Comparing the total cost of ownership (TCO) of hosted versus on-premise CRM solutions is becoming a "hot" topic as hosted solutions continue to gain market share, particularly in the small and mid-sized (SME) marketplace.
Although there have been a number of articles and white papers written which compare hosted versus on-premise CRM TCO, I believe that because everyone's situation will be somewhat different, the only way to derive anything that will be of value to you is to do your own analysis. So get out your spreadsheet software!
The first question you'll need to answer is: how long of a timeframe should my TCO analysis cover? Depending on how rapidly your organization is growing and or changing in order to meet marketplace demands, I suggest covering a period of between 3 and 6 years.
Next, you should estimate each of the following variables for each year:
- The number of CRM software users (a)
- Per user software license fees; (for on-premise CRM only)
- Per user annual subscription fees (for hosted CRM only)
- Total software costs (1x 2or3)
- Software maintenance & support fees (b)
- Estimated software upgrade fees (for on-premise CRM only, if applicable)
- Project implementation costs (for both internal and third-party resources)
- IT infrastructure (servers, PCs, networking, etc.)
- Hardware site preparation, installation and configuration
- System integration
- Software configuration and customization
- Data clean-up and conversion
- Training (technical, administrative and end-user)
- Project management
- Ongoing application administration and internal IT support personnel
(a) If the software is priced by module, (ex. sales, marketing, customer service, etc.) you'll need to estimate how many users you'll be adding each year by module.
Continue reading Part 2
This was first published in March 2004