On-demand CRM services can save customers money because they offer lower initial start-up costs and require fewer internal IT resources. Because of these money saving benefits, many small and mid-sized companies are choosing on-demand CRM instead of on-premise CRM software.

However, many people are not aware of huge cost-saving alternatives available to on-demand CRM customers. Innovative CRM vendors are now offering customers on-demand solutions that offer even more flexibility and money saving options.

Save money with floating licenses:
By purchasing a combination of floating and dedicated licenses for an on-demand CRM application, most companies can save 40% or more. As part of your research, ask perspective vendors about the different licensing options they offer. The most common option is named or dedicated user licenses, which requires each user of the system to have a separate license, no matter how often he or she uses the software.

This option obviously increases the total cost, because the company must purchase a license for every employee that will use the application. In many situations, dedicated licenses make sense because the user will need constant access to the application.

But if every user in a company will not be using the application every day, or if a call center runs in different time zones, concurrent or floating licenses are probably a better choice because they are more economical. Floating licenses allow customers to purchase a certain number of licenses that can be used by different employees at different times. This scenario will allow most people in an organization to use the CRM system°© without any additional cost.

For example, a company with round the clock operations in a support center can add as many users as necessary to different shifts without purchasing additional licenses. Concurrent user licensing is also beneficial for international operations that have facilities in different countries (and time zones). In addition, floating licenses work well for organizations that have a significant numbers of occasional system users.

Many on-demand CRM vendors offer only named or dedicated user licenses. A company may have purchased dedicated licenses, but allow numerous users to share a single dedicated license. This scenario will save money to the company, but it will not allow it to track, monitor, and schedule individual activities for individual employees.

Floating licenses allow a company to assign numerous users to each license and still receive tracking benefits although numerous people are using a single license. For example, you can have five users and one license, yet each user can log in under their own name°© as long as they are using the application at different times. This feature improves productivity as it allows employees to schedule activities and allows managers to track progress for everyone using the system.

When selecting an on-demand CRM solution, you should explore a combination of floating and dedicated licenses. You will probably want a certain number of both types of licenses, depending on the activities of the proposed user base.

If the company you are considering for your on-demand solution does not offer floating licenses, they may entice you by promising to include a few extra dedicated licenses in the deal. This solution does provide a discount, but it does not give you the benefits of floating licenses°© which allow unlimited users.

For companies who have numerous employees that will not access the software day in and day out on a consistent basis, or for companies that operate in different time zones, insist on floating licenses for your on-demand CRM solution. It will save you money and increase productivity.

Save money with ‘Host-to-Buy’ CRM service

Companies typically acquire a CRM system in one of two ways:

1) On-premise© software that is purchased, installed, and administered by the company,
2) On-Demand, which is rented at a monthly cost.

On-premise systems have the greatest initial cost and highest risk. All major expenses occur at the beginning of the project, including software, hardware, implementation, and training. Integration of on-premise systems with other enterprise systems is often easier, and in the long term, they usually offer the greatest power and the lowest cost to operate.

On-Demand CRM provides lower risk, since you do not need to make a hardware and software investment. However, most on-demand vendors do require a one-year contractual commitment. Hosted CRM can have the lowest initial cost, lowest risk, but the greatest long-term operating cost.

Deciding between these two options can be difficult. Most small to mid-sized companies find on-demand extremely appealing, but would love the option of buying the software and converting it to on-premise, if all goes well. And wouldn’t it be nice if all the money you paid to “rent” the software during the first year was applied to the purchase price?

Now progressive vendors are offering a utopian solution called host-to-buy (or rent-to-buy), which combines the best of both the on-premise and on-demand worlds. Host-to-buy allows the customer to start their CRM solution as a hosted system, and then convert it to an on-premise system at any point in the relationship. All money spent on hosting is automatically applied towards the purchase price.

With host-to-buy, costs and risks are minimized in the short-term because there is no enormous investment up front. In the long-term, operating costs are minimized. For example, a twenty-five user host-to-buy system saves 14.9% over an on-demand and 18.1% over on-premise at the end of the 4th year assuming $60.00 per user hosting fee per month. From the 5th year onward, the savings is a staggering 157.6% over a hosted solution!

Before you purchase a hosted CRM system, carefully research all available options. In this competitive CRM environment, innovative vendors are catering to the customer by offering on-demand options that will save you money and provide you with greater flexibility.

Manu Das is founder and president of Soffront Software, Inc., a pioneer of CRM since 1992, offering end-to-end, fully integrated CRM solutions and Help Desk software. With more than 500 CRM customers worldwide, Soffront’s customers include Fortune 500 companies, mid-sized businesses, federal, state, and local governments.