One of the major questions surrounding hosted CRM, or CRM SaaS (Software as a Service), is an economic one: Do the best hosted CRM software solutions from vendors like SugarCRM and Zoho CRM save you money?
First, of course, the answer depends on your particular circumstances. You need to carefully compare costs — both open and hidden — before choosing between a hosted CRM or an on-site solution. There are many cost-saving benefits of CRM. They include savings in hardware, installation, support, and personnel, as well as some less obvious ones.
It's a truism in IT that expertise costs more. The more bases you have to cover, the more expensive it will be. This goes double for expertise in a hot field like CRM and triples for a small department where your CRM expert also has to serve as a database administrator or some other critical role. Hosted CRM can help keep these costs down.
Hosted CRM Hardware & Software Costs
Something many companies fail to consider is that hosted CRM systems cost more than just the price of the software. You must also build factors such as your operating systems, databases, integrations, and necessary hardware into your overall CRM budgeting to get an idea of the true cost. These costs often get missed since they're not typically included in sales or marketing budgets.
CRM is important for SMBs and enterprises, but because of the way these additional hosted CRM costs are hidden in a large organization, small companies tend to see the value proposition of hosted CRM much more clearly. If you don't have a corporate IT department to pick up the expenses of additional operating-system and application licenses or to handle maintenance, the advantages of hosted CRM are much more visible. Low entry costs and an absence of an established IT team usually lead small companies to choose hosted CRM systems over on-site installation.
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Excess Hosted CRM Capacity
Hardware is modular, but your needs for hosted CRM aren't. In other words, you can only increase the capacity of your servers, disk drives, and other infrastructure in discrete chunks. However, the demands your hosted CRM system puts on hardware vary.
This produces a classic IT dilemma and potential CRM disadvantage if not properly considered: Do you purchase the hosted CRM capacity that's going to be most economical in the long run, or do you get what you need now and plan on upgrading later? Buying for a long-term economy tends to leave you with excess hosted CRM capacity most of the time. Sometimes it's a lot of excess hosted CRM capacity, but it has to be paid for whether or not you're using it. Buying in smaller increments is more expensive in the long run and means that you're constantly purchasing additional hosted CRM hardware.
With hosted CRM, you can vary your capacity demands much more smoothly. You don't have to add hosted CRM capacity until you actually need it, and then the scaling-up process consists of a phone call to the vendor.
Upgrades and Patches to Hosted CRM
Normally SaaS systems are automatically maintained by the vendor at no added charge to the customer. While most hosted CRM vendors supply patches and minor upgrades for free, they often charge for major upgrades. Since the customer has no control over when the hosted CRM vendor is going to release a new version, this is a cost that is paid on the vendor's schedule, not yours.
The other advantage is that patches and upgrades are applied automatically. You don't have to worry about making sure you've got the latest revision, tracking patch numbers, and other maintenance chores. Hosted CRM saves money by reducing the load on your IT department.
One other result of the different economics of hosted CRM and on-site CRM is that the monthly fee for hosted CRM software will often be less than the monthly cost of support for an on-site CRM system.
One of the more subtle cost discrepancies between hosted CRM and on-premise CRM results from the different patterns of outlay for each approach. An on-premise CRM system has a much higher up-front cost as you invest in hardware and software as well as in setting up the system. A hosted CRM solution has set-up costs as well, but for the most part, your investment consists of a monthly hosting fee.
Even if the hosted CRM application does not represent savings when costs are compared over the long term, it makes a considerable difference when it comes to writing the checks each month and matching outlay to income.
Time to Hosted CRM ROI
While deploying a fully hosted CRM system is a complex process that requires considerable planning, the time needed to actually implement the software and start reaping its benefits is typically much less with a hosted CRM system. Hosted CRM systems can be implemented in a matter of days. This is especially true for SMBs that don't need elaborate customization of their hosted CRM systems. CRM ROI is achievable, but factoring in the full spectrum of costs will help you realize the financial benefits much sooner.
When comparing costs of hosted and on-premise CRM, these hidden savings can mount up. They can even tip the balance in favor of hosted CRM when overall economics are considered — as they should be when choosing a CRM solution.
