In short - most businesses have the choice of whether to host a business application themselves or to let someone else take the hassle of managing the server(s). If the choice is to let someone else host it, there is often a further choice - buy the license or pay on demand (eg per use or transaction etc).
As you would expect, the vendors will have a convincing argument in favour of their chosen route. Salesforce.com say hosted on demand is the route, SAP will say never, host it yourself. Some vendors will offer you the same product by two methods - Sage CRM (license and self hosted) vs SageCRM.com (ondemand).
Ondemand is tempting
- no up front costs
- no server costs
- usually easy exit route
- regular monthly payments
- BUT can be expensive over a longer term
The only way for a business to decide which approach to use, is by asking some common sense questions -
- How much will we rely on the system?
- Is it a long term investment in systems?
- Will it be business critical?
- How much do we have to spend?
- Can the company afford the capex?
- What options are available for the type of application we need?
- What capacity do we have on our servers?
- Does the company have the skills required to manage the application?
- Do we have the bandwidth to access the application?
- What level of support do we need?
There are a ton of other relevant questions but answering the above should give a good idea of the direction to take. And have this little Q&A session before you get too tempted by the salesman.
Hint: Talk to the consultants that implement the applications - they are more likely give you the true story and advise on the right approach for you. Beware though - if the consultant doesn't have a broad and unbiased knowledge they might send you to a favourite. Ever asked an Apple fan what they think of anything Microsoft!
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