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The Cost of CRM Software: Cloud vs. On Premise

Kyle Harper
September 27, 2018

3 minute read

You may agree with the point of view that old technology cannot compete with new technology. Indeed, the largest customer relationship management (CRM) software vendors in the market will have you believe this is true. And it is hard to argue with the long-term cost-savings and efficiencies modern cloud-based CRM technologies provide.

Still, for certain organizations, there is a reason to use on-premise technology or at least a hybrid approach to meet both the regulatory requirements of the business and the skyrocketing expectations of modern customers.

The Cost of CRM Software: Cloud vs. On Premise

A recent study shows that 64% of companies that utilize sales technology rate their CRM tools as “impactful” or “very impactful” when it comes to growing revenue.

While there’s a clear opportunity for CRM software to make a difference, interested brands are faced with a difficult decision: is it better to opt for 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 the overall trend toward web-based solutions seems to have caught on.

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.

The Cost of CRM Software: Cloud vs. On Premise

Buying factors

A recent Software Advice report found that most small to midsize businesses estimated their monthly cost per user to be between $60 and $75 dollars 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.

Overall, the best CRM for your business is the one that best enables your brand to interact with your customers in a meaningful way. But when considering cost, it remains essential to consider upfront implementation and tertiary operating expenses in addition to your regular monthly subscriptions or fees.

Kyle Harper
Kyle Harper
Kyle Harper is a writer turned data geek who is obsessed with the experiences that brands can build. A big believer in "learning by doing," he's helped launch a handful of startups as a Marketing Director, and today is working to understand the future of customer-centered listening as a Marketing Analyst at Harvard.
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