CRM in the Cloud: Which Model Is Right for You?
There’s little question for most companies whether they will use cloud-based CRM solutions. Even before the pandemic made on-premises installations of CRM or other software much more challenging, public companies and even government entities were transitioning quickly to cloud-based solutions.
“A growing percentage of our customers are in the cloud today,” says Jonathan Moran, product marketing manager at SAS.
“There’s been a steady rise of CRM-in-the-cloud deployments since the early 2000s,” adds David Campbell, vice president of product marketing at SugarCRM. “It rose from the ashes of the dotcom. At the time, there was euphoric investment in speculative ideas. Post the dotcom bubble, companies were using that technology to get behind proven business models and/or ideas with strong business cases behind them.”
While Campbell traces the beginning of CRM in the cloud to the early 2000s, others say there wasn’t much of an uptake until about 10 years ago.
The popularity of cloud options has grown significantly, with a recent Gartner report citing three-quarters of recent CRM implementations in the cloud. Two years ago, about half of SugarCRM’s deployments were in the cloud. Now 80 percent are cloud deployments, Campbell says. “A fair amount is pandemic-driven, but it’s not a temporary change. There are many advantages to the cloud.”
Esteban Kolsky, SAP’s chief evangelist for CX, adds that the continuing growth of data available to CRM systems is simply too much for most on-premises CRM solutions, whereas cloud-based systems don’t have such data limitations.
“The cost of maintaining data in real time continues to be cheaper and more efficient in the cloud. Customers saw that value,” Kolsky says.
Companies, by and large, found it far easier to enable employees to work from home amid pandemic-induced lockdowns with cloud-based solutions, but beyond meeting the limited contact needs of the pandemic, there are other factors driving companies to the cloud for CRM. Going to the cloud helps companies with limited resources because cloud deployments don’t have the large up-front costs of onsite deployments, Moran says. Companies have laundry lists of priorities for their resources. Cloud-based deployments don’t require companies to pay for or maintain the same resources as on-premises deployments.
Companies have access to new capabilities more quickly than with on-premises deployments since there is no need to go onsite to make upgrades.
Additionally, costs of CRM deployments in the cloud have dropped significantly. For example, Amazon Web Services (AWS) offers 80 percent more services in the cloud than it did four years ago, but prices have been slashed as much as 60 percent, according to Campbell.
And then, reliability is another issue. “There’s been a marked improvement in the speed and reliability of the cloud infrastructure. This rapid innovation of cloud services enables Sugar to innovate our products at a rapid pace so that we can bring new features and technology to market much faster,” Campbell adds.
AWS offers tools to make machine learning models available to CRM vendors and their end customers without having to train the staff of either, making it more cost-effective to launch enhanced capabilities.
With the cloud, though, it’s not an all-or-nothing proposition. While the majority of companies are going to the cloud exclusively, others are moving much of their CRM functionality to the cloud while still keeping some of the most sensitive CRM information on premises in hybrid solutions, according to Moran.
When choosing a cloud solution, there are many different options, with some pros and cons to each. Below is a look at the different cloud choices companies are making for their CRM solutions today, as well as some of the most notable advantages and disadvantages to each.
A major advantage of the public cloud CRM solution is that it’s very easy to get started, says Srikanth Balusani, chief technology officer at MST Solutions, a certified Salesforce consulting and implementation partner in Arizona. “In modern enterprises, sales, service, and marketing all go hand in hand. Some of the public CRM solutions are easy to start in one area, like sales, then expand into others, like marketing or e-commerce, in order to add value. You have multiple functionalities when you have an integrated experience.”
Since companies can outsource resources to another organization, they can quickly gain ubiquitous access to CRM platforms while also receiving best-in-class security, Campbell says.
Data integration in public cloud CRM solutions is relatively easy, Kolsky adds. “You can add capacity at the drop of a hat.”
In the past 10 to 15 years, the functionality of CRM public cloud solutions has grown rapidly, making it a superior option for many companies, according to Balusani.
Public cloud providers have also grown their capacity in the past few years, so there are no storage issues, Moran adds. “You can scale up and down as needed.”
The public cloud option also offers a wide variety of CRM choices, since all the major platform providers support it, Kolsky points out.
“If you’re not careful, [public cloud deployments] can grow out of control,” Balusani cautions. “You have to think about how you’re going to use it to transform your business. You need to determine your usage, the features you want, and the number of people that will access the system. It’s important to understand the limitations of the public cloud.”
The biggest negative is a misconception rather than an actual drawback from the public cloud option, according to Kolsky. “Some companies don’t think that their legacy CRM systems will be able to follow them to the public cloud. They’re worried that they have spent 10 or more years to build their [CRM] resources and will lose their legacy investment. Then it becomes a self-fulfilling prophecy.”
While the customer no longer needs to concern itself with the hardware, public cloud solutions place the burden on the customer for maintaining the software, Campbell said. “Taking on the burden of managing the software is just something that’s not beneficial for most companies.”
Another concern is that a company is handing its CRM and data to a third party, Moran says. “You have to work with someone that you trust.”
With a private cloud solution, all computing resources are dedicated to one client, Campbell says.
CRM users tend to consider private cloud systems more secure and more under their own direct control, according to Balusani. Financial services companies, government agencies, and healthcare providers tend to opt for private cloud CRM solutions.
Kolsky sees the private cloud as the preferred option for companies with complex legacy systems. Many of those organizations will start with a private cloud, then migrate to one of the other options.
Depending on the level of customization, private cloud CRM systems can become very expensive, according to Balusani. “Upgrades can be challenging, too.”
Balusani expects the private cloud portion of the market to fade because companies are finding other cloud options meet their needs at a lower cost with similar security protections.
Hosted cloud CRM users have more control with costs that can be lower over the long term, according to Balusani. “The cost isn’t based on licensing; you can host it anywhere you want.”
The hosted cloud option is also more flexible; Moran says it’s best to consider three different hosted cloud options:
1. Public hosted: “With data stored on third-party servers, like Amazon or Google, public cloud CRM data is easily accessible from a variety of regions and locations. Subscriptions are often cost-effective, with scalability and performance being good. Instances are very easy to set up and use,” he says.
2. Private hosted: “Private cloud CRM instances are deployed by companies and, thus, can be more personalized, perceived as more secure, with greater data control, data governance, compliance, privacy, security, etc., that can be more tightly managed,” Moran says.
3. Hybrid hosted: “The main issue here is that if your software isn’t set up to access data from both public and private instances simultaneously, accessing and leveraging data properly will be an issue,” Moran states. “SAS CI 360 (CRM) is set up to leverage what is called a hybrid cloud architecture, where segments and campaigns can be created from public and private instances simultaneously.”
Moran adds that the pro and cons apply to both private hosted and public hosted cloud options.
“A hybrid model that keeps personal identifiable information on premises with the graphical user interface, etc., in a public cloud is the model of the future,” Moran says.
Companies in regulated industries tend to opt for hosted cloud options, Balusani says.
With hosted clouds, the vendor selection is more limited than with some other cloud options, Balusani argues. Another drawback is that hosted cloud solutions might not receive upgrades as quickly because the customer is responsible for them.
The downsides of public hosted cloud solutions are perceived security concerns—even though they’re very rarely an issue—the lack of individualization, and performance and reliability issues, according to Moran.
Kolsky sees the hosted cloud as a poor model, used primarily by technology laggards and late adopters of CRM in the cloud.
The managed cloud model is similar to the private cloud model in that data is “completely self-
contained,” Moran says, but companies have better control of data, software, and hardware.
Balusani says that handing off management to a third party is beneficial for companies that don’t have the expertise or resources to manage the system themselves.
Migration issues also become the partners’ responsibility, letting companies focus on their business rather than on the technical issues of managing their CRM solutions, Kolsky adds.
“This eliminates the need for companies to be experts in areas such as database administration, backup, and recovery,” Campbell adds. The managed cloud option, then, appeals primarily to small and midsize companies.
It’s easy to start small and scale up as needs grow, making the managed cloud attractive for some smaller companies, Balusani says.
The drawbacks of managed cloud CRM solutions are that they carry higher management costs and recurring fees for facilities/electricity/service/upgrades, etc., according to Moran. Campbell adds that companies have less transparency into how managed clouds are operated compared to other options.
Companies using multitenant CRM cloud solutions can have multiple instances where unique projects or campaigns can be hosted, according to Moran. “These types of deployments are usually needed for large organizations that have distinct operations in various regions or countries or across different lines of business. Most CRM vendors can deploy multiple tenants of their software without any issues.”
A multitenant cloud offers companies maximum economies of scale, Campbell adds. “A vendor is able to administer and upgrade everything all at once. You have uniform service and lower cost.”
Among the drawbacks of this type of solution, Moran says, are synching issues—keeping all instances aligned—as well as the higher cost of having multiple deployments.
Another issue, according to Campbell, is that all data is on a single server, so there is risk from a data access/protection standpoint: If the server goes down, none of the data is available; if the server is successfully hacked, all of the data can be exposed.
Companies best suited for multitenant cloud solutions, according to Campbell, need CRM functionality and want cutting-edge cloud capabilities without the IT burden and are interested in sharing the cost of infrastructure with like-minded companies.
THE FUTURE OF CRM IN THE CLOUD
Ninety percent of cloud-based CRM today is either managed or multitenant, according to Campbell. “Hosted cloud will become less prevalent. Vendors will be rewarded for multitenant cloud, as it affects valuation as a company,” he states.
Kolsky, however, expects most of the growth in the next few years to be in the public cloud option. “It will be driven by companies understanding the value that the public cloud offers.”
It’s important to note that as CRM continues to evolve and incorporate machine learning and predictive analytics to enhance its utility and value, AI and the cloud are a natural (and necessary) pairing, Campbell adds.
Phillip Britt is a freelance writer based in the Chicago area. He can be reached at firstname.lastname@example.org.