On-Premise CRM Pros and Cons

While the number of companies that choose hosted software is increasing, many organizations still prefer an on-premise CRM solution. This article highlights the pros and cons of selecting an on-premise CRM application.

On-Premise or On-Demand CRM? Which Is Best for Your Company?

CRM can increase the efficiency of employees in customer-facing roles, streamline and coordinate key processes across an organization, and help companies build stronger and more profitable relationships with their existing and potential clients. Although CRM’s advantages are obvious, which deployment method is best – on-premise CRM or on-demand CRM – is not. Selecting the right solution, as well as the right implementation model, can be a tough decision to make.

The Pros

Although on-demand or hosted CRM is gaining in popularity, many companies still prefer to purchase an on-premise CRM solution. Some of the advantages of the on-site deployment model include:

• More flexibility. On-premise CRM applications provide wider customization capabilities, so companies can tailor the features, interfaces, and other characteristics of their solution to best support their specific needs and unique customer-facing processes.
• Greater control. When a business selects an on-demand software solution, it is handing a certain amount of control of the software and its associated hardware over to the third-party service provider. With on premise CRM, all components are housed and overseen by the customer. Many companies prefer this approach, because they can ensure – first hand – optimum performance, reliability, and availability of the system at all times.
• Tighter security. Customer data is sensitive and highly confidential. That’s why some organizations simply don’t feel comfortable with the on-demand approach, since it requires the servers that contain client information to be managed by the vendor. With on-premise CRM, companies can rest assured that the appropriate protection mechanisms are in place, so their customer data doesn’t fall into the wrong hands.
• Lower total cost of ownership (TCO). Although on-demand solutions are cheaper in the beginning, after the first several years the costs can really add up. In fact, many experts believe that after a period of five years or more, the use of a hosted software package is no longer economical. And while on-premise CRM applications are more expensive initially, they end up costing much less over their lifetime.

The Cons

While on-premise CRM offers significant value, there are also some drawbacks to the on-site approach. These include:

• Higher up-front costs. Unlike hosted software, on-premise CRM packages come with large price tags. Software must be licensed, and the needed hardware to support its operation must be purchased.
• Slower return on investment (ROI). Because they cost more at the outset, on-premise CRM solutions take longer to deliver ROI.
• Increased maintenance. The primary benefit of an on-demand CRM solution is the fact that ongoing maintenance and administration tasks are taken care of by the service provider. With on-premise CRM, staff resources must be dedicated to ongoing system monitoring as well as all routine service, upgrades, and enhancements. This can be an issue for smaller companies who have limited technical resources.