It’s easy to agree with the idea that old technology cannot compete with new. Indeed, the largest providers of Customer Relationship Management (CRM) software on the market would believe this to be true. It’s hard to argue against the long-term savings and efficiency that modern, cloud-based CRM technologies offer. However, for some organizations, there is a reason to stick with on-premise technology or at least adopt a hybrid approach.

Recent research shows that 64% of companies rate their CRM tools as “influential” or “very influential” in driving revenue growth.

If CRM is a game-changer for a company, brands interested in leveraging this change face a tough decision: is it better to choose a cloud-based CRM solution or an on-premise one?

Advantages and Disadvantages

At its core, the choice between on-premise and cloud-based CRM is a balance between cost and control. With on-premise CRM, a company pays upfront for user licenses and installs the customer database on its own servers. This gives businesses control over their data but also means they are responsible for most IT operations, including ongoing maintenance, updates, and scaling technical infrastructure.

Cloud-based CRM systems are typically SaaS agreements between the business and the CRM provider, which offers system access and data storage. This model can provide businesses with more reliable user support and scalability but at the cost of some access and security concerns. The predictable costs and scalability of these systems often make them a popular choice. Another option for companies and government agencies facing specific business or local regulatory restrictions is to use cloud-based CRM within their own data center. Providers like Oracle offer such possibilities.

Purchase Considerations

Operational costs for CRM are often more complex than simple month-to-month expenses. To gain a full picture of what your CRM solution may cost, you need to account for several additional factors:

1. Infrastructure Costs: Managing a cloud-based CRM solution requires less technical infrastructure compared to an on-premise solution that demands internal servers.
2. Human Resource Costs: As the demand for CRM software grows in business, the market for skilled developers and administrative staff is also becoming more competitive. Depending on your CRM choice, you may need to hire additional in-house staff, invest in extensive training, or maintain consulting services to meet ongoing needs. All these options influence the total operational costs of the CRM solution.
3. Operational Risks: While on-premise CRM might seem more expensive, it provides your company with the ability to control ongoing services. With cloud-based services, companies expose themselves to potential outages or slowdowns that are beyond their control. Considering how your business could operate—or suffer—in case of a downtime event can help estimate the risk-related costs of adopting a cloud or on-premise solution.

Conclusion

Ultimately, the best CRM for your business is the one that enables your brand to interact with customers most effectively. However, when considering costs, it is still important to weigh initial implementation costs and higher operational expenses against regular monthly subscription or licensing fees.