An increasing number of companies are turning to “on-demand” CRM applications, rather than the traditional “on-premise” solutions that were popular in years past. When asked why, CSOs typically cite the lower cost as the main factor behind the decision to go on-demand. The cost of a subscription license for an on-demand license is often a tiny fraction of the expense of buying a license for an on-premise system. However, one of the best kept secrets of CRM marketing is that on-demand achieves a much faster ROI, not just because it’s cheaper, but because the on-demand concept makes it possible to build CRM implementations more quickly and which, when built, are easier to use.

With an on-premise system, it’s always in the financial interest of the on-premise CRM vendor to sell the customer as much software as possible in a gigantic lump. The hope, of course, is that the software will be eventually used, but the vendor is more concerned with making a comprehensive sale rather than spacing out the integration of new features. This tendency creates two potential results. Either much of that software ends up sitting on a shelf (and thus adding costs with no corresponding benefit) or an effort is made to put a large amount of functionality into production quickly. While that sounds better than paying for shelf ware, the result is generally a CRM system with feature-bloat and which is so complicated that sales reps simply won’t use it.

By contrast, it’s in the financial interest of the on-demand CRM vendor to only sell as much capacity as the customer can actually use. Because of this, on-demand CRM implementations tend to be smaller in size and scope than the grand all-inclusive CRM installations of the unlamented past. On-demand CRM systems thus do a better job at reducing the amount of data entry and keeping such work focused on what’s actually going to benefit the sales team. This was not always the case in the past, where large-scale CRM solutions, in all their feature richness, were typically optimized for opportunity management and forecasting – tasks important to sales managers but largely irrelevant to the feet on the street.

Because on-demand CRM implementations tend to be smaller scale and better focused on the needs of the sales reps, they’re more likely to prove productive and thus more likely to achieve a quick ROI. This is important because CEOs and CFOs now hold the purse strings for technology spending and few are willing to dole out dollars like they did during the dot-com boom years. And even though on-demand systems cost less than their traditional on-premise counterparts, sales managers aren’t likely to get any money for CRM unless they can prove a strong business case and a reasonable ROI.

By the way, the big challenge with estimating the cost/benefit of CRM has always been the quantification of what are generally considered “intangible” benefits, such as customer retention. However, most of the benefits of CRM can be quantified, providing that the sales manager is willing to examine the key metrics of the sales process. Ideally, the sales manager can work with the IT vendor or independent analysts or staff to estimate how much timesavings can be derived from a proposed CRM solution.

The promise of CRM – to help salespeople close more sales and service customers better – has always been compelling. In the past, though, that promise has sometimes been more honored in the breach, because the on-premise business model constantly fought against an effective deployment of only the most useful features. However, now that on-demand CRM is creating real-world solutions that actually help salespeople, the long delayed promise of CRM is finally becoming a practical reality.