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On-Premise CRM vs Cloud CRM: Which should you choose?

Considering a new CRM system? This article explains the difference between on-premise CRM software and cloud CRM software to help you understand which is the best for your business. It also lists the key considerations you need to think about when choosing your new CRM system.

So, let's get into it.

5 minutes

Written by James Vjestica, Digital Content Manager

Organisations have had the choice between a cloud-based Customer Relations Management (CRM) system and an on-premise CRM software since the former was introduced back in 1999. While both methods have proven to be very successful, making the right choice for your business may require quite a lot of thinking and pre-planning.  

Important considerations such as your budget, business size and long-term scalability are crucial for helping to determine which is the best system for you. 

Keep reading to learn more about on-premise CRM vs cloud CRM and how to choose the right platform.

What is the difference between on-premise CRM vs cloud CRM?

The main difference between on-premise and cloud CRM system is where they are hosted. This determines how they are implemented and maintained.  

On-premise CRM (also referred to as on-site CRM) involves organisations purchasing licences and installing a system on internal servers that are physically located within a building. This requires a specialist in-house IT department to build the system and oversee day-to-day maintenance tasks - such as running updates, managing back-ups and security procedures.  

A cloud CRM is a much different solution. Rather than being managed on-site, a cloud CRM is outsourced to a provider. This is then hosted on their servers (aka, the ‘cloud’) and can be accessed remotely, providing that you are able to connect to the internet. Also known as ‘software as a service (SaaS), a cloud CRM system usually requires a monthly subscription fee to the respective provider in exchange for their services. 

Since its inception, cloud CRM has become an increasingly popular choice for many businesses. A recent report by Gartner found that 80% of all CRM sales in 2020 were cloud-based [1]. 

Find out more about how to avoid choosing the wrong charity CRM.

Choosing between on-premise and cloud CRM: Key considerations

Now that you understand the difference between the two systems, the next step is to weigh up important factors that will help you to make an informed decision. While more and more businesses are opting for a cloud-based CRM solution, there are several disadvantages as well as advantages to this approach. Likewise, an on-premise CRM system may work well for some businesses, but not for others.  

Asking yourself the below questions will help you to make the right choice for your business.  

What is the more affordable CRM solution?

Cost can be a huge deciding factor for many businesses looking to implement a new CRM system and the payment models of on-premise vs cloud CRM software differs significantly.  

With an on-premise CRM, there is typically a higher up-front cost when compared to a cloud-based solution. As on-premise software is managed internally, you are responsible for every aspect of implementation and maintenance of things like:   

  • The CRM software 
  • All the required hardware and servers 
  • Maintenance costs 
  • Salaries of internal IT department 

Not only can maintenance be one of the most expensive factors to consider, but ensuring that the servers and hardware run consistently can require around-the-clock attention. As the energy put into this task could be prioritised elsewhere, ‘time’ can go hand-in-hand with financial cost and is therefore a crucial factor to consider. 

Alternatively, the SaaS model associated with a cloud CRM system means that the software is paid for on either a monthly or annual pay-as-you-go basis. While the up-front costs are less compared to an on-premise CRM system, there will likely be hidden costs. These will derive from factors such as the number of users that require the system, ongoing customisation, and staff training.  

However, as there are no hardware, physical infrastructure or maintenance requirements, a cloud CRM solution could be a more cost-effective option for some businesses. 

What can your business afford?

Affordability can depend on the size of your organisation. For example, if you’re a large enterprise, your infrastructure may mean that, after overcoming the initial expense of implementation, an on-premise approach could be cheaper in the long term than paying a continual subscription fee.  

Alternatively, the small up-front costs of a cloud CRM may be more appealing to an SME as not only is it more affordable to them, but they can put their valuable time elsewhere other than managing maintenance tasks.  

Small up-front costs and third-party management could therefore be contributing factors towards the growing popularity of cloud CRMs.  

If you are a charity or Not For Profit organisation, find out more about the cost of a charity CRM

Which is more secure?

Security is arguably the most important factor when choosing a CRM. Charity databases can contain highly sensitive information about supporters and service users and must be protected and secure at all times.  

For some, on-premise CRM systems are considered more secure than their cloud counterparts. This isn’t necessarily true. The reality is, the level of security can be perceived to be better as in-house management provides access to your own servers, meaning that you always have transparency and control of where your data resides.  

While a cloud CRM is managed by a third-party provider, this doesn’t mean that your data is any less secure. Most providers are especially vigilant where security is concerned about adhering to internationally recognised standards such as ISO 27001, while also working in line with GDPR. It’s important to acknowledge that the providers’ reputation is also at stake, so it is clearly in their best interests that they run a secure operation.  

Experts in the field have also played down the theory of on-premise CRM systems being more secure and reliable. Especially as they can be susceptible to data loss from events such as flooding or fires. One of whom is Dell Technologies' founder, Michael Dell, who states that security issues essentially occur due to human error. 

Public cloud is no more or less secured than on-premise. The reason is that security is about people, and people on both sides can make mistakes and compromise security.
Michael Dell. [2]  Dell Technologies founder

Gartner also supports this notion, as they predict that through 2025, 99% of cloud security failures will be down to the fault of the customer [3]. 

Regardless of whether you opt for cloud or on-premise, you can do so in the sound knowledge that your data should be equally as safe.  

Which is more suited to continued scalability?

Another consideration is whether there are long-term plans for your organisation to grow and develop. If the answer is ‘yes’, then this may involve continuous upgrades and customization of your CRM platform.  

Cloud software is well suited to any continued developments that your CRM may require. Upgrades, technological patches and customisation are managed by the provider and can be deployed within a relatively short period of time. In some instances, this can almost be instant. 

Integrations can also be an important part of developing your CRM. This involves connecting your CRM software with third-party applications such as your website, social media platforms and analytics accounts to expand the functionality and insight of your system. Again, this is usually a simple task when managing in the cloud, as your provider can simply apply the correct APIs to ensure that seamless connections are made. 

With on-premise CRM, this isn’t necessarily as straightforward or as cost-effective. Due to the customer being limited to the confines of the hardware and software they initially implemented, any additional upgrades could come at a substantial cost. In addition, this may not align with the timeframe of any CRM upgrades that the provider has planned, which could cause delays.

Which is more accessible?

Providing that you can connect to the internet, with a cloud-based CRM you will be able to access it remotely on a selection of devices including mobile. Once you are signed in to the CRM, you will be provided with real-time data across your organisation, regardless of your destination.  

This means that employees across different departments and locations will have access to the required insights to make swift, informed decisions. For example, this could be a sales executive who is out of the office but needs to view the details of a certain customer prior to contacting them. 

With on-premise CRM, users can only access the system on-site. Although this may not be a problem for most organisations, if urgent access is required and key stakeholders are not physically within the premises, then this could be very problematic. On-premise CRM software can be set up with a VPN, but this requires additional cost and may not always be effective.  

When deciding on whether to implement cloud-based or on-premise CRM, consider the importance of remote accessibility and whether it aligns with your requirements. 

Which is easier to deploy?

Whether you’re implementing a CRM system for the first time or updating to a new and improved version, you’ll want a seamless transition. Avoiding long delays will enable you to learn the key features of your CRM system from the outset and hit the ground running. 

As a cloud-based CRM is hosted by a supplier, there should be no disruptions to your existing infrastructure whilst preparing for the new system. Once you’ve made a decision on a solution, it should be as simple as making several potential amendments to your business processes and supplying members of staff with their login details.  

However, you should also factor in a transitional period for training, especially if you are moving from an on-premise to a cloud CRM. This may take your employees some time to get accustomed to the new setup. Thankfully, most providers will offer training and customer support to ensure you fully understand the new system. 

Due to its complex nature, implementing an on-premise CRM can take considerably more time. Factors such as setting up all of the different pieces of hardware and on-site servers, while also finding the required members of staff to build and maintain this infrastructure can be very time-consuming. SMEs generally don’t have the resources to manage this, which arguably makes a cloud solution a more feasible option. 

Next steps

Whether you opt for an on-premise CRM system or cloud-based CRM, the system will form an important part of your organisation and will help you to fully understand your day-to-day processes and how they can be improved.  

If your current software is on-premise and you are keen to move to your first cloud-based CRM system, at Access we’re specialists in supporting businesses of all sizes and complexity to make this happen. 

Find out more about our cloud-CRM system or our other sector-specific CRM solutions to see which one is best for your business.

Explore all our CRM solutions