Microsoft offers customers three primary choices on how to deploy Microsoft Dynamics CRM: cloud, hosted, and on premise. Here are some of the key differences among these choices which may help you decide which is best for your solution.
Dynamics CRM Online
Cloud-hosted Dynamics CRM is the fastest path to deployment, and undoubtedly the least expensive for a small number of users. You can have CRM Online up and running in the time it takes to sign up and enter your credit card payment information, and you don't have to purchase any server hardware or server software.
For most customers, Microsoft CRM Online costs $65/user/month. Microsoft has non-profit pricing which is even lower for qualified organizations. This subscription fee covers both the hosting and the associated software licenses. This deployment model is rapid -- Microsoft manages the infrastructure and you don't need to install anything on your servers. It is flexible and quite scalable, so you can add (or subtract) users as your needs change. If you deploy with Dynamics CRM Online, you will automatically receive all software updates which will be installed by Microsoft.
One of the advantages of cloud deployment is that you can quickly scale up and scale down as needed. You can purchase additional storage for Dynamics CRM Online at $9.99 per gigabyte per month, so you should estimate the storage you will need to get an accurate cost estimate.
CRM Online has a strong track record of reliability and availability, and offers a service level agreement to back it up.
CRM Online does have some constraints in terms of what code you are allowed to run on the server and how you handle reporting, so hosted or on premise deployment may be more suitable for complex solutions.
The second option is hosted deployment. Many companies will host your solution for you on their server facilities. Hosting may be shared (with other organizations) or dedicated (you have the server to yourself). Microsoft offers Service Provider (SPLA) licensing for its products which allows the license to be bundled into your monthly hosting bill. If you choose dedicated hosting, you may use your own licenses purchased in the same way as for on premise deployment.
Hosted deployment can be tailored to your unique requirements in ways that are not available with Dynamics CRM Online. Hosting companies can provide dedicated or shared servers, and they allow you to load software for integration and other purposes that is not allowed by CRM Online.
Some government agencies require security settings and certifications that are not available for CRM Online but are offered by hosting companies.
With hosted deployment, you can control how updates are handled rather than have them automatically applied by Microsoft.
On Premise Deployment
The third and most common option is on premise deployment -- installing the software at your own facility on hardware that you provide. Microsoft offers software maintenance under a program called Software Assurance that includes updates to the products you purchase. Your organization must manage the servers and is responsible for backups and installing updates.
With on premise deployment you can achieve the highest performance possible for local users and are not dependent on the speed or reliability of your Internet connection. You can also change the hardware or configuration whenever you would like.
On premise deployment requires server hardware, so it is the slowest of the three deployment options to get up and running if you have to order new gear. You will also be responsible for maintaining and upgrading your servers.
Microsoft licensing is more flexible for on premise (or hosted) deployment than for cloud deployment. In addition to the full user CAL, Microsoft offers two special CALs with limited functionality. First is the Employee Self-Service CAL, with a limited API and limited read/write access using an interface other than the standard Dynamics CRM interface such as a form on a web page. The second is the Limited CAL, with full read access and limited write access using the Dynamics CRM interface. There are additive CALs which allow you to step up from a limited to a less limited CAL.
Like hosted deployment, on premise deployment allows you to control how updates are handled rather than have them automatically applied by Microsoft. You may want to test new versions of Dynamics CRM on your solution before the updates are applied and users are affected.
Hybrid deployment models are also possible in which on premise, cloud and hosted components exist together.