CRM: Hosted vs. On Premise

By Kristine Hegglin
Updated: April 01, 2011

On-Premise CRM Solutions

Customer Relationship Management (CRM) solutions are offered as hosted solutions and as on-premise or on-site solutions. There are several differences between these two solutions, which makes each of them appealing to different sized businesses. An on-site CRM solution requires a business to invest in the hardware to implement the solution, the middleware to integrate the solution, and employees to maintain the solution. Maintenance for a CRM solution generally involves database backups and upgrades, server maintenance and network administration, and software updates and upgrades. Because the business is responsible for purchasing the technology and hiring employees to maintain the solution, on-site solutions cost more than hosted solutions. However, on-site CRM solutions are appealing to some businesses because they can be customized. Once the license to the software is purchased, a business can do whatever they like with it, which includes customizations. Large businesses typically need CRM solutions that can be customized and small business generally don’t. Large businesses also typically have the capital to invest in a robust and customizable CRM solution.

Types of On-Premise CRM Solutions

There are two types of on-site CRMs solutions; proprietary and open source.

• Proprietary - Businesses implementing a proprietary CRM solution must purchase licenses to the software. Businesses implementing an open source CRM solution don’t need to purchase licenses because open source solutions are free.
• Open Source - Open source solutions are typically downloaded from the vendor’s website. Not all open source solutions are supported, which may be a disadvantage for some businesses away. Proprietary on-site CRM solutions are supported.

Hosted CRM Solutions

Hosted CRM solutions generally appeal to small and medium sized businesses because they cost less and are quick to implement. It typically takes businesses ten to fourteen months to implement an on-site CRM solution whereas it usually takes less than three months to get up and running on a hosted CRM solution. Hosted CRM solutions are popular among the small and medium sized business industry because small and medium sized businesses don’t usually have the unique needs that large businesses have. While hosted CRM solutions are not customizable, they are configurable.

Types of Hosted CRM Solutions

There are a variety of names for hosted CRM solutions. Besides hosted CRM, these solutions are also referred to as web-based CRM, on-demand CRM, and Software-as-a-Service (SaaS) CRM. Hosted CRM vendors require businesses to pay a monthly fee to use the software, which is typically hosted at the vendor’s data center. Because the software is hosted by the vendor, the vendor takes care of maintenance issues and upgrades.