At 1CRM Systems in 2021 we see about 95% of new clients choosing to use our CRM as a cloud service. But in 2004 when we began, all our clients had their CRM systems on premise. It’s interesting to study the spectacular rise of cloud computing as a solution for businesses of every size, but it is also equally valuable to examine the reasons why an on premise CRM can still make sense today in some situations.
Before cloud CRM became the dominant model, clients typically had to purchase a relatively expensive perpetual software license for their CRM, and sign up for annual support and update agreements as well. Then they needed their own server running Windows Server or Linux, and most of all they needed someone capable of managing that server and installing the CRM software on it properly. Then keep that person around for the ongoing maintenance of hardware and software. If access to the CRM from outside the office was a requirement, then network configuration and security management became ongoing technical tasks as well.
Contrast that with the cloud solution. A new client could simply sign up for a few users, for as little as one month. A commitment of perhaps $100 or so. No up-front hardware costs. No internal IT person doing server hardware and software management, network configuration or network security management. No initial perpetual license costs – just a monthly or annual subscription fee. With CRM support and software updates included in that subscription. Life could be very simple, and expenditures could be very predictable with no large initial investment.
Predictably, cloud CRM swiftly came to dominate the CRM marketplace.
Cloud CRM also had one more big advantage: rapid scalability. Clients who needed more computing power or more data storage could simply change to a different set of cloud resources at the flip of a switch. Again with predictable expenditures and no large costs that might otherwise be involved in the purchase of new higher-capacity server hardware.
Cloud CRM was even good for the CRM vendors, as it replaced the feast-or-famine model of perpetual license sales with nice predictable subscription income.
With all of these reasons working in favour of cloud CRM, why do on premise CRMs even still exist? There must be good reasons – and indeed there are!
Probably the biggest of these revolves around trust and control. Despite the fact that large cloud vendors can without doubt afford better network and infrastructure security than most of their customers, some clients just don’t feel good about their precious customer data living anywhere except within their own four walls. They feel that they will be able to keep that data more secure than any cloud vendor can. While the typical data security worry is concern about having your data stolen – perhaps by a competitor – another aspect of security is protecting your valuable data against loss. Clients with on premise servers will operate their own backup regimen and be confident they will never lose their data. Again, an understandable belief which may or may not be valid.
Related to these data security concerns is the issue of where the cloud vendor might keep their data. In Europe for example, a CRM cloud solution that houses its data in the USA is not really a saleable proposition due to GDPR rules. So unless the cloud CRM vendor offers a range of countries for where the CRM data will be kept, on premise can start to look attractive because of the data privacy control which it affords.
Another issue some clients consider is system performance. They believe that if the server is local to them and their data as well, they will get faster system response when using their CRM. It is largely the case nowadays that this is simply not true and is just based on outdated memories from days of slower internet speeds, and slower-performing servers, laptops and phones.
Some clients may want to consider the cost of having to retain a very large volume of data on cloud servers. An architecture firm or graphical design company for instance will be sending large files back and forth with clients repeatedly. If they retain hundreds of thousands of emails in the CRM and many of them include large file attachments, it will require many terabytes of relatively expensive storage for the cloud CRM. There can be a point at which this creates a noticeable cost advantage for the on premise solution.
A notable proportion (perhaps 5-10%) of CRM clients find they wish to customize the actual CRM software that they use. Not all CRM solutions permit this but many do. All CRMs offer some degree of customization, providing tools which allow the client to customize data fields, screen layouts, reports, menu systems and so on. But these tools inevitably have limitations – and some clients really value being able to go beyond these limitations. For some CRM systems customizing the actual CRM software you are running is only possible with an on premise solution.
Lastly, there still exist many places on planet Earth which have poor or non-existent internet connections. For these remote locations an on premise CRM is clearly the only real solution. (We just hope they have telephones to speak with their clients!?)
- Capital Costs
- Operating Costs
- Data Privacy
- System Performance
- Huge Storage Needs
- Custom Software
- Isolated Location
- Simple monthly or annual subscription cost includes support. It is all very easy to budget for.
- Easy to flip a switch to get more computing power or storage when your needs change.
- Cloud infrastructure has the scale and budget for world class network security and protection against system penetration.
- Make sure your cloud service stores data somewhere acceptable to you.
- Cloud service hardware, network topology and internet connections are literally state-of-the-art.
- Large amounts of cloud storage will typically cost more than simply buying SSD/HDD drives on premise.
- May require a dedicated system option when in the Cloud.
- Needs a reliable internet connection.
- You will need to buy expensive servers, storage, backup devices and system software. And perhaps substantial up-front perpetual CRM license costs.
- Budget required for server hardware/software maintenance and depreciation. You’ll also need full/part-time staff to configure and maintain the server and its software, as well as for network configuration and security management.
- May involve buying more equipment and a delay while it arrives and is setup.
- Some clients still just want their data inside their own four walls and to manage data backups in-house.
- You control exactly where your data is stored.
- You may feel a server local to you will provide the best performance. In almost every case you’ll be wrong.
- May well have a price advantage if the organization has unusually large storage needs for files and email attachments.
- Total flexibility to customize as long as your vendor’s software is ‘open’.
- Has the advantage if Internet connectivity is slow or unreliable
For the record, 1CRM Systems offers monthly and annual subscriptions to its 1CRM cloud service which provides a wide range of locations for where your data may be stored – Canada, USA, Ireland, the Netherlands, France, Germany, the UK, Singapore, Australia, etc .. We also offer on premise 1CRM solutions by either monthly or annual subscription or with perpetual licenses.
In most countries our cloud CRM service is hosted in Microsoft Azure data centres with state of the art physical and network security. All 1CRM clients have the 1CRM source code open and available to them and they can customize that software when on premise, or when in our cloud using a dedicated virtual machine option.