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CRM Selection: Cloud or On-Premise? – A Guest Article by Wolfgang Schwetz

There has been talk of a trend towards cloud computing for CRM (CRM on Demand / Cloud Computing / SaaS) in the DACH region for more than ten years. However, the German-speaking market is reluctant to outsource data and complete CRM software systems to the cloud for various reasons. The main obstacles are the lack of data security for the outsourced data and the uncertainty of the economic benefits. The bugging scandals surrounding NSA have also had a negative impact on confidence in these technologies.

A crucial mistake was the lack of credibility of some cloud vendors in their attempts to promote this technology as a better solution. This had a deterrent effect, apparently on the CRM software market as well. About half of the approximately 150 CRM software providers in the DACH region do not offer a cloud solution. According to a recent survey of the German market, only 15.2 percent of companies would opt for CRM software based on the cloud. The low demand for cloud computing is also confirmed by most CRM providers at CeBIT 2015.

Cloud Can be Cheaper

However, it is now a good idea to look closely at alternative cloud computing in the selection process for a new CRM system. All one-time and running costs for the first five years should be compared. There are conditions where the cloud solution is the better alternative. If a new area is to be developed in terms of IT technology, cloud computing can be the better alternative.

Two examples illustrate this: A start-up company wants to put its market development on a professional footing in a short period of time right from the start, but has neither the IT resources in terms of hardware and personnel nor the financial means to set up its own IT. In addition, all this costs too much time. For those who are at this point, the cloud solution offers the following advantages: Immediately available software, no investment in IT resources, high flexibility in terms of adapting services or user numbers and manageable costs of 30 to 100 euros per user per month, including ongoing maintenance costs.

This scenario makes it clear what is important: it is about the additional effort or savings opportunities in the one-off costs of software, IT personnel, IT infrastructure, financial resources, time bottleneck. Such situations can also occur with large international companies that want to implement new CRM software at different locations in several countries, so that all customer data can also be accessed across countries. Instead of setting up and operating the IT infrastructure yourself in several countries, this can be done relatively easily and much more cheaply using a cloud solution. Both the data and the software are no longer accessed on the operator’s own server, but via the web browser on the cloud services of the operator.

Public Cloud / Private Cloud / Hybrid Cloud

Cloud solutions are divided into public, private and hybrid clouds. In the public cloud, cloud services are offered freely accessible on the Internet for everyone. This can result in restrictions on the flexibility and adaptability of the software to individual requirements. Private cloud services are therefore more popular. The user operates the software including databases at a private data center exclusively for his company. This makes it possible to implement higher and individual security requirements with regard to data protection and IT security. Users access their software via their browser as in a public cloud.

With hybrid clouds, individual services are used by public providers, while others, possibly with higher security requirements, are operated by private service providers.

On-Premise / In-House Solution

By way of comparison, the classic in-house implementation, the so-called on-premise, incurs one-off additional costs for application and data servers, networks, software licenses for testing and live operation, installation and running costs per year for maintenance (approx. 20 percent of the software), release changes and personnel costs for system administration, which in the case of cloud applications are also, but significantly lower.

Irrespective of the cloud or in-house mode of operation, the following costs are also incurred: Workshops to develop the detailed specifications from the specifications, adapt the software, set up the interfaces to adjacent systems such as ERP, groupware, Microsoft Office, document management system and costs for user training. Of course, the interfaces between the cloud application and the in-house ERP system in the head office are clearly structured.