Hosted or On-Premise CRM? (Part II)

You’ve already decided to implement CRM but you still dont know which flavor suits your needs. An on-premise solution with Salesforce.com CRM or another vendor, or perhaps a hosted CRM service. How do you select the best deployment method?

Is a hosted solution the best option?
Its true, hosted solutions offer a fast deployment, but where they really add the most value is after deployment.

The best hosted solutions offered by Application Service Providers include:

  • A low monthly fee, which simplifies budgetting and improvis ROI
  • License to use all necessary hardware and software
  • Monthly server administration
  • Daily incremental backups
  • A support hotline
  • Guaranteed uptime of 99.9%

The true benefit, then, of a hosted solution is that for a very very low initial investment you are able to use the application without making a huge outlay for hardware, software licenses and IT personnel. The implementation time is about the same, but you can definitely rest easy once the system is in place because your monthly fee pays for normal system maintenance and support.

An on-premise solution, on the other hand, can actually be less expensive over a longer time-horizon. Consider, for example, the following comparison between a TurnkeyCRM Deployment Plus system and a comparably-sized and -featured Salesforce.com system:

Total Cost of Ownership

OnPremise CRM Deployment 

Hosted CRM Deployment
Number of Users
55
50
System Cost & Subscription
$63,974
$39,000
Support/Upgrade Costs
$7,015
$0
Implementation & Customization
$0
$9,750
IT Personnel Support 2
$25,000
$0
Training Costs (Admin & End Users)
$20,000
$3,900
1st Year Totals
$108,974
$52,650
4-year TCO totals
$205,019
$210,600
1 First-year MS CRM Maintenance fees are included in the license fees
2 Assuming a $50,000 IT person who spends 50% of his time on CRM annually
.

As you can see, over a four-year period, it is less expensive to deploy an on-premise CRM system than a hosted system, and the advantage only grows over time. Keep in mind that not all on-premise CRM systems are as reasonably priced as a on-premise CRM system, so this comparison will yield distinctively different numbers with other products.

Additionally, if you work in an industry where there are privacy issues (e.g. Financial Services, Medical), you should consider whether you are living up to your stated policies if you hand over your customer information to a third party.

In conclusion, the choice of whether to go with a hosted or on-premise CRM deployment is largely based around the kind of company that you work for. The following table probably best sums up when each solution is a good fit.

Factor
On-premise
Hosted
Data privacy important for your industry
Better
Good
Customization
Good $$$
Good $
Desired ROI Horizon
Longer
Shorter
No internal IT personnel
OK
Better

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