Cloud-Based CRM Software vs. On-Premise CRM Software

cloud based softwareBecause relationships are the foundations of any business, customer relationship management software may be one of the most crucial tools modern companies have at their disposal. A customer relationship management system, commonly referred to as CRM, is a technology that companies use to manage and improve their relationships with customers and leads as well as suppliers, colleagues and other stakeholders. A CRM system provides a place where companies can store all of their information about their contacts and their interactions with them. They can use this data to streamline their communications, enhance their relationships and grow their profits.

Businesses have several options when it comes to CRM software. One of the primary choices they need to make is whether to host their system on-site by investing in hardware for the office or to subscribe to a cloud-based system hosted off-site. Growing numbers of companies are also opting for systems that combine aspects of these two possibilities. This guide will lay out the benefits and drawbacks of each and help you decide which one is right for you.

Cloud-Based CRM Software

Cloud-based software is the newest of the technologies and its popularity has been steadily rising. Research suggests that 62 percent of CRM systems will be cloud-based by 2018. Companies that choose this option don’t install infrastructure at their office to support their CRM. Instead, they contract with a software provider for access to a system that the provider hosts at their location. The provider is in charge of maintaining the system and the business connects to the software via the internet. All customer data is stored in the cloud.

Side view of a woman with glasses looking at a desktop computer screen with cloud based software

Benefits

Cloud-based CRM solutions have a number of advantages over hardware-dependent systems, which have led to their popularity. As the technology advances, they may begin to offer even more advantages. Here are some of the benefits that cloud-based CRM software currently provides:

1. Easy to Deploy

One of the most appealing benefits of using cloud-based software is the speed and ease with which you can get started with a new system. In many cases, all you need to do is select and pay for the system and then log in with the information the provider gives you.

Learning to use the system can also be easier with a cloud-based option. Most providers have fine-tuned their products for ease of use as more customers give them feedback and offer customer support to help new customers learn how the system works.

2. Lower Upfront Costs

Becuase you don’t have to invest in infrastructure, the upfront costs of cloud-based solutions are low. In fact, they’re often practically non-existent, since payment works on a subscription basis. Because of this, small- to medium-sized businesses often choose to use the cloud if they don’t have the capital to make a large upfront investment in equipment and installation.

Side view of a millennial man and woman pointing to a desktop computer displaying the upfront costs of cloud-based solutions are low
3. The Provider Handles Maintenance

When using a remotely hosted software program, you don’t even necessarily need an on-site IT department. That’s because the provider will handle all of the IT needs related to their product, including setup, maintenance, data backup, security, upgrades and troubleshooting. This dramatically reduces your IT costs. The IT services provided are also typically of high quality, since the company knows their software well.

Sometimes, security is seen as a drawback of cloud-based software. If a company doesn’t have the resources to invest in stringent security measures, however, a software provider may be able to provide better protection than an internal IT team could.

4. Available From Anywhere

Because you access it via the internet, a cloud-based system is available from anywhere. As long as you have an internet-enabled device and an internet connection, you can access it. When information gets added or updated, all users also get access to the most recent information in near-real-time. This makes using the cloud ideal for companies that have employees in multiple locations or salespeople who work from the road.

5. Scalability

Cloud-based solutions are also readily scalable. Most software providers have the resources to scale their customers’ systems almost immediately. Scaling up doesn’t involve installing any new equipment and it doesn’t require downtime. You can add permissions for new users and new features at any point and quickly scale back down if need be. This scalability enables you to only pay for what you use and adjust your capabilities as your needs change.

Drawbacks

Some companies choose not to move to a cloud-based system because of concerns with the technology or simply because of their preferences. Here are some of the concerns companies have with using a cloud-based CRM:

1. Must Pay Subscription Fees

One potential drawback is that you must pay subscription fees, often monthly or yearly and typically by user. You’ll save on upfront costs as well as maintenance costs, but some companies, especially large ones, may prefer to get the payments out of the way with one large payment up front.

2. Data May Be More Vulnerable to Hacks

Because data must move between cloud storage and your employees, it may at times be more vulnerable to hacks and other cybersecurity issues. Moving data always comes with some level of risk. With an on-premise system, you can minimize that risk because the information doesn’t need to leave your office building.

Because of these risks, it’s essential to choose a provider with an excellent reputation for security. For businesses that don’t have adequate security capabilities of their own, this can be the better option. Some companies also choose private cloud storage. While they still work with an outside provider, other clients of the provider don’t share the cloud with them.

On-Premise CRM Software

Hardware-dependent, or on-premise, CRM software is housed at your business location and installed on your company’s computers and servers. An internal IT department manages it. The developer of your CRM software may provide some technical assistance and training, but the company using the system is responsible for most of the management, maintenance and operation of the CRM.

This option is the more traditional option of the two, as it doesn’t depend on cloud technology. It’s often more popular among larger businesses than it is among smaller ones.

Benefits

Why do some companies prefer to stick with hardware-dependent systems? Here are some of the main reasons:

1. More Customization

When you host your system at your business’ location, you have more control over how you set up and update it. You don’t have to request that the provider makes changes. Instead, you can do them yourself. While this gives you more flexibility, it also puts the responsibility for setup and upgrades on you. While not all companies will want this responsibility, those with more extensive IT capabilities may see it as an advantage.

Side view of a laptop showing bar charts on the screen
2. Control Over Integrations

Cloud-based systems increasingly offer integrations with other business tools, but with an on-premise system, you have complete control over what you integrate your CRM with. Because you own the servers that host the software, it may be easier to create gateways between your systems. You won’t have to worry about the provider not offering integrations with another tool you already use. Again, you’ll need the IT capabilities required to make this happen. If you do, this can be a clear advantage.

3. Minimizes Connectivity Issues

If you access your CRM through the internet and your Wi-Fi connection goes down, you will lose access to your CRM. With a system that runs on hardware as opposed to the cloud, you could continue to use your CRM even when facing internet connectivity problems. If you are worried about technical issues related to your internet connection or don’t want to risk losing access to your CRM if your internet goes out, a hardware-dependent tool could give you some peace of mind.

4. No Subscription Fees

Some companies may prefer the pricing model of an on-premise system. Rather than pay a monthly or yearly subscription, you pay for the program up front and then own it outright. The upfront costs will be much higher with an on-premise system, but if you use the system for long enough and without too many additional expenditures, this option may be more cost-effective over the lifetime of the system.

Drawbacks

There are some potential drawbacks to using a hardware-dependent system as well — namely higher upfront investments and limitations due to the use of older technology:

Graphic of a person's hands typing on a laptop talking about potential drawbacks of using a hardware-dependent system
1. Maintenance Requires Extensive Resources

While some companies may appreciate the added flexibility that owning your CRM allows, others might view the additional responsibility as a disadvantage or even a barrier to using the system. Installation, maintenance, upgrades and other IT needs require extensive resources and capabilities. Smaller companies might not have the resources needed to do this and, so, prefer to let a CRM vendor take care of them.

2. Harder to Scale

While on-premise systems offer flexibility regarding customization, they are typically more difficult to scale than cloud-based ones. With a cloud-based CRM, quite often, all you have to do is tell the provider you want to add more functionality or users. If you’re using a hardware-dependent system, you may have to install new infrastructure to support an expansion.

3. Can Only Be Used in the Office

Because the system relies on hardware rather than an internet connection, you can typically only use it in the office on devices connected to that system. This limitation may be a problem if you have employees who need to access the CRM but work outside of the office, such as remote workers and traveling salespeople. If an employee makes changes to the information that’s in the system from outside the office, you might not have the most recent data until they come back to the office and upload it.

4. Higher Upfront Costs

One of the most significant drawbacks of on-premise systems is the fact that the upfront costs are much higher than those of a cloud-based system. When getting started with a hardware-dependent system, you need to invest in infrastructure, space to host equipment and IT staff to set up and maintain the system. Some smaller businesses might not be able to, or prefer not to, invest this much capital upfront. Hardware-dependent systems also come with the ongoing costs of maintaining your IT department as well as regularly upgrading your system.

Cloud-Based vs. On-Premise CRM Software: A Direct Comparison

So how do cloud-based and hardware-based systems compare? Let’s make a side-by-side comparison of the various stages of setting up and using a CRM system.

Deployment

You can set up and deploy cloud-based systems more quickly and with a smaller upfront investment. The provider does the vast majority of the work after you choose your software. You don’t have to invest in on-site infrastructure.

Hardware-dependent systems typically take longer to set up because they require you to install infrastructure and set up the program on your own servers. This requires an in-house or contracted IT team.

Maintenance

Similarly, the provider takes care of most maintenance needs when using a cloud-based system. They can often quickly fix issues that arise because they are familiar with the system. The primary responsibility of the company using the system is to watch for and report problems. The provider will take care of fixing these problems and providing regular system updates.

With an on-premise solution, you are responsible for all maintenance and upgrades. This, again, requires an IT team.

Flexibility

With respect to scalability, cloud-based systems are much more flexible. You can quickly scale up or down your CRM, and the vendor will take care of doing this for you. As technology improves, these vendors are also offering more flexible functionality and integrations.

On-premise programs can offer more flexibility, functionality and integrations because you control how you set up and manage your system. If you have the necessary IT capabilities, you can customize your software to meet your company’s needs.

Reliability

The reliability of a CRM system depends on the system itself, your company’s IT capabilities and the rest of your IT environment. The advantage of a cloud-based system is that the vendor takes care of troubleshooting and maintenance. They can often fix issues rather quickly, since they understand the software well. If you have trouble with something the vendor doesn’t control, such as internet connectivity, you may lose access to the CRM temporarily.

With a hardware-based system, internet connectivity problems won’t keep you from using your CRM. You are in charge of all maintenance and troubleshooting, so if you have the necessary resources, this can be a positive. If not, it can be a barrier to using an on-premise system.

Costs

The upfront costs of cloud-based programs are much lower than those of hardware-based ones. They don’t require you to invest in infrastructure. Rather than making a large upfront purchase, you pay smaller amounts over time. For many smaller businesses, this is a more attractive pricing model.

The upfront costs of an on-premise system are much higher because you need to invest in infrastructure and purchase the system upfront. You also need to pay your own IT team to install it and then maintain it over time. If you use the system for long enough, however, owning the system might eventually become more cost-effective than paying a subscription fee.

Which Is Right for You?

When choosing a CRM, outline the goals you hope to achieve by using a CRM and the business needs you want it to fulfill. Then, look for a system that has the functionalities you need and meets your requirements for scalability, cost and other factors. Also, look at the companies providing the CRMs and their reputations for customer service, technical support and reliability.

If you find that you like some aspects of cloud-based and some parts of on-premise systems, you may not have to choose. Some providers offer a hybrid option that gives you some features of each. For instance, the CRM may run on the cloud, but you host that cloud on your servers. The hybrid options available depend on the company you work with.

The LeadMaster Solution

At LeadMaster, we offer a fully cloud-based CRM platform that includes features such as lead management, sales management, marketing automation, email marketing, call center solutions and more. Our system doesn’t require you to install any hardware and is highly flexible. You can easily turn features on and off and integrate it with a range of other business applications. With our secure, easy-to-use and affordable CRM platform, you can start improving your communications and boosting your profits today.

Curious about what the LeadMaster system can do for your business? Contact us with any questions or request a no-strings-attached, free 30-day trial today.

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