The ROI of SaaS vs. on-premise CRM

Barney Beal, News Director

When vendors such as and RightNow emerged on the enterprise application scene, offering CRM via the Software as a Service (

model made little sense for large enterprises.

After seeing successful deployments and losing business to the SaaS upstarts, however, both SAP came out with SaaS offerings of their own. Now, recent research from Cambridge, Mass.-based Forrester Research suggests that on-demand deployments do offer an economic advantage for smaller organizations, while on-premise is still a better choice for large enterprises.

"It's really changed my opinion on Software as a Service," Ray Wang, Forrester analyst, said. "[For companies with 50 to100 users] it's a slam dunk. Even for those with 250 to 500, they have to think [whether] they want to retain all the IT staff that aren't critical to the business."

Wang researched the ROI of SaaS and on-premise deployments using Forrester's Total Economic Impact (TEI) methodology. The method includes factors beyond just costs, such as benefits, risks and flexibility of the deployment. The research also took into account more than just CRM applications and included security, supply chain, and ERP applications.

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