Hosted or On-Premise CRM - a brief guide

For the majority of companies looking to implement a CRM system, there are two main hosting alternatives:

  • On-Premise CRM
  • Hosted CRM

While both forms of CRM implementation provide a way to manage the key customer facing aspects from within a CRM software solution, some businesses are more suited to hosted CRM, and others more suited to on-premise CRM solutions.

For small businesses, the hosted solution provides a cheap, convenient method of implementing a CRM system. It can be a good way to try out CRM software and a way of getting started, without having to spend on new hardware or IT infrastructure. For larger organisations, hosting CRM in-house is often the more appropriate choice.

Benefits of Hosted CRM and Benefits of On-Premise

As with all decisions, it is important that businesses fully research each type of solution. There are pro's and cons to each method. For example, on the surface, typical benefits of hosted CRM software includes:

  • Quick to set-up
  • Low initial set-up costs
  • Unlikely to need extra hardware of infrastructure
  • You can use the software as soon as you have bought the licence

On the other hand, the benefits of on-premise CRM system include:

  • Greater control of the system
  • Easier Integration
  • More secure
  • No monthly fees
  • Total ownership of the solution
  • Ease of configuration
  • Unlimited customisation potential

Decision Factors

When you delve deeper into the benefits and pitfalls of hosted versus on-premise CRM, it becomes clear that the choice between each type of system is not always straightforward. It depends on a number of factors, and the key to these is your type of business and your business requirements.

For the majority of organisations, there are four key indicators which enable decision makers to gain an understanding as to which is the best fit solution for their business. These include:

  • Your business processes. Which, and how many functions within your business need to be part of the customer interaction systems.
  • Integration - What customer data or processes need to be linked to other systems and departments?
  • The importance of customer processes - How important are customer processes to driving competitive advantage?
  • Total cost of ownership

Key Differences

In the short term, a hosted CRM solution will usually provide a lower cost of implementation. This may lure many organisations into a false sense of security, and over a longer period of time it will probably become more expensive. This is due to the costs involved with customisation, licence fees and support.

Another key difference to be aware of is that with hosted solutions you never actually own the solution, so the level of customisation which you can carry out is somewhat limited. It is therefore critical to consider the bigger picture in terms of the growth prospects of your company. Gartner suggest that once the total expenditure is calculated beyond three years, the cost of a hosted solution may be greater than an on-premises solution, especially for businesses with a complex organisational structure.

What's the Best Solution?

So who is most suited to on-demand? As a general guide (but by no means exclusively), on-demand is used by small and medium size companies that don't need significant workflow or software customisation. Similarly they'll be little integration needed between front and back office (for example integrating CRM with financial or accounts systems). Security is also a major factor - companies who choose hosted CRM trust their data to an external system. Unfortunately there have been security breaches, however many organisations may feel it's worth the gamble.

Who Uses Hosted, Who Uses On-Premise?

There are not always clear cut differences between businesses that choose hosted CRM and those that use on-premise. For example, on-premise CRM is used by small businesses as well, although they are probably more prevalent in mid to larger companies. They typically need more powerful functionality, with several different departments accessing the data, better configuration and customisation capabilities and greater flexibility. They may also have taken a more longer-term and autonomous approach, so they can decide what needs to change, and when. And of course, many businesses just feel more comfortable with their own system. In particular having their key data stored using their own infrastructure, back up procedures and so on.

There is no right or wrong solution when it comes to implementing a CRM system; it's a case of implementing a CRM solution which best caters for the needs of your company. Whichever CRM solution you choose, it is important to remember that CRM is a long-term investment and the solution choice needs to be thought through thoroughly as it will require a complete cultural shift. A CRM system doesn't have to cost a fortune, or cause major disruption to your business. Correctly deployed, it will deliver significant benefits to your organisation.

More Information

For small businesses looking to quickly and effectively implement on premise CRM solutions, Concentrix has developed a range of Easy-Start CRM solutions. For straightforward, cost-effective contact management, Sage ACT may also be a consideration (please try our free Sage ACT demo). Concentrix can also provide information on hosted CRM.

For larger businesses who's business requirements point to on-premise CRM, Concentrix recommends Sage CRM, Microsoft Dynamics CRM, Sage SalesLogix or FrontRange's GoldMine.

For a fully integrated ERP solution incorporating powerful CRM functionality, Concentrix strongly recommends the Sage 200 suite.

If you need more information regarding the type of solution which will be right for your company, or if you wish to discuss CRM with an expert, please contact Concentrix on: 01509 410500 or email info@concentrix.co.uk.