There are a lot of buzz words around in the business world at the moment, but understanding what they actually mean and the benefits which they can bring to your business can be difficult to comprehend. So, here is an insight into cloud versus on-premise CRM.
What is CRM in the cloud?
This is when your system is held on hardware and IT infrastructure which is accessed remotely. With CRM in the cloud you will pay a monthly fee and be able to use the software as soon as you have bought the license. The solution in the cloud delivers a number of benefits including:
- Rapid Deployment
- Low initial set-up costs
- You can use the software as soon as you have bought the license
- You can access the solution from anywhere in the world providing you have an internet connection
What is On-Premise CRM?
This is where your system is based on servers which you own which are located on your premise. Although the set-up costs of On-Premise solutions are higher, you will ultimately own the solution. The benefits of On-Premise Solutions include:
- Greater control of the system
- Easier Integration
- More Control
- No Monthly fees
- Total ownership of the solution
Capital expenditure versus Operational Expenditure
It could be argued that the decision isn’t just between Cloud or On – Premise solutions; it’s also a decision between whether you want to go for a capital expenditure or an operational expenditure. Capital expenditure is any investment in assets that will be used over a long period of time. Capital expenditure assets usually depreciate over time. For example, buying a new piece of machinery would be classed as a capital expenditure. However, an operational expenditure is an expense which occurs in the course of ordinary business, such as sales and general or administrative expenses. For example the cost of a salary – if you stop paying someone they will no longer work for you.
In terms of CRM solutions, the on-premise solutions such as Microsoft Dynamics CRM, Sage CRM and FrontRange’s GoldMine would be classed as Capital Expenditure. This is because you will pay up front for the solution and once paid for the solution will continue to work until you tell it not to. In terms of the Operational expenditure, this is what cloud solutions are. With cloud solutions, although the starts up costs are lower, you will never actually own the software and if you stop making your monthly payment the solution will stop working.
If you decide to go for the operational expenditure (cloud solutions), there will be other economic benefits which will arise other than the direct cost saving on infrastructure acquisition such as:
- The ability to get up and running quickly
- The increased productivity of the workforce
And although on-premise solutions (the ones which are classed as a capital expenditure) give organisations the ability to customise the solution and complete ownership, it will never just be the case of a one-off capital expenditure, there will also be the ongoing operational costs of maintaining the solution, for example the cost of energy, IT admin staff and servers.
So which is best?
It really isn’t a case of Operational expenditure (cloud CRM) being better than a capital expenditure (On-premise solution) of vice versa, as both will ultimately deliver a significant return on investment. It’s more a case of finding the hosting alternative which best matches the requirements of the company in question. Typically, smaller organisations will be more suited to the cloud solutions and larger organisations generally require more control and therefore the on-premise solutions are generally more appropriate.
Whichever solution you choose it is important to remember that you need to consider the bigger picture so although the solution meets you needs now, will it continue to do so in the future? It’s also important to consider and additional costs.
For help or advice on selecting the right CRM solution for your business, contact Concentrix on 01509 410500 or email [email protected]
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