Hosted or On-Premise CRM? Let Users Decide.

Updated: April 30, 2009

When deciding whether to invest in a hosted or on-premise CRM solution, it's best to look at every angle. However, many businesses neglect to include end users in the equation and thus suffer the consequences of purchasing an expensive CRM package that no one actually uses. Here is a quick checklist to help your company evaluate CRM products from this important perspective.

1. Where Are Your Company's Users?

"If the majority of your users are going to be outside of your corporate network, then a hosted solution will most likely provide your users with the best response times," said Yacine Filali, business systems analyst at Winbond Electronics Corp . "Very few companies enjoy the pleasures of insanely huge data pipes and infinite hardware scalability."

"If, on the other hand, you have few or no external users," added Filali "then security and ease of administration would dictate an in-house installation."

2. How Do Users Actually Work?

"A very important consideration should be if the system can be customized and tailored to the organization's specific industry, business processes, terminology and workflows," said Mini Peiris, vice president of product programs at NetSuite Inc .

Do not focus solely on what work your company's employees deliver. It's equally important to consider how they deliver it. If you know how people perform their work, you can ascertain what CRM functions and features they need, as well as how much you will have to customize the solution after the buy. If you have this information early on, it will greatly smooth the process of choosing a CRM product. Plus, employees will actually use the solution, making the investment far more worthwhile.

3. How Much Work Do Users Do?

"If you expect a large volume of transactions/data, and it is substantially more than you can possibly back up and manage remotely, you are in a tough position," said Filali. "Large transaction volumes dictate lots of bandwidth and the flexibility provided by a hosting partner who can have compatible hardware up and running within minutes or hours."

"A competent hosting partner will often solve the backup and administration piece for a cost," Filali said. "If you have a lot of data traveling through your CRM, it is entirely possible that you would not be able to afford doing it yourself anyway. Outsourced hosting it is!" she exclaimed.

4. How Many Users Will Your Business Add?

The number of users affects licensing costs, but it also can present a scalability issue. "Other factors that may come in to play in the decision are business changes — for instance, acquiring a new company or opening up a new business unit — and needing to scale the current systems or accommodate new business process to address those changes," said Peiris.

Calculating staff growth in your business's expansion or merger plans can help you determine which CRM product will fit its changing needs the best.

These questions will help you further define your business needs, which is a far more important consideration than simplifying the question to whether to purchase a hosted or on-premise CRM solution. "In reality, there is very little that a hosted solution can't do that an on-premise solution can," said Laef Olson, chief information officer for RightNow Technologies Inc . "All CRM packages are hosted somewhere and available over a network. The question is 'Hosted by whom?'" he said.

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