Comparing/Contrasting Cloud and On-Premise CRM Models

When evaluating Customer Relationship Management (CRM) solutions, there are many different factors to take into consideration. From the cost of the software and implementation to the ease-of-use and functionality of the user interface, many factors should weigh in on your decision. For starters, if your company does not have a set budget, make one. Even if it’s a number you’d consider crazy (like $500/month/user for a cloud CRM, for example), go with it. With the possible need for customizations, data migration, and other costs, you never know how high a software purchase price can get with a large CRM vendor that nickel and dimes you any and every chance they get.

Before you set the budget, however, step one should be considering whether you want an on-premise or cloud solution. There is a huge difference in price and how the two deployment models are set up and maintained. Let’s review the two main models CRM software companies use to sell their products.

Cloud CRM

The cloud-based model is the most common and is rising in popularity as companies look to store data and information remotely, requiring less time and cost for their on-site hardware and IT staff. In this model, you pay the CRM provider a smaller month to month fee (that ranges from a $25-$100/month/user on average). There are some solutions that offer a lesser CRM with simplistic functionality for less cost, and some that offer more functionality and more options for more. Finding the best fit after setting the budget goes a long way in saving time. An important reminder: if the price of a cloud-based CRM solution is extremely low (less than $25 a month), that’s a big red flag! In most cases, an extremely inexpensive customer relationship management solution won’t have the functionality or features you’ll need, especially as your business grows and demands more from your vendor and software.

This model is particularly good for smaller companies that do not have a big budget or large in-house IT infrastructure, as they can pay as they go without worrying about dropping a big check upfront. It also does not tie them into one CRM solution for years so it can be easier to switch to a different solution (or deployment model) should business needs change.

On-Premise CRM

An on-premise customer relationship management model is the original, tried and true deployment. Although it’s fading in popularity, companies with deep pockets or that require higher levels of regulated security with their data likely still need this model. For on-premise, you pay a large upfront fee to buy the user license outright (usually around $500-$1500 per month per user). After that, there is no more paying for users. So, in the long-term, an on-premise CRM model is more affordable than the cloud. There is an ongoing cost for annual maintenance for the CRM from the provider, but it is a small percentage and sometimes optional.

Companies often want to host their own data due to government regulations or compliance from HIPPA in the medical field. It can also make it harder for someone to hack in and steal their data—if data security is a top priority, on-premise CRM will give you peace-of-mind, ensuring all data is kept safe and secure from malicious attacks. It is, however, a long-term investment and not something companies often switch or look to replace quickly.

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