I cannot count the number of times that I have reviewed the pros and cons of SaaS (cloud computing) or on-premise CRM alternatives, so I am going to share my thoughts in this blog post.
First let me cover cost. Many make the argument for SaaS based on cost, stating that SaaS is less expensive. While that may be true for the initial outlay (usually one year of service for SaaS vs all licensing for on-premises), the actual reality is that after 3 years licensing is roughly equal (see charts one and two and compare the three year costs). However, the sticker shock comes in year 4 when SaaS is 3 ½ times more expensive each and every year. My recommendations on cost are as follows:
Go with the CRM that meets your needs (on-premises or Saas) since 3 year licensing costs are very similar
If you like the idea of spreading your payments out over several years, but on-premises seems to be a better solution, consider leasing the software.
This is where SaaS shines! If you do not have servers or updated workstations/laptops, an on-premises implementation my be costly in terms of hardware. All on-premises CRM systems will require at least one server (a database server like Microsoft SQL server), and many require multiple servers.
This is where on-premises shines! If you are looking to implement true enterprise-wide CRM, you will be looking for data integration into your back office at the very least, and quite possibly other sources of customer data as well. Linking to invoicing, orders, and accounts receivable is not the easiest thing to do in a SaaS environment. While it is not impossible, it frequently requires more time and resources to set-up the links and build the tunnels to allow access.
Along the same lines with integration is automation of processes and alerts. This is a very difficult thing to do with some SaaS models. If the software does not include an alert engine or process automation you are stuck. With on-premises you can augment any CRM system with automation and alerts provided by such products as Vineyardsoft’s KnowledgeSync (http://www.vineyardsoft.com/).
Speed of Implementation:
This is an “old wives tale.” SaaS only CRM companies make it sound like SaaS can be fully implemented in 24 hours and on-premises takes years. The truth is that the time to live is about equal for both. Just because you can have a database live up in the cloud in 24 hours (which can be done for on-premises as well) doesn’t mean you have CRM. There are many things that have to happen before CRM is live. These include, but are not limited to:
- Initial discussions of needs and layout of the project plan and goals
- Data source cleansing, data import, duplicate removal
- Customizations and configurations to match your needs
- User education
SaaS has one draw-back here. In order to access the data you must be connected to the internet. The speed of access is based on your internet connection speed and the number of users accessing the web at that time. Other people using services like Netflix and Amazon movies can cause internet speed issues and actually cause your access to CRM to be less responsive.
As I stated earlier, go with the CRM solution that will best help you meet your Customer Relationship Management strategic goals. Infotech Research Group (http://www.infotech.com/) gives the following guidelines you may want to consider:
Choose SaaS CRM if…
· There is no executive support or CRM strategy and you need something in the department right away.
· You need to speed up implementation timeframes.
· You need something right now that can grow with you quickly as needed. A lot of organizations that went through a failed big-bang CRM are trying SaaS, but are doing so cautiously and want to see results before they try to roll it out further.
· You have too few IT staff available to administrate the system in the long term.
· You have no disaster recovery plan for CRM data so keeping it on someone else’s locations seems smart.
· Little offline capability is required.
Choose On-Premises CRM if…
· There is a legislative/regulatory requirement to host your own data or keep it in a certain jurisdiction.
· Complex data integration with large data volumes is needed. Info-Tech’s survey suggests that customers are still having trouble getting the kind of tight integration mid-large size organizations need. Solving that is key for SaaS products to continue to move up market. Data integration is tricky enough to begin with, but there are many factors that complicate it further, such as large data volumes integrated across the web and firewall configuration issues.
· You want to align CRM with your existing ERP vendor and the on-premises product is different or superior.
· Heavy offline capability is required.