leaders: A Conversation with Julia Fajgenbaum May 25 @ 11 am PT
- The Do’s and Don'ts of Small Business Marketing May 29 @ 11 am PT
Related Activity
5 Comments
Peter,
I think it is a bit more complex that you describe. I was lucky enough to collaborate with Paul Greenberg in his latest book CRM Speed of Light, and I wrote the section on just such the choice you are talking about (page 452). There is a set of criteria which each business needs to evaluate to determine what the best approach to take.
Considerations such as Hardware, Comfort with Technology, Business Focus, Data, Control, Industry, Cash Flow, User Count, Network, System Load, Growth Projections, Technology Maturity of the organization, Time to Market. His book is great, and I like to think this section is worthy.
Mitch
Peter, great high level overview. I do agree with Mitch it can get a lot more complicated but I think it really depends on the SMB. Since you're article specifically singled out small business, which is my sweet spot, I think the considerations Mitch identified are really hard to do in a small business (under 99 employees). I find that the hosted model of CRM is a great low cost way of introducing CRM to these business owners who have in the past been reluctant to go for such a comprehensive system. The considerations that Mitch identified seem to come to fruition once the organization has matured to the point of understanding what these systems can do. Now, I'm sure some will say "It's your job to explain this to the small business owner." I get it and I completely agree. For those that say that, I would argue that you haven't truly worked with a small business owner in the segment I identified. So to sum up where I am going: I like how you said "It depends!". You're first barrier is the business owner, once he buys it and gets it then you're rocking. With Mitch's considerations, all of that happens when a business owner gets it, which unfortunately for many of us takes some time and work to do. Cheers.
Hi Mitch and Derek,
Thanks for the comments.
Mitch, I agree completely the factors you point out are all important and involved in the decision. But if you’re talking to a small business owner who is deploying CRM for the first time, you can usually get a good idea of which option they are more likely/best choosing by answering the high level points. The other factors tend to fall into place after that.
As Derek says, it does depend on the SMB and whether they ‘get it’ - ie they have a good understanding of what CRM is all about and can achieve for them.
Now here’s an aside - One thing I’ve noticed over the past year or so is that most of our new small business CRM customers, when they’re choosing between a CRM product as a hosted or on-premise solution, nearly always start off with hosted. For example, for our new clients with between one and twenty users, hosted has accounted for over 90% of implementations of one particular CRM product where we offer a choice between on-premise and hosted deployment. And once they’ve used the product for a while and really ‘get CRM' then they’ll talk in more depth about deployment options and long-term CRM strategies.
It’s a different story with larger organisations – they tend to choose on-premise deployment from the start.
(A disclaimer here - the numbers involved are high enough to make this a general point of discussion but not significant enough for anything other than that).
Cheers
Peter
Thank you, Peter for this insightful article. I agree with you that choosing the type of CRM should be based on business needs. For small businesses, I think the best option indeed is hosted CRM as it will save the company on the higher cost of maintenance and upgrades. I used web crm www.worketc.com. It works for me in my small business as our work requires constant collaboration and project work, and also the need for monitoring work done by our contractors. With all these requirement, I don't think I can save more if I have my own IT team running the system. So my thought then was to put more resources on the sales and operations than on the support group. But if my business grow even larger...say more than 50 people, by then I think I have to review my decision.
Another consideration that I think warrants mentioning, are some of the inherent benefits of cloud computing associated with multi-tenant architecture.
With on-premise software of any type, system integrations may make implementing new versions more complex or prohibitive. Many of the SaaS companies, on the other hand, are constantly seeking to establish integrations with complimentary SaaS tools. These 'integrations' happening at 'the hub' may provide some serendipitous benefits to a SaaS subscriber, and allow them to take advantage of the latest techniques and tools.
If evolving your business practices and staying current with the latest technologies is an important consideration, than SaaS may offer the SMB some additional benefits. Of course this assumes that the changes are for the better. If in your situation, control is more important than evolving your practices with the latest technology, then (as the author of this analysis states) you may be better served with an on-premise solution.
Answer This Question