We submitted this question to our analyst team to get their collective opinion. Read on to find out what they had to say.
With the advent of several “technological changes,” it hardly matters (from a performance point of view) if your CRM package is local or remote.
• Operating systems are becoming less and less important for hosting desktop applications.
• High-speed (fiber) connections are becoming increasingly low cost and widespread, suggesting very rapid display updates.
• Mobile access is becoming increasingly significant.
• Any operating system (Mac, Linux, XP, Vista) that can host a Web browser can be used as the application interface.
CRM hosting is a business that allows one company to provide an application at lower cost than having the same application executing on a local system. The support costs are shared amongst the clients and the host, the licensing costs for the host are lower because of economies of scale, and the client thus benefits.
Remote hosting does and will work for most companies because the data to be hosted can be historic (one day or more older). Therefore, the selection of a CRM application is just based on the distinction between competing hosting vendors and local package vendors. It comes down to mainly ergonomic and business function considerations.
Only when CRM data has to drive sales, marketing, or HR is it necessary to install this functionality in house.
• No software investment—just license for each user and, of course, costs per client registered. (Got to make money somehow).
• Salespeople on the road can use the BlackBerry to fetch information.
• Not sure that a CRM hosted product demand can be automatically converted to a sales order. The reverse is possible, however: sales order info can be uploaded to CRM host.
Advantages of an On-demand Solution
There are many benefits to using an on-demand solution. The most important benefit is that organizations can minimize the amount of resources applied to IT, thereby allowing for a greater concentration on their core business.
As such, an on-demand solution has appeal for the following reasons:
On-demand solutions are easier and faster to implement because they are Web-based applications, and therefore it is not necessary to install any software. All data can be accessed from any computer, anywhere in the world, that has an Internet connection. Generally speaking, in the short term, on-demand applications have a much lower setup cost, since an operating system license is not being purchased for each workstation. On-demand applications are billed as a recurring service, either in monthly, quarterly, or yearly billing cycles. The payment cycle is dependent on what the vendor is offering and the organization’s negotiating position. The lease costs can be allocated as a business expenditure, and your organization can get a tax break by leasing out the software, as opposed to the on-premise model which must be amortized over a specified time period, depending on the cost of the software.
An on-demand provider may be able to offer its clients a more sophisticated security system than each individual client would normally be able to afford. This is because although each client pays a relatively low monthly fee, the combined revenue to the provider gives it the financial ability to provide a quality of security comparable to that of large organizations.
Disadvantages of an On-demand Solution
Since an on-demand solution relies on a third-party provider, it puts your business at its mercy. If a vendor goes out of business, there will be a substantial amount of work involved in finding another solution, with a resulting loss of productivity during staff re-training.
There are also security concerns that are particular to an on-demand solution. Your data resides in an external data center that your organization has no control over. Security breaches and natural disasters such as earthquakes and flood can occur, potentially causing the loss of your data. That’s why it’s important to find out if the service provider offers a plan of action to protect your data, known as a redundancy, where the data is stored in a second location, providing a backup in case the data in the first location gets lost or corrupted.
Since an on-demand solution is a pay-as-you-go service, users do not own the rights to the software; it is being leased out to the client, at a premium in cost because of its convenience, ease of use, and most importantly, its limiting the need for an internal IT presence. Several licensing options that have a buy-back clause as part of their agreements are available, but this option tends to be more costly over time compared to an on-premise solution.
Companies operating in the SMB sphere may prefer the hosted solution based on the following information:
What Alex mentions is true. However, let me make the following comment:
If your organization is either large or a bigger SMB, then an in-house system will probably outweigh the costs of a hosted system. In the long run, hosted solutions are strictly run from the provider’s servers, and clients must pay the service fee if they want access to use the system. With a hosted solution, this issue is not inherent when procuring the solution. As well, larger firms will want a more complete CRM package, including features such as analytics, sales and customer forecasting, etc. Thus, there are many advantages to an in-house solution for organizations in the call center environment.
Shashi , We should down load and use as sales collateral for building user confidence in Hosted CRM Solution
Every model has its own advantages and disadvantages. On-Demand solution is less costlier however there is a security threat. Companies can go for On-Deamnd solution when they are small. But when they grow and capable of maintaining their own resources the CRM system should provide that flexability to own the solution in a later date. Companies implementing CRM should consider this while selecting a CRM vendor.
I am a technical sales representative for a VAR and my responsibilities are to sell ERP and CRM. In my role, I often run into the pro’s and con’s of hosted vs onsite in almost every deal I work. I’ve noticed lately that many people think hosted CRM or ERP is cheaper, and on the surface, it appears to be, but in the long run, it MUCH MORE expensive to go hosted in an ASP arena. I recently ran into a customer that signed up for SalesForce.com and learned only too late, that they were locked into a 36-month arrangement and for a 5 User deal, will end up paying over $36K over the 36 months….and, it’s all sunk cost, they’ll never recover the investment. A 5-user Dynamics-CRM system would have run them only $8,500. When they learned that the cost of Dynamics-CRM was $1,000 flat and that in as little as 9 months, they would have a full ROI, it surprised them. I’m a bit concerned that SFDC continues to “mis-lead” potential new customers into believing it’s cheaper. It sounds like a good story, but in the end, people that sign up for hosted CRM are being mislead. That’s my take on hosted vs on-site.
I am a real estate agent engaged in sale/purchase and renting of residential and commercial properties. as of now it is a one man show. I wonder if hosted crm can enhance my business. I am struggling . I work form home.
Expert suggestions welcome which I need badly.
I am worried about information leak in hosted crm. Please let me advise on this issue.
Of the four CRM systems I’ve lived in, the hosted one (Salesforce.com) was my favorite because of its browser functionality that allowed me to hit the Back button, the ease of cloning records, the easy to use reports, and the ability to use it anywhere there was an Internet connection. Plus there was nothing to install, and no software to use up the memory on my hard drive.
ACT! was a close second because it allowed me to zoom from record to record without having to worry about a browser on the Internet connection going down. Being in sales, where I make a lot of outbound calls, makes geting information quickly very important. I could make 10%-20% more calls a day.
SalesLogix and Goldmine were my least favorite of the four I’ve used.
Deploying a hosted CRM with a skilled sales force is essential for the long-view Client Relationship Management CRM. If you plan to do business over the next ten years look at hosted solutions. Be on the lookout for security, utility, speed, adaptability, ease of integration and mobile access. Facebook and Ifora are good examples of what CRM systems should aspire to. - Philip Dursey
Please let me know a full CRM progoramme
relevant to Manufacturing Industry.
L D V Gunasekare