On-Cloud or On-Premises ERP – A Decision Not To Be Taken Lightly
New age ERPs are much more scalable than their predecessors and assist enterprises in a much wider spectrum of business operations. With the kind of impetus they provide to businesses, the value of ERP to any business is now well beyond any discussion, but there are many decisions which influence the success of any ERP implementation. One of the many questions that ERP buyers face is whether they should choose the On-Premises or opt for On-Cloud models of ERP deployment.
In the On-Premises ERP model, the software is deployed on a company’s own servers and is administered by its IT staff. In the on cloud model, the software is deployed on Cloud (somewhere on the internet) by the ERP vendor and is accessed by customers via a web browser. All maintenance and uptime are provided by the ERP vendor. Multiple aspects of these models need to be understood before taking this crucial decision.
On-Cloud ERP vendors argue that all IT infrastructure management must be left to experts, and businesses should focus on what they do best, which is their own operations, and not technology. This aspect is indeed true but must be weighed some other points as well.
One of the highlights of a Cloud ERP software is that it’s agiler than the traditional systems (read on-premises) as the updates occur monthly or even weekly at times. This helps the ERP software remains in tune with the trends and the changing regulations. But looking at the other side of the coin, frequent updates may face some resistance from organizations that like a stable working ERP and not one which is changing constantly, even if it is for the better.
A cloud-based ERP generally means that a single copy of the software is being used by diverse organizations. Modern ERPs are highly configurable, so a majority of user needs are covered through the available options within the ERP. However, today’s businesses demand highly tuned, and in many cases specifically customized solutions which enable them to leverage their competitive edge and not merely have generic solutions. Naturally, client specific (or highly tailored) solutions are tough to provide as a shared, common ERP.
The number of locations from which the ERP will be accessed also plays a significant role in this decision. If the majority of users are at a single location, an on-premises model can be considered. If the organization has a large number of users spread across the country or multiple time zones, then a cloud-based ERP should be the go-to option. Of course, if one can provide infrastructure such as stable power, high-speed internet access as well as network security for the server located on premises, then some advantages of the cloud may become available even in this environment.
On the Security front though, the cloud model has the reputation of being vulnerable to breaches and hacks, which is not the case with the traditional model, at least in theory. This threat has been reduced through encryption and use of refined security protocols. Even in cases of On-premises model, the moment the ERP is connected to the internet for various business needs, it becomes equally vulnerable to being targeted by hackers or malware. In fact, the ability of individual businesses to keep all such attacks at bay is considerably lesser than that of the ERP provider, or cloud service providers such as Amazon or Microsoft, who have huge resources and cutting-edge technology.
When it comes to the upfront investment, on cloud ERP seems to be an obvious choice as there is no infrastructure to be taken care of or hardware to be upgraded. Even so, thinking that cloud is synonymous with savings is a mistake. One should ideally build a spreadsheet which gives a five or seven-year cost of ownership before arriving at hasty conclusions. Aspects such as growing number of users and data access costs must be considered while developing costing for on-cloud ERPs. For on-premises costing, costs of servers, systems software such as operating systems, databases and their upgrades, etc. must be factored in carefully.
So, it’s not a walk in the park to zero in on an ERP model, as some water will spill out of the bucket in going for each model. Companies need to go that extra mile in understanding their business needs so that they can use one of the models to their advantage.