SaaS vs. On-Premise: Which CRM Solution is Better For You?
SaaS CRM, CRM free, CRM software…?
While several new business software technologies are catching the media buzz – including social CRM, Hosted CRM, open source CRM, customer experience management, mobile CRM, CRM free, SaaS CRM, crm software and business intelligence solutions – none seem to match the confidence in continued growth as the combination of software-as-a-service and cloud computing.
“Cloud Software as a Service (SaaS) offerings continue to grow impressively,” affirms Ahmar Abbas, SVP, remote infrastructure management of CSS Corp., a global IT company. “SaaS-only vendors have risen in all key software domains and have successfully challenged the packaged software application companies.”
There are solid reasons for such widespread and enthusiastic adoption rates.
“The virtues of a hosted solution are legendary,” says Bill Johnson, CEO of Jesubi. “SaaS providers hardware is consistently upgraded and amortized against thousands of other customers; software upgrades happen dynamically with no involvement from the end-user; response times allow for end-user success; and there are no incremental service fees to manage the hardware infrastructure or break-fix issues.”
“It’s too common-sensical in today’s economy to do anything other than a hosted solution,” suggests Johnson.
It appears that companies from large to small are quick to seize these advantages and learn from the experience. “According to our most recent survey, cloud and SaaS are still gaining market share, and a lot of the myths are being shaken off,” explains Shari Lava, senior research analyst for Info-Tech Research.
“The total cost of ownership (TCO) is about the same after three years – so don’t make your decision based on that,” she advises. “And SaaS products have nearly equal functionality.”
Considering myths have been busted and the old rules of thumb have been given the finger, how is one to know whether or not to thumb a ride on the cloud computing and SaaS CRM bandwagon?
Info-Tech’s Lava breaks it down this way:
Choose CRM SaaS if …
- There is a lack of executive support or CRM strategy and you need a departmental solution right away.
- You need to speed up the customer relationship management implementation process.
- You need a business software solution right now that can grow with you as needed. A lot of companies that went through a failed big-bang CRM project are trying SaaS CRM, but are doing so cautiously and want to see results before they continue their roll outs.
- You have too few IT staff available to support and administrate the business system over the long term.
- You have no disaster recovery plan for CRM so keeping it on someone else’s locations seems smart.
- Little offline capability is needed.
Choose On-Premise or Hosted CRM if …
- There is a legislative or regulatory requirement to host your own data or keep it in a certain jurisdiction.
- You require complex system integration with large data volumes. Info-Tech’s survey suggests that customers are still having some trouble getting the kind of tight integration mid-size and large companies need. Solving this challenge is key for SaaS CRM solutions to continue to move up market. Data integration can be tricky enough to begin with, but there are several factors that complicate it further, such as large data volumes integrated across the web and firewall configuration issues.
- You want to align CRM software with your existing Enterprise Resource Planning (ERP) software system and the on-premise product is different or superior.
- Heavy offline capability is required.
In Defend Hosting we provide both types of solutions:
- SaaS CRM (CRM as a service). You can read here more information or click here to go directly to our specialized CRM site IncomeCRM.com
- Hosted CRM. We can install and maintain your CRM free or CRM software on premise or hosted in our datacenters, with our Virtual Private Servers or Dedicated Servers.
Top 5 Rewards of SaaS CRM
- Total Cost of Ownership (TCO). It’s no coincidence that the last SaaS risk may actually be a SaaS reward. SaaS entry costs are certainly lower and SaaS converts capital expenditures into operational expenses (capex to opex). Studies form analyst firms such as Yankee Group and Gartner have illustrated that even with the recurring nature of the SaaS subscription model, the cumulative effect of subscriptions may still be much less than the one-time capital expenditure associated with on-premise CRM systems.Verification strategy: As suggested, to determine whether SaaS TCO is a risk or a reward, create a multiple year cash projection that is reflective of your organizational environment. For on-premise systems, don’t shortchange the calculation by failing to include real world expenses such as computer hardware, redundant systems, platform software (such as databases, operating systems, backup programs, etc.), application software annual maintenance fees, and labor associated with system administration, database administration, near annual system upgrades, information security and IT trouble-shooting. Also remember that hardware must be upgraded or recycled about every three years. Realistic cost projections should also include the management time involved with operating in house information systems.
- Focus on Core Competencies. It’s been my observation that this SaaS reward varies in importance by region; being a top purchase criteria in America and one of a top 3 or 4 in the Middle East, Latin America and Eastern Europe. In a conversation I had with Gartner’s Rob Desisto, he commented that cost is not the primary decision criteria for SaaS, instead limited resources and time to market are the most influential factors. Clearly, outsourcing a non-core competency such as business software administration to outside experts removes what is often viewed as a headache function and reallocates management time to more critical areas.Verification strategy: SaaS providers manage the IT infrastructure, delivery platform, maintenance releases, new version upgrades, backups, disaster recovery and information security. Even though these functions are handled by the provider, IT buyers are wise to understand these processes and in particular their frequency and how they may affect the customers utilization of the application.
- Predictable Expenses. SaaS pricing models are normally per user per month subscriptions. This type of utility based pricing is simple, predictable and reduces cost surprises and overruns.Verification strategy: The caveat here is to avoid shelfware, or maybe its now called cloudware. Vendors often require customers to prepay SaaS subscriptions in order to secure aggressive discounts. While such a move may be financially worthwhile, it is generally cost ineffective to pay for user subscriptions prior to the go-live cut-over or before those users come online. Instead, defer most user subscriptions during the implementation period and agree to a schedule whereby subscriptions are activated as users begin using the system.
- Accelerated Time To Market. With no hardware to implement and no software to install, SaaS deployments are much faster than on-premise CRM software implementations. Due in part to their browser-based interfaces and intuitive navigation, on-demand systems often also achieve a shorter learning curve and more successful user adoption.Verification strategy: Implementation consultants are very valuable, but expensive. A time and cost implementation comparison between SaaS and on-premise deployments will reveal the cost savings.
- Business Agility. SaaS applications permit companies to scale up or down their user count or software utilization on-demand. This is a big change from on-premise systems which require IT departments to purchase, implement and forever manage expensive IT infrastructures ‘just in case’ they’re needed – and provides no refunds or credits if the company doesn’t grow according to projections or reduces staff.Verification strategy: Make sure you don’t turn this SaaS reward into a risk with a vendor contract that imposes minimum user counts or penalties for subscription reductions.
Focusing on risks and rewards which deliver bottom line business impact, and not getting sidetracked into the nebulous techno jargon, will aid business and IT buyers in determining whether SaaS CRM software systems make the best business sense for their organisations.