On-Premise CRM vs Cloud CRM

On-Premise CRM

The debate over cloud vs. on-premise software deployment extends to CRM, or Customer Relationship Management. CRM technology and practices enable organizations to gather and monitor information concerning their consumers, market conditions, and internal operations, improve sales and marketing activities, enhance customer experience, and facilitate better support and customer service delivery.

Customer Relationship Management systems provide the tools and mechanisms required for fulfilling all of these functions. And as we’ll see, there are cases to be made for both cloud-based and in-house implementations.

The Case for Cloud CRM

With a cloud-based or web-based CRM system, a service provider hosts your Customer Relationship Management software in the cloud. Rather than buying and installing software on a local server housed at your business premises, you typically pay the provider a monthly fee to host all of your CRM data on their remote servers. This eliminates the requirement for licenses to store customer information on an on-site server. For this reason, cloud CRM is a popular choice with small to medium-sized businesses (SMBs), which tend to have modest budgets and limited IT resources.

Cloud CRM software is also made accessible to users via any device with an active internet connection. So your sales and marketing teams aren’t tied to a dedicated desktop system and can use laptops, tablets, or smartphones to access the cloud CRM platform. This extends the system’s range, making it suitable for traveling, remote, or home-based workers.

Many cloud-based CRM solutions offer integration with other types of business software, such as email programs, collaboration tools, and Business Intelligence (BI) platforms. However, though some cloud systems provide offline synchronization tools, the software is inherently dependent on a continuous data connection. So if your internet connectivity goes down, you’ll lose access to the system.

What On-Premise CRM has to Offer

With on-premise CRM, the Customer Relationship Management software and data are deployed on in-house servers, and your organization’s IT staff assume responsibility for installing, managing, and maintaining all the necessary infrastructure. Smaller businesses tend not to have the resources necessary for handling such a deployment. On premise, CRM has remained largely the reserve of big enterprises capable of running their own data centers.

Access to an on-premise CRM system is usually limited spatially to the office or complex where the servers reside and to those hours designated for formal work in terms of time. However, this setup does away with the connectivity issues typically associated with cloud deployments. To expand their range of access, some enterprises set up a Virtual Private Network or VPN, which gives workers remote access to their corporate networks. 

With effective measures in place for business continuity and redundant data storage, nothing short of a major power outage should hamper user access to the customer and other information in an on-site CRM system. And with all infrastructure hosted on-site, enterprises retain full control of all their customer data.

Hosting your CRM deployment on-site with in-house expertise also gives you increased options for system customization and integrations with existing platforms. An in-house IT team will be intimately familiar with the quirks of the corporate system and be able to make any tweaks or alterations to align the CRM with processes and systems already in place. This approach allows for the fine-tuning of integrations with your existing business applications and platforms. Ease of integration with on-premise CRM also facilitates collaboration between different business units and departments.

In terms of costs, enterprises undertaking an on-site CRM deployment must budget for the purchase and installation of servers and other hardware, the funding of an IT division, and the one-time costs of purchasing the software from a vendor (or developing it in-house). 

Though these costs may seem high compared to the monthly subscription fee associated with cloud CRM, long-term use of the on-premise infrastructure and software may lower the organization’s Total Cost of Ownership (TCO). In the long run, it’s possible for an on-premise CRM solution to work out cheaper than a cloud-based option. This is especially true for large enterprises, for whom the subscription fees associated with hundreds or even thousands of users can soon become prohibitive.

Catering to the On-Premise CRM Market

For enterprise businesses and government organizations looking to retain the greatest possible degrees of data governance and security, on-premise CRM deployment is very much the preferred option. In the current market, a large proportion of on-site data center capacity is being devoted to unified communications, collaboration tools, productivity apps, and platforms such as Customer Relationship Management which must frequently integrate with these functions.

Besides government, health care and pharmaceutical organizations, energy companies, and organizations with valuable intellectual property tend to be less keen on trusting their data to the cloud and look to either on-premise solutions or hybrid CRM systems that incorporate a private cloud for sensitive information. Enterprise divisions such as finance and operations tend to have the same mindset.

Some of the major CRM vendors have developed special packages with these markets in mind.

Microsoft’s On-Premise Offering

Microsoft Dynamics 365 was originally intended as a cloud-only offering. But when the software giant realized that there is still a significant demand for locally hosted software, the company expanded its CRM suite to include multiple modes for deployment.

Dynamics 365 on-premise is given the Microsoft designation “ Local Business Data” and enables users to host their Dynamics 365 software either on their own servers or on a  partner IT organization. In both cases, users are solely responsible for all management and maintenance of the software.

Under this implementation scheme, various categories of customer information may be stored in Microsoft Azure data centers located in the United States by services such as LCS, Azure Active Directory, and Microsoft Office sign-up portal. The core customer data comprising all other information types must be held on-premises. Users who choose to configure additional services or components to extend an on-premise deployment may need to trade this customization off against the potential for core customer data needing to be transferred outside of their data center.

With the Microsoft Dynamics 365 Finance + Operations (on-premises) deployment solution, the Microsoft SQL Server database and application servers run in the user’s data center. Enterprise users and their partners can employ Microsoft Dynamics Lifecycle Services (LCS) to manage their on-premise deployments. The LCS application management portal offers features like software deployment and patching, monitoring, diagnostics, and business process modeling.

Dynamics 365 also offers a hybrid deployment solution known as Cloud and Edge. In this implementation model, transactions and data are stored locally in the users’ own data center. Microsoft provides cloud-based services, including Business Intelligence (BI), machine learning, and development sandboxes.

The Problem with Salesforce

To date, one of the best-known names in the Customer Relationship Management ecosystem remains stubbornly committed to the cloud. Salesforce on-premise isn’t an option, as deployment occurs on a Software as a Service (SaaS) basis. Organizations that are uncomfortable transferring their information to the cloud or looking for an on-premise alternate or replication solution for their Salesforce data must seek options elsewhere. And such options are few and far between.

This approach has brought mixed results for Salesforce. By concentrating solely on Software as a Service and Platform as a Service (PaaS) cloud offerings, the company’s earnings per share (EPS) have veered up and down in recent years, topping out at only around $0.50.

If Salesforce is to stay in step with prevailing trends, the company will have to reinvent itself, with less emphasis on the public cloud and more offerings in the hybrid market providing private cloud and on-premise options.  

A recent spate of acquisitions seems to indicate movement in this direction. For example, in August 2019, Salesforce acquired the data analytics and visualization platform Tableau, whose focus is on making Business Intelligence and data visualization comprehensible to non-technical users, such as marketers and sales personnel. 

Another prior acquisition by Salesforce involved MuleSoft — a $6.5 billion deal that has contributed to the development of products like Salesforce Customer 365, a platform that creates a unified view for customer service representatives. MuleSoft supplies back-end data via an Application Programming Interface (API) network, connecting applications across the cloud, on-premise, and in legacy systems. 

With many enterprises wanting the luxury of retaining sensitive data and intellectual property on-site while running select applications through the public cloud, Salesforce will continue to lose market share unless it begins to cater more for the on-premise CRM market.

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William Goddard

William Goddard

William Goddard is the founder and Chief Motivator at IT Chronicles. His passion for anything remotely associated with IT and the value it delivers to the business through people and technology is almost like a sickness. He gets it! And wants the world to understand the value of being a technology focused business in a technological world.