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CX Tech

The Cost of CRM Software: Cloud vs. On Premise

Benjamin Hunting
May 14, 2021

3 minute read

Keeping track of customer information in today’s digital-first environment is crucial. Sales teams can select from a number of different customer relationship management (CRM) software vendors, and cloud-based CRM technologies offer cost-savings, efficiencies, and mobility that flexes with today’s remote and on-the-go sales workforce.

Still, certain use cases exist that encourage companies to stay with on-premise technology or at least a hybrid approach. These solutions allow businesses to meet regulatory requirements and deliver on the high expectations of modern consumers.

A recent study shows that 65% of companies use CRM tools and 97% consider this sales technology “important” or “very important.”

CRM software can make a significant difference in your growth and ability to manage customer data. But interested brands are faced with an important decision: is it better to choose an on-premise or cloud-based CRM solution?

The pros and cons

At the most basic level, choosing between on premise or cloud-based CRM is a balancing act between cost and control.

With on-premise CRM solutions, a business pays upfront for user licenses and to have the customer database installed on their own servers. While this affords the business control over its data, it also means they’re on-the-hook for the majority of IT operations including ongoing maintenance, updates, and for scaling technological infrastructure to match needs. This previously made on-premise CRM a popular option, but as of 2020, Apps Run the World estimates cloud-based CRM is nearly 83% of the market.

Cloud-based CRMs are often SaaS agreements between a business and a CRM provider who offers access and storage through a web-based program. This model has the potential to provide businesses with more robust user support and ability to scale, but at the cost of some access and security. The predictability of costs that scaling these systems afford often make it a popular option.

Another option for companies and government agencies facing certain business or local regulatory restrictions is to leverage a cloud-based CRM in their own data center. Certain vendors like Oracle, for example, offer this capability.

Buying factors

A recent Software Advice report found that businesses estimated their monthly cost to be between $50 and $90 per user to operate their CRM.

But operational costs can be more deceptive than simple month-to-month expenditure. To get the full picture for how much your CRM solution might cost, there are a number of additional factors to consider:

  • Cost of infrastructure: Supporting a cloud-based CRM solution doesn’t require as much tech infrastructure as an on-premise solution that necessitates in-house servers that are data redundant and scalable. With an estimated growth of storage demand over 5 to 10 years, brands can compare the cost of expanding in-house tech versus bumping up to a new level of service with a cloud-based provider.
  • Human resources costs: As demand for CRM software in business continues to grow, the market for capable developers and administrative staff likewise becomes more competitive. Depending on your business’s choice of CRM, you may need to hire additional in-house staff, invest in wide-scale training, or retain a consultancy to meet ongoing needs. All of these options affect the overall operating cost of your CRM solution.
  • Business dependency costs: While on-premise CRMs seem more expensive upfront, they provide your business with the ability to control ongoing service. With cloud-based services, businesses expose themselves to potential outages or slow-downs that are out of their control. Thinking about how your business would operate or possibly suffer in the event of an outage can help gauge the risk-related costs of adopting either a cloud-based or on-premise solution.
  • Mobile capabilities: As sales teams work remotely and sales representatives need access to data on-the-go, mobile CRM capabilities are in the spotlight. Does your proposed solution support mobile access or does mobile access require customized setup and maintenance? It’s also important to look at device capability issues, from tablets to smartphones with different OS environments.

Overall, the best CRM for your business is the one that meets your organization’s unique needs for tracking customer data. Empowered sales representatives–and other functions within your business–can best serve customers with real-time data at their fingertips. However, when you’re choosing whether to select an on-premise or cloud-based solution, in addition to the features, it’s important to look at the full range of potential costs.

This article has been updated by Liz Alton from its original version.

Benjamin Hunting
Benjamin Hunting
Benjamin Hunting has covered science, medicine, and technology for a wide range of publications, and has also been published in the Journal of Medical Economics. He coded his first computer program at the age of 8 on a Commodore VIC-20 and still has the audio cassette he saved it on hanging around somewhere in his office.
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