Among CRM vendors, SalesForce.com pursues the pure software-as-a-service strategy and Microsoft the hybrid strategy. Microsoft customers choose between licensing Dynamics CRM for on-premise installation, hosting with Microsoft, or hosting with a third-party hosting provider. SalesForce.com lets customers host its software with SalesForce.com only. Which approach is best for customers?
By avoiding the complexities of releasing its software for installation on customer networks, Salesforce.com is more agile, enabling it to introduce new features every few months.
The Salesforce.com feature advantage is most noteworthy in the capabilities it provides to non-programmers to customize the solution. With CRM packages, customizations fall into two basic categories: those that require programming and those that do not. In SalesForce.com, look and feel, calculated fields, and validation logic are all configurable by non-programmers. For many organizations, these features will reduce the cost and time of implementation.
By contrast, Microsoft releases new versions of its on-premise package at intervals of at least two years. This slower release cycle meets the needs of IT departments for stability. Moreover, the Dynamics CRM team needs to deal with the complexities of running code in diverse environments and of integrating that code with other systems, most notably Microsoft Office.
Microsoft may decide to add features to its hosted version of Dynamics CRM prior to their inclusion in the on-premise version but the further it allows this feature gap to grow the more difficult it gets for customers to switch from the hosted to on-premise versions of its package.
While Salesforce.com has clear advantages, so too does the Microsoft hybrid approach. Flexibility is always important. A company may decide now that it is acceptable to store sensitive data with a vendor but later change that policy for any number of reasons. Or a company may decide that the on-premise pricing model is more advantageous. In these scenarios, the company that had chosen Salesforce.com would need to port its customizations and migrate its data to a different CRM platform, the cost of which might not be trivial.
The on-premise version of Dynamics CRM also offers a richer application programming interface (API) than is available through either Salesforce.com or the hosted version of Dynamics CRM. This richer API includes access to data through database views, the ability to build custom workflow activities using the .Net workflow foundation, and access to the entire .Net framework when building business logic. Moreover, the ability to create solutions for Dynamics CRM using Visual Studio increases developer productivity. This richer ability for programmers to customize the platform to meet unique business requirements becomes more critical as CRM gains in importance within an organization.
The pure cloud and hybrid approaches both entail advantages and disadvantages. Customers must carefully consider the pros and cons of each in the context of their particular business needs.
Just read this interesting post: http://markokenya.wordpress.com/2010/03/15/true-saas-or-half-baked-saas/. Takes a very strong SaaS-only position and makes a good case.