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The differences between on-demand CRM and on-premise are substantial. They are architecturally different, with on-demand CRM being constructed around what is called a multitenant architecture – meaning many clients can run off of a single instance of the applications/services that reside on a server at a remote site. On-demand applications are ordinarily accessed via the Web. Alternatively, the on-premise versions are each a separate version that resides on a server that sits behind the firewall of a company. The CRM application there is ordinarily accessed via the desktop or some remote connection to the desktop.
The on-demand business model is hosted, meaning that the CRM provider is not the company that is using the application, but another company that is assuming the overhead: the server maintenance, the data maintenance and the costs associated with that. The way that a company pays for on-demand CRM is usually through a per-user monthly subscription fee. Oftentimes there are costs associated with start up of the application or the customization required, but the maintenance costs are built into the subscription fee. Alternatively, the on-premise model includes a license fee that pays for the installation and implementation of the software and the hardware that it needs to run. There are usually service fees associated with the implementation. The license to use the software is also often priced per user or by server or by flat fees.
The features and functions are pretty much the same in each, for example, whether it's on-demand or on-premise, the sales functionality is still the same. The on-demand model has gained huge ground over the past few years and only the most complex implementations aren't likely to benefit from going on-demand rather than on-premise.
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