Editor’s Soul-Searching Disclaimer
I have to confess that it was difficult to write objectively about SaaS (Software as a Service) versus On-Premises customer care tools, because I work for Assistly and I believe that almost all companies would benefit from the advantages of using our product to deliver amazing customer service—inexpensively, efficiently, and confidently.
That said, I really tried to find good reasons why some companies would choose an enterprise system, and there were some circumstances where it would make sense to do so. For instance, if you have recently spent several hundred thousand dollars to install on-premises software, it wouldn’t make sense to abandon it. It’s also true that if your customization needs are very complex and driven deeply into the entire infrastructure of support, or if your business is in a highly-regulated industry and/or operates in a U.S. state where data must reside within the state borders–it makes sense for you to host your own system in-house.
With these exceptions, making a choice of cloud-based software means you can achieve the goals of full functionality and security while maximizing revenue and minimizing acquisition costs.
Quick Definitions of “SaaS” and “On-Premises”
SaaS (software as a service) is software that is hosted by a vendor and licensed to customers by subscription. The vendor maintains all aspects of the software and the customer uses it “on demand” through an Internet web browser.
“On-premises” or enterprise software is installed at your location, on your computers, and in your data center. It is managed by your IT resources.
SaaS Trending Up!
SaaS has now moved out of the SMB universe and many large companies are adopting SaaS alternatives. That trend will continue, according to reports by Gartner, Frost & Sullivan, and others. Forrester reports that SaaS CRM is becoming the default choice for companies at all sizes as a way of “testing the waters” before purchasing an on-premises system.
So why are on-demand choices gaining ground over expensive, multi-week installations of on-premises systems, and how can you be sure that you’re making the right decision?
“Always start with the business case,” advises Kate Leggett, senior analyst at Forrester Research. “What is it you need to be successful? Then map it to the vendors that can support the business.”
Get out that whiteboard! Here’s a checklist to print out!
Advantages of Cloud-Based CRM Software: The Short List
- Low overhead and no IT infrastructure
- Affordable(low cost of ownership, lower training costs, lower financial risk, more predictable cash outlay)
- No software installation (no maintenance or upgrades)
- Ease and speed of deployment (configuration is faster and simpler than on-premises)
- Ease of Integration
- Easy access over an Internet browser.
- Support is included
- Flexibility
Advantages of On-Premises CRM Software: The Very Short List
- Tighter control over system and security
- Less chance that outside connectivity issues will make your data inaccessible from time to time
- May be better in cases where complex customization is required
- may be preferable for legal reasons in some highly regulated industries (some states require data to be stored within state borders)
Considerations
Functionality. Does the product do exactly the tasks you need to accomplish? If not, what is the cost of finding other ways to accomplish those tasks?
Usability. Is the system easy to use or will it require extensive staff retraining and/or an increase in support staff?
Price. Calculating the cost of a system involves more than just the initial outlay. Consider all parts of the total cost of ownership (TCO), including adding features, storage costs, and fees.
“The ROI calculations are the trickster’s tool,” Drew Kraus (Research VP at Gartner) said. “What we are finding is that many organizations are looking at the software costs, but forget the administration costs. If they have personnel in charge of the care and feeding of this environment, and if that goes away by having someone else run the infrastructure, then that can really tip the scales.”
Flexibility. Access through Web allows remote and mobile workers to participate easily. Most providers also have their own API, which permits further coordination between your company and the hosted software.
Configuration and Integration. The rule of thumb is that the more closely you want to integrate CRM with other internal systems, the more likely on-premises will be preferable. However, SaaS CRM providers are increasingly able to share and transfer customer data easily and with low risk. Most providers have their own API to make it easy to integrate with a company’s current software applications
Customization and Interface. Define exactly what kinds of customization you require. If you do not, you risk finding out–with either an on-premises or a SaaS installation–that the chosen product does not meet your needs.
According to Donna Fluss, president of DMG Consulting LLC in West Orange, N.J., hosted CRM providers don’t sit on their laurels. “The hosted vendors are hungry and they will do what it takes. I will say for a fact there is more R&D going on in the hosted market right now.”
Security. While security was once thought a “con” of cloud-based software, that has changed, according to Kraus. “When you talk to the providers of SaaS solutions, because they know security is an important issue, they over-invest in it. They tend to be better than many enterprises.”
Reporting. Analyze your reporting needs carefully and make sure that reporting functions are satisfactory, or that you can work with the CRM vendor to customize reports.
Support. Customer support is a high priority with SaaS CRM providers. Since you can disconnect your company easily from a SaaS product that isn’t meeting expectations, SaaS companies tend to take customer service very seriously.
Vendor Viability. Look at the company’s management and history to assess their credibility and business strategies. Talk to the principals and others on the team to help develop a profile of the company’s long-term health.
Support and Administration. Hosted software has very low personnel, support, and administration costs as compared to on-premises solutions.
Some Questions to Ask
- What happens in the event of an outage?
- What happens to my data if I end the relationship?
- How do I know that regular maintenance or upgrades will not disrupt service?
- Is there a disaster recovery plan?
- Who and how will others have access to my data? How will it be protected?
- Will the product be able to adapt to my changing needs based on things like growth spurts, seasonal spikes, and employee turnover?
- Will SaaS be affordable as my business grows?
The overall expense and total cost of ownership for on-premises systems continues to be very high—prohibitive for small and medium-sized businesses. For example, for a call center of 100 agents, “the price tag could be in the $1 million range for a new on-premises system,” according to Sheila McGee-Smith, president and principal analyst of McGee-Smith Analytics.
For small and medium sized companies, SaaS is almost always the way to get more bang for the buck—and the risk is low. Two great places to get started: Google Apps Marketplace and GetApp.com.
When it comes to customer satisfaction, you should not set limitations. Clients affect the achievement of goals and it matters a lot to make sure that none of your effort will lack to satisfy them.