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Cloud-based vs. on-premise CRM: Which is better?

On-Premise CRM
What is an on-premise CRM?
When is an on-premise CRM suitable?
The challenges of on-premise CRMs
Why a cloud-based CRM is an excellent fit for growing businesses
On-premise vs. cloud CRM: A side-by-side comparison
Final thoughts

You may have already decided to invest in a customer relationship management (CRM) solution. Before you choose one though, you’ll need to consider whether you’d benefit most from a cloud-based or on-premise CRM.

Cloud CRMs are popular among small businesses, but on-premise systems can offer unique benefits for all kinds of establishments in the right situations.

In this article, we’ll explain how on-premise CRMs work and the types of organizations they fit best. We’ll also explore why so many companies opt for cloud-based software and do a comparison to help you make a confident choice.

What is an on-premise CRM?

An on-premise CRM, also known as an on-site CRM, is a customer relationship management system whose infrastructure, hardware, operating system and data are stored on the user’s premises.

On-premise CRMs are hosted on a company’s own servers and typically share the following characteristics:

  • Internal management. The user’s IT department, a designated team member or contractors manage and maintain the system. This includes hardware and software updates, backups and security.

  • Full customization. The user has a high level of control over their system’s features and capabilities and can tailor it to their needs.

  • Data ownership. The user has complete control and ownership of the customer data stored offline in their CRM.

  • Complex implementation. Given the need for internal infrastructure (i.e., a dedicated CRM server), setting up on-premise CRM solutions takes time. It can take days, weeks or months, depending on the system and the number of users.

  • High upfront costs. The user must cover the cost of software licenses, hardware and training before starting.

In contrast, cloud-based CRMs are hosted on external servers by third-party vendors and users access them via the internet. These on-demand CRMs offer convenience, scalability and reduced IT costs as vendors take care of maintenance and updates.

When is an on-premise CRM suitable?

While cloud CRM solutions have become more popular in the past decade, on-premise systems offer unique benefits in some situations.

Here are a few scenarios where an on-premise CRM can be a great fit.

Military and other government agencies

Complete ownership of the system and CRM data make on-premise solutions ideal for organizations that handle classified information. For instance, military and government agencies.

Many on-demand CRMs offer robust security features. However, organizations with strict data security and compliance requirements may not be allowed to involve a third party (i.e., the software-as-a-service (or SaaS) company.

Weak internet infrastructure

On-premise CRMs provide a stable user experience in areas where internet connectivity is unavailable or unreliable.

That stability is important for companies operating in challenging environments (e.g., offshore oil and gas exploration) and developing countries. It minimizes disruption and lets people focus on core business activities.

Proprietary software and legacy systems

A fully customizable, on-premise solution ensures seamless integration with existing infrastructure and applications.

It allows developers and IT staff to adapt the system’s backend to their needs.

Specialized budgeting requirements

On-premise CRM requires a substantial initial investment. This might appeal to companies seeking a single payment rather than ongoing subscription fees. For those with the resources, the in-house approach may make long-term financial planning easier.

The challenges of on-premise CRMs

Even if your business fits one of the descriptions above, implementing and using on-premise CRM software can be challenging.

Here are four common drawbacks of on-premise CRMs to consider before you invest:

  • High costs. An on-premise CRM system requires a big initial investment. You’ll need to pay for software licenses, hardware and infrastructure. Even if your business has the budget now, consider how these purchases will impact your cash flow.

  • Greater demand for IT resources and expertise. You’ll need IT expertise to install, configure and maintain an on-premise CRM system. If your IT team doesn’t have the capacity to handle these responsibilities, you risk causing bottlenecks in other business areas. You could also outsource this responsibility, but it’ll increase your costs.

  • Limited accessibility. On-premise CRM tools are typically accessible from a single location using devices on the same IT network. This limits its availability for remote and mobile teams, reducing productivity and responsiveness. Poor response times could also potentially hurt the customer experience.

  • Increased risk of data loss. Storing all customer data on an on-site server makes your business more vulnerable to hardware failures, power outages and natural disasters. You’ll need robust backup and disaster recovery processes to avoid disruption.

Many businesses overcome these challenges with preparation, refined data management processes and some external support. If you don’t have the time or resources for such measures, a cloud-based CRM solution will likely be more practical.

Why a cloud-based CRM is an excellent fit for growing businesses

Unless an on-premise CRM is the only suitable choice for your organization, a cloud-based CRM platform is the way forward.

On-demand solutions provide companies with flexibility, accessibility and seamless integration with other tools. Let’s focus on how both large and small businesses can benefit from cloud-based tools.

Scalability and flexibility

The best cloud-based CRM tools offer multiple pricing tiers, flexible agreements and plenty of customization. They allow you to scale your usage according to your needs and budget.

For example, Pipedrive’s Essential plan allows 3,000 open deals per company and 15 insights reports per user.

As your business and sales team grow and you begin to generate more leads, you can upgrade to the Advanced tier. This plan allows 10,000 open deals for the company and 30 Insights reports per user. It also includes sales and marketing automations to increase workflow efficiency.

You’ll continue using the same hardware after any upgrade, meaning no extra costs outside of your subscription fee. You can switch back to your original plan or add more functionality as your business evolves.

On-the-go productivity

Cloud CRMs offer easy access from anywhere with an internet connection, which is ideal for any business with remote teams. In contrast, on-premise CRM users need to be close to the server using a device on the same network.

Flexibility is increasingly important. According to a McKinsey survey, 58% of US workers report that they can work remotely at least once a week, while more than a third say they can do it daily.

The freedom to work from anywhere boosts productivity for salespeople and marketers. For example, they can access and edit data between meetings or save on commuting time by working from home.

For even more efficiency, ensure your chosen product has mobile CRM support for Android and iOS devices. Mobile apps enable users to get quick updates and communicate easily with leads to keep deals moving through the sales pipeline.

Access to upgrades

Cloud-based CRMs continuously evolve to meet the changing needs of business users. Providers typically release updates to improve:

  • Functionality. New features, capabilities and integrations help to increase your return on investment (ROI).

  • User experience (UX). Refining user interfaces and fixing bugs makes the software easy, enjoyable and efficient.

  • Security. Regular security patches protect your customer data against the latest cyber threats.

Most updates are automatic, ensuring large, medium and small businesses can always access the latest features and improvements without manual installations or new hardware.

For example, Pipedrive users can now internally share dashboards and reports with other team members. This wasn’t possible when Pipedrive first launched, but the update doesn’t cost existing users extra.

To add features to an on-premise CRM, you’d need a specialist team to tweak the software and may have to upgrade your infrastructure. The system may also be unavailable during maintenance, hindering productivity.

Fast, accessible support

The user-friendly support options that come with most cloud CRM tools help growing businesses stay productive and achieve greater ROIs.

Users can tap into community forums, frequently asked questions (FAQs) and other online resources to find answers or learn best practices. Pipedrive’s Knowledge Base, for example, has guides and tutorials covering all aspects of the software.

Pipedrive Knowledge Base CRM

There are also dedicated customer support channels and services to solve more specific issues and concerns. For example:

  • Live chat, telephone and email

  • Multilingual support

  • Guaranteed response times

It’s almost impossible to access such comprehensive support for on-premise CRMs. As each has its own configuration, infrastructure and hardware, issues require attention from IT staff or contractors. Over time, this increases the total cost of ownership.

Simple connectivity with other tools

The best cloud CRMs can connect to a whole marketplace of third-party programs that enhance productivity and help you close more deals.

Integrations with other tools allow:

  • Data consistency. Share customer information across multiple tools and ensure you get a clear, consistent and accurate view of every deal, activity and contact.

  • Faster business processes. Automate repetitive tasks and achieve more in areas like marketing, email communication, task management, contact management and customer support.

  • Added customization. Create the type of software your business needs by adding new capabilities with minimal effort and IT expertise.

Marketing consultancy Flowbird’s experience is an excellent example of how effective cloud CRM integrations can be. By connecting Pipedrive to ActiveDEMAND, the CRM consultancy streamlined its lead-nurturing processes and increased business by 23%

Flowbird founder Jason Rainbird said:

The system we’ve created takes CRM to the next level. You don’t need to pay someone a massive amount of money to have a really slick solution. If you’re an SME with about 10–15 employees, losing even one lead can be a serious problem. We’ll make sure that no one falls through the cracks. By combining Pipedrive and ActiveDEMAND, we believe we’ve created the perfect system.

Read the full Flowbird case study for more CRM integration inspiration.

On-premise vs. cloud CRM: A side-by-side comparison

On-premise CRMCloud CRM

No monthly subscription fees. Significant up-front costs, with ongoing specialist maintenance and support required.

Ongoing subscription fees, with no initial expenses or support costs. Choose between pricing tiers to fit your needs and budget.


IT specialists must build integrated programs from scratch or modify existing programs to ensure CRM compatibility.

Access to a growing library of third-party apps for task management, communication, email marketing, lead generation and more.


Near-complete control over features, infrastructure and user interfaces. With the right support, expertise and budget, you can build a tailored CRM solution from the ground up.

Customization options include custom fields, dashboards and reports. API access allows developers to create bespoke apps when needed.


Requires specialist support from staff or contractors who know the unique system and infrastructure well.

Support is readily available from CRM providers, online knowledge libraries and other users.


Users must be connected to the same network as the on-premise CRM server, limiting them to the same premises.

Desktop, mobile and browser access allows users to view, edit and enter customer data from anywhere.


IT teams must modify the existing system to add features or implement new software.

Providers deliver feature, security and user experience updates at no extra charge and without disrupting service.

Final thoughts

If it suits your company’s needs, an on-premise CRM can be a fantastic investment. With control over every detail of your system, you can build a unique solution that slots perfectly into your complex infrastructure and processes.

For most businesses, however, a cloud-based system is the easiest and most affordable way to streamline and organize sales workflows. For a much lower cost, you’ll get flexibility, support and accessibility that in-house CRMs can’t match.

For the best of both worlds, look for a cloud CRM with plenty of customization options. Custom data fields, personalized dashboards and third-party integrations will help you tailor your system quickly and effectively.

Driving business growth