One of the most critical decisions companies must make when selecting new business software is whether it will be cloud-based or installed on-premise. While from a functionality perspective, the two are very much the same, there are several other reasons to consider before choosing one deployment method over the other.
By Liviu Buligan, Executive Manager, SoftOne Romania
Considering and evaluating your options, on which model would be the best fit for your business is not always an easy process. The type of ERP deployment model you choose can have a significant impact across your business. The right answer then really depends on the technology state of your company and the complexity of your daily business operations.
The Basic Differences
A traditional, on-premise ERP system is one where the software is installed locally on your company’s hardware and servers. You deal with installing the hardware, running the system, and your IT staff manages all technical issues. That being said, on-premise ERP systems commonly require large upfront investment for purchasing the software and the related hardware, and ongoing yearly payments for keeping the software up-to-date.
Cloud ERP – also called Software as a Service, is provided as a service. This practically means that your software provider is responsible for hosting and maintaining all of the IT infrastructure for you, while ensuring that your systems is always running and always up-to-date, at no additional cost. More importantly, a Cloud based ERP is offered with a pay-as-you-go subscription model and requires a much lower initial investment since you only need to configure the software to your requirements.
Outside of making sure the system you select offers all the features, functionality, flexibility, and scalability you need for running your business, you should also measure up those key attributes that define your company’s current financial status, IT capabilities and infrastructure. On the most basic level you need to remember that every business is unique and the criticality of the tradeoffs between On-premise and Cloud ultimately depends on optimizing your overall business performance.
Cloud-based ERP is the way to go if:
- – You are a fast growing company and want to streamline your business processes and boost productivity without the need of large upfront IT investments. A Cloud solution enables you to focus on your core activities and increase your business agility.
- – You are a company that wants to lower its operating costs and get better control of its cash flow. A Cloud ERP solution enables you to spend money only for what you need (pay-as-you-go). So, as your resources grow along with your business, you will be able to project and manage your cash flow with extreme flexibility.
- – You want your workforce to break out of the confines of office walls and start improving its effectiveness. With a Cloud based ERP your employees can access company data from anywhere and with any device. There is no need for any further additions to your infrastructure.
- – You have a relatively small IT department and you want it to focus on your business priorities instead of running your system, handling overwhelming technical issues or dealing with upgrades and software updates. In a cloud ERP system, the vendor is responsible for handling all IT issues related to your business software.
- – You want to take the fast lane with easy deployment and get your business software up and running in weeks instead of months. A Cloud ERP system is way faster and easier to implement than a conventional system allowing your business to realize value from the project sooner, than traditional on-premises deployments.
- – Your company has multiple sites or many geographic locations and does not want to build or support remote access to existing network. Collaboration in a cloud environment gives your business the ability to communicate and share more easily outside of the traditional methods.
On-Premise ERP is the way to go if:
- – You are an established organization with the ability to make the required upfront investment to purchase and implement the ERP software.
- – Your company for some financial reason prefers capital expenditures over operating expenses. Simply put, if you prefer to invest up-front a large amount of capital instead of low monthly payments then buying your on-premise software is what you need.
- – Your company has a mature IT team who have a proven history of successful service delivery and support, then an on-premises deployment may allow you equal focus and therefore an equal ability to succeed.
- – You operate in an industry that has data storage regulations and in some cases, laws or corporate regulations restrict where data is stored. If you fall in this category then a Cloud solution is not even an option for you.
- – Your company has multiple sites across geographic locations and has a supporting network infrastructure.
There are many factors to consider when choosing a deployment method and every situation is indeed unique. What it’s equally important is the ability to easily change your deployment model if your business model or technical needs change.
At the bottom line, with a Cloud ERP solution you will save money and reduce your total cost of ownership. Your IT department won’t have to worry about problems such as maintenance and upgrades or how to properly integrating your ERP it into your business.
A medium to long-term business plan will surely help all companies make the best decision fitted for each of them.