Security concerns often can be a sticking point for CRM customers. "Will my information be secure in a hosted environment? Will I have access to it? Who will own it? Will competitors be able to view my customers? These are important questions," says Wayne Latterell, president and founder of CRM consultancy Portico Solutions. "Imagine—would you put your company’s financial data on the same server as that of your competitors?" Some customers will be satisfied with the hosted vendor’s security measures, while others may not want to risk it.

"We wanted more control," Quinn says. "We didn’t want to put our sales pipeline out there in a hosted environment with someone else controlling the servers." He had heard horror stories about ASPs in the dotcom era, such as some closing their doors without giving notice to clients, leaving them with no system and no way to re-create one, and others selling the customer data they hosted. While he knows that most hosted CRM providers today are much more reliable, Quinn says, "putting our proprietary information outside our firewall, spam filter, intrusion detection and virus-scanning software would be putting a great deal of faith in the hosting company. We may not have the same global resources as larger hosting companies, but at least internally we can hold someone accountable."

Quinn looked at several CRM systems including Siebel, Saleslogix and Goldmine, but ultimately chose Microsoft CRM so that he could more easily integrate it with the Great Plains ERP package Qosina had put in place the year before.

Dialing Into the Back Office

The level of integration required between a front-office CRM system and back-office systems is another factor to consider when choosing between hosted and on-premise CRM. On-demand CRM vendors are offering ever-more robust integration tools. But, says AMR’s Bois, "integration is always going to be an issue with software-as-a-service because you don’t own the application or have access to the source code." And more sophisticated real-time integration with back-office transactional systems isn’t possible with on-demand CRM software—at least today. "There’s movement in that direction, but they can only import flat files asynchronously in batches," says Bois. "Companies that need to do that kind of [real-time] integration are more likely to stick with licensed software."

"It’s not that on-demand software can’t integrate," says Greenberg of The 56 Group. "It’s just that the integration tools in traditional on-premise software are better. The more complex the integration requirements, the better off you’ll be with onsite software."