The key factors that decide the appropriateness of a CRM deployment, whether on-site or hosted include the amount of integration required, customer processes, and the extent of operations required for a fruitful customer interaction.

An on-demand solution can be useful in scenarios where customer relationships are managed largely by the sales department which functions more or less as an independent entity.

Companies in which customer relationship management is intertwined with the working of several departments including the company contact center are better served by opting for an on-site CRM solution that is more suited for the level of integration required with large organizations.

Since customer tastes and needs are dynamic, a company needs to evolve its business processes constantly to be able to fulfill customer expectations. To do this it needs a customer process solution that helps it to compete in terms of cost, products, and service level. This requires a high degree of application customization that is usually found in on-site CRM systems.

Integration of legacy systems that contain vital customer data and run important business processes with a new CRM application is another consideration. If data exchange between application silos does not happen in real-time and is carried out periodically, then an on-demand solution may do the trick. In contrast, organizations that needs to upgrade customer data constantly and access it in real-time from highly customized systems are better suited with on-site CRM.

Companies where customer-related decisions are affected by the workings of several departments need to provide customer data to all these departments such as sales, accounts, marketing, and call centers are candidates for an on-site solution.

When the growth of an organization is linked with achieving an edge over the competition by means of advanced processes and managing customer experiences and proprietary customer data, which is too sensitive for storing in a third-party database, an on-premise system is a better option.

Large companies need to constantly identify key customer trends and create strategies for cross- and up-selling and present a customized experience. To this end, they need a CRM solution that offers the depth of applications for achieving cross-organization linkage and swift customer analytics. These attributes are found in on-site solutions

Companies are researching CRM solutions, it is best to consider the short-term and long-term scenarios and opt for a solution that is cost-effective in the long-term and also provides the necessary scalability. Companies have started to invest $$$ in evaluating their options. Some have roadmap that starts with on-demand and leads into onsite-CRM, while some have onsite-CRM with pockets of on-demand solution based on specific need for their business units.