Recently I’ve been developing a custom CRM solution for a client using SugarCRM and it’s got me thinking about the whole ‘cloud’ term and how companies have confused consumers as to exactly what it means.

Just as full disclosure – I’m developing a CRM solution for a client on his own server using SugarCRM. If those buzz words are giving you a headache I can understand.

You can read what “cloud” is here: http://computer.howstuffworks.com/cloud-computing/cloud-computing.htm

And you can read about SugarCRM here: http://www.sugarcrm.com/

What I wanted to do though is to educate the consumer (that’s you) about what all this cloud business really is.

The whole ‘cloud’ phenomenon really blew up a couple of years ago where everything started to be delivered in the ‘cloud’ or in other words online. For example you could have your employees submit timesheets “in the cloud”, you could manage your customer database and marketing “in the cloud”, you could pretty much have all your business data “in the cloud”.

The whole cloud thing was pretty good, and it helped businesses save money and have a less stressful experience, and of course the companies who were able to establish themselves in their niche (DropBox for “cloud storage” for example) made a lot of money.

Everyone was happy.

The actual “cloud revolution” was started by Salesforce, and you have to remember that these guys marketed the hell out of it, it wasn’t like they made this killer app and everyone jumped on it, they applied a killer marketing strategy on top of what was, essentially a fairly straightforward service – a customer database that could be accessed online. Of course, there’s more to it then that but you get the idea.

So I just wanted to point out a couple of things when it comes to CRM’s and the whole cloud phenomenon (I’m using CRM’s because that’s what everyone automatically thinks about when you mention the cloud – since Salesfroce has such a strong marketing position in everyone’s minds – I guess because they were on the scene first and called their service ‘cloud software’).

So below I will write some simple facts that will probably not show up in Salesforce sales materials but you should know, here they are:

Fact 1: You Pay Until You Die

If you are paying $150 – $500 a month for a CRM system you pay that until you die… or your business dies. In other words if your business exists for the next 5 years, at 5 years * 12 months * 500 =

(5 * 12) * 500 = $30,000 for the life time value of the product

Keep this in mind when you’re thinking about “how awesome” it is that you’re only paying $500 a month instead of paying a developer $5,000 to make some custom software.

Fact 2: You Can’t Touch Nothin’

If you are buying into a CRM plan on Salesforce, the application lives on Salesforce’s servers. This means it’s a ‘hands off’ policy when it comes to modifying the software.

Now sure Salesforce allows customizations to an extent, but at the end of the day they only allow customizations within the paramaters of what they leave open. This might be fine for you, but if you are looking at a system that integrates with your site content you may have a problem.

Fact 3: If The Business Falls, Or the Price Changes – You’re Out of Luck

I’m not saying Salesforce will collapse in the next 10 years, highly unlikely. But what can happen is prices can change, and should anything happen all your business data and processes are tied up with the company. Not a big deal but I thought I’d point it out.

Fact 4: That $30,000 is out of the box

This is another thing people lose sight of. Remember how I made that rough calculation that if your CRM software costs you $500 a month then over 5 years you’re looking at $30,000?

That’s a big number, and with Salesforce’s packages, even having as little as 3-4 users can put you at that rate.

However what I didn’t mention is that the $30,000 that you end up paying is for an out of the box solution. Understand this – Salesforce does nothing for you.

In other words they grant you access to an out of the box application and say “Good luck”. Now if you want help customising it, creating custom code then they’d be happy to help you for an extra fee.

Think about that next time you think you’re being smart going on a monthly solution.

Fact 5: You Pay Through the A$@ for every new user

This is the other thing to consider. Let’s say you start with 4 users on a CRM system at $400 a month. That might be okay for you, but let’s say you expand to 8 people, and maybe have 4 people part time. Now you have to fork out an extra $800 a month. As your business expands so does the length at which Salesforce reaches into your pockets.

Now granted if you’re expanding you may have money to the point that it really doesn’t matter, but let’s be real – $800 a month is money that you could be spending on other parts of your business.

—-
Now, alternatively you could get a self hosted solution with SugarCRM Community Edition (or another open source CRM system like vTiger and have a developer customize it for you).

Now let’s look at those facts:

Fact 1: You Pay Until You Die

New Fact: you only pay for the initial installation and customisation of the CRM system. Now, you get your CRM installed on your server and after it’s installed you don’t pay a monthly fee (except for your web hosting, which you’re paying anyway).

If the initial development cost is acceptable you’ll be in a good position.

Fact 2: You Can’t Touch Nothing

New Fact: Touch away baby. The CRM software lies on your server now, which means you have access to everything.

Heck if you wanted you could have a big smiling image of your face come up whenever anyone logs into the CRM to deliver some big brother type speech (exagurrated example but you get the idea).

All the code for the CRM software lies on your server.

Fact 3: If The Business Falls, Or the Price Changes – You’re Out of Luck

New Fact: since you own all the code the happenings of the outside world don’t affect you. Let’s say you install SugarCRM Community Edition on your server and the SugarCRM company closes down.

Not to worry, your code and your company is safe.

Again this is unlikely but it’s worth mentioning.

Fact 4: That $30,000 is out of the box

New Fact: If you were to spend $30,000 on initial development you would have a true monster tailored to your business and processes. Really $30,000 is over kill and you could have a custom developed application for much less ($2k-$5k range) but the point is, at least when you pay that money you’re getting a developer who will work on customizing the environment to your needs, rather than just a monthly plan to rent an as-is software.

Fact 5: You Pay Through the A$@ for every new user

New Fact: with a self hosted CRM solution, you could have 1,000 users for all you care and it wouldn’t make a difference, you can have as many users as your database can hold.

—–
Finally I want to end with one note: it’s not how good the CRM system is that you use, it’s how well you can utilise it. I’ve worked with a number of clients through a number of CRM solutions, and unlike those salespeople at Salesforce I actually worked to not only plan the sales software, but also implement it for a client.

However besides that, just think long and hard before you jump on the cloud train. Because once they got ya, they got you. I believe in owning everything if possible, and if the price is right why not?

We’re still paying our monthly fee because we thought we were smart lol