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CRM buyers say goodbye to cloud CRM/on-premises debate

Rosemary Cafasso, Associate News and Site Editor

When AAA Western and Central New York needed new CRM software two years ago, it bypassed the cloud CRM vs. on-premises CRM debate and selected an on-premises system from CDC Software of Atlanta based on the functionality--not the deployment-- model.

Now the Williamsville, New York-based organization is considering moving its data center management, including the CDC CRM system, out of house entirely to NaviSite, an Andover, Mass.-based cloud-based outsourcer, to lower operating costs.

“I am not hung up on where my servers are sitting,’’ said Robert Leach, the CIO at AAA Western and Central New York.  "I start with the business problem I am trying to solve and when I have really defined it, then I look for the solution that meets my business need as opposed to being dogmatic and saying I will discard solutions because they don’t fit a technology paradigm.’’

More and more CRM buyers are adopting similar purchasing strategies. While many in the marketplace have cast CRM system selection as an either/or decision between cloud and on-premises, buyers are putting less and less emphasis on the deployment model.

“It’s no longer about religion,’’ said Michael Maoz, a vice president and distinguished analyst at Gartner Inc. in Stamford, Conn. “The ‘no software’ claims have yielded to [the question of] does this system meet my business needs.’’

Line between cloud CRM, on-premises CRM features beginning to blur

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Buyers have moved beyond the cloud vs. on-premises debate because there are simply more CRM deployment choices available today. The same vendors that once drew a clear dividing line between cloud and on-premises functionality have enhanced their product offerings enough over the years that those differences have become less distinct.

“It depends on the company and what infrastructure they have already in house and what resources they have for these systems, ‘’ said SAP CRM Marketing Vice President Vinay Iyer of the current buying trends.  “We are seeing wide variations.’’

Other software executives and industry analysts agreed that the traditional assumptions about cloud and on-premise purchasing are not as relevant as they once were. 

For example, CRM managers were once skeptical that cloud offerings could not be customized to meet their organization’s needs. Some companies now select cloud offerings because of the application development capabilities.

D-link, a maker of networking equipment based in Taipei, Taiwan, selected Salesforce.com as its CRM vendor because of the software’s “overall functionality,’’ said Michael Walsh, CIO. The Force.com development platform helped seal the deal.

“What put us over the hump was its ability to be a platform we could develop on,’’ Walsh said. “It was our desire to spend more time and IT dollars on developing applications and not building infrastructure. Instead of having a guy managing servers, I’d rather use those dollars developing apps.’’

Pricing, infrastructure concerns are changing


There are several other examples of how the lines between CRM cloud and on-premises offerings have blurred, including:

Pricing. Cloud vendors have long insisted that their approach is significantly cheaper than the on-premises applications because of the per-seat monthly rental approach.  But analysts point out that once a company has been using cloud-based CRM for several years, the savings from continuous monthly payments diminish when compared to the up-front license fee of an on-premise application.

Furthermore, as companies move their cloud offerings deeper into the enterprise, requiring integration with other corporate applications, they will need to invest resources to maintain the system, which can add to the cost considerably.
Even Salesforce.com concedes this point.

“If you want to integrate your cloud with other technologies, there would be a cost of setting it up,’’ said Scott Holden, a senior director of product marketing atSalesforce.com.  "Whether it is cloud or on-premise, it doesn’t matter."

Ease of use and rapid deployment. For years, cloud vendors owned this issue. However, traditional on-premises companies, like SAP, have been pitching rapid deployment packages to get users a more cloud-like installation. Additionally, on-premises-based vendors have learned from the past and invested heavily in improving the user interface.

Infrastructure. Once considered the Achilles heel of cloud-based CRM, infrastructure issues like security and availability made many companies wary of leaving the on-premises model. However, analysts said the cloud model has passed the test of time, although security breaches and system outages do occur. For example, just last week Microsoft experienced a glitch with its Dynamics CRM Online.

“There wasn’t a full outage, but there was a slowdown in systems for a part of the morning for some customers in North America,’’ said a Microsoft spokesman in a written statement.

Security and privacy will remain nagging issues, but for many companies these concerns are not in the forefront, some analysts said.  “You will always have people concerned about security,’’ said Denis Pombriant, a CRM analyst and president of Beagle Research Group in Stoughton, Mass. “But at the end of the day, this issue has become less valid.’’

Enterprise-class applications.  While large global corporations still rely heavily on on-premises solutions, cloud vendors are making inroads. Salesforce.com now has several global accounts with more than 40,000 seats installed, Holden said.  These include Dell Computer Inc., Bank of America, Cisco Systems Inc. and EMC Corp.

More CRM choices enable users to create variety of approaches


Without the hard and fast rules about cloud or on-premises models, companies are charting an increasingly wide variety of courses with CRM deployments.

“The business people don’t care about the cloud. They just want the application,’’ said Anthony Lye, senior vice president for CRM at Oracle Corp. “They want it to meet their needs and help them do their jobs better.”

John Ragsdale, vice president of technology research at the Technology Services Industry Association, has seen companies maintain hybrid environments, particularly during acquisitions or other corporate changes.

“In the older days, before the economy went to heck, when you bought a company you rolled them onto your technology,’’ said Ragsdale “I am seeing a much more gradual approach to how companies do this, so, it’s not all at once.  I think we will see many more products co-existing. ‘’

Others agreed. Microsoft’s Seth Patton, a director of Microsoft’s Dynamics CRM product line, said he said he often sees hybrid models at customer sites, where “at a corporate level they have on-premise and when they bring on new business units, cloud is a tool to do that more quickly.’’

One company found both models worked for different business needs


Then there is the example of Cemex USA, in Houston, Texas, which used Salesforce.com  and SAP on-premise software at different times and found each worked for certain business needs.

“We had a great implementation,’’ Ven Bontha, Cemex's director of CRM said of the Salesforce.com deployment. “We achieved what we wanted. But eventually we decided it wasn’t a sustainable solution. Over time, there were too many connectivity points, and it wasn’t scalable anymore. We couldn’t integrate other businesses. ‘’

Bontha said Cemex eventually opted for SAP’s CRM on-premises software, in part because the company was becoming “SAP-centric.’’ But he has no hard feelings about the cloud approach, an attitude that is an increasingly common sentiment among buyers of either platform, analysts said.

Gartner’s Maoz said with the deployment model no longer dominating a buyer’s decision process, he sees that companies are reaching a point where they can say, “I would have bought this regardless of platform. It is what is best for us as an organization.”