What is On-Premises CRM? - Types, Drawbacks, Software Examples, On-Premises vs. Cloud

On-premises CRM means running customer relationship management (CRM) software on the company's own servers. It is the traditional model of business software, where the customer buys the hardware and runs the software in-house.¹ Many vendors now lead with the cloud, but Microsoft and Oracle still support on-premises editions.^{2 3} The newest AI features, such as Copilot in Microsoft Dynamics 365 Sales, run on the vendors' cloud services.⁴

Open-source CRMs such as Odoo and SuiteCRM can also run on a company's own server.^{5 6} In each case, the company owns the whole stack.⁷ The servers, the database, the security patches, and the upgrades are all its job. As such, on-premises CRM gives a company the most control, and the most work.

What is on-premises CRM?

On-premises CRM is a CRM that the company hosts and maintains, not the vendor. It is also known as on-premise CRM, on-prem CRM, or self-hosted CRM.

Strictly, the term means the company's own building. In practice, it covers any CRM the company runs itself, wherever the server sits.

Below are the parts that the company runs:

• The CRM application and its custom code
• The database with the customer records
• The servers and the operating system
• The network and the remote access

How does on-premises CRM work?

An on-premises CRM runs inside the company's own network.

Below is how it works day to day:

• Licensing: The company pays for licenses or a subscription, while open-source editions carry no license fee. Each Microsoft Dynamics 365 Customer Engagement (on-premises) server, for example, needs its own license.⁸
• Installation: The IT team installs the CRM and its database on the company's servers.
• Access: Users connect over the office network, or through a virtual private network from outside.
• Updates: The vendor publishes each update, and the IT team decides when to install it.⁹

Types of On-Premises CRM: In-House, Colocated, and Self-Hosted on Cloud Servers

On-premises CRM comes in three setups, based on where the servers sit.

1. In-house servers

The CRM runs in the company's own server room or data center.

• The IT team runs everything, from the power to the CRM
• Ideal for strict data rules and an existing data center

2. Colocated servers

The company's servers sit in a provider's colocation facility.

• The provider supplies the space, the power, and the physical security
• Ideal for owning the hardware without owning a data center

3. Self-hosted on cloud servers

The CRM runs on virtual servers rented as infrastructure as a service (IaaS).¹⁰

• The provider runs the hardware, and the company runs everything above it
• Ideal for full control without buying hardware

Drawbacks of On-Premises CRM

Most drawbacks come from the work the company takes on.

Below are the main drawbacks:

• Upfront Cost: Servers, licenses, and setup are paid before the first user signs in.
• Staff and Skills: Someone has to patch the servers, run the database, and test the backups.
• Upgrade Projects: Skipped updates pile up into a harder upgrade later.
• Support End Dates: When a version's support ends, its security updates usually stop.¹¹
• Features Arrive Later: Vendors often ship new features to their cloud editions first. Odoo, for example, releases cloud-only versions every two to three months.¹¹

On-Premises CRM vs. Cloud CRM

On-premises CRM keeps the data, the custom code, and the upgrade calendar in the company's hands. In a cloud CRM, the vendor runs the servers and the software, and the company keeps the data and the settings.⁷

Below is who runs what in each setup:

To learn more about cloud CRM, please read our article: What is Cloud CRM? - Benefits, Examples, How to Choose.

Examples of On-Premises CRM Software

Below are five on-premises CRMs, with the support dates their vendors publish:

Please note that the vendors can move these dates. Microsoft, for example, has extended version 9 support twice.^{2 16}

Is on-premises CRM right for your business?

For a company with strict data rules and its own IT team, often yes.

Below is the quick fit check:

• Who it suits: Companies whose data must stay in-house, or whose CRM is tied to other in-house systems.
• Who should look elsewhere: Teams without IT staff, and teams that want new vendor features first.
• For everyone already on an on-premises CRM: Check the support end date, then audit the CRM before any upgrade or move.

At Vegacompass, we sell no CRM licenses, so the advice can be to stay put.

FAQs

Q. Is open-source CRM the same as on-premises CRM?

No. Open source describes the license, and on-premises describes where the CRM runs. Odoo, for example, also runs on Odoo Online, the vendor's own cloud.¹⁷

Q. Is on-premises CRM more secure than cloud CRM?

Not by itself. The company stays responsible for its data, devices, accounts, and access in every setup.⁷ On-premises adds the servers too.

Q. Does on-premises CRM work offline?

Partly. If the servers are in the office, staff there can keep working through an internet outage. Remote users still need a connection.

Authorship

Rakesh Kurhade (Written by)

Rakesh is a technical content writer. For the past 8+ years, he has been writing practical, plain-language guides on CRM, revenue operations, and AI in CRM for sales, marketing, and RevOps leaders at mid-size and enterprise companies.

Jason Linkswiler (Reviewed by)

Revenue Operations and CRM expert with 20+ years of experience. Jason focuses on Salesforce-driven GTM and revenue systems for mid-market and PE-backed firms.

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