Cloud vs On-Premise: Which ERP configuration is best for your business?

ATB-ERP-Cloud-vs-On-Premis-IMAGE-300x200 Cloud vs On-Premise: Which ERP configuration is best for your business?Cloud vs On-Premise: More choices equal more questions

The rise of cloud platforms has given companies of all sizes more options in terms of how they purchase software and what solutions are available. With these options come questions; about which configuration is right for your organization based on the size of your company, your priorities, and needs. From security to implementation, there are several specs to consider.

Cloud vs On-premise: Security

With cybercrime costs expected to reach $6 trillion annually by 2021[1], it’s no wonder that security is a top factor when it comes to choosing your company’s architecture. The difference between cloud and on-premise security lies mainly in who is ultimately responsible. In a cloud ERP system, security is primarily your vendor’s responsibility. An on-premise ERP solution puts security squarely in your own hands. While it’s possible to “remote in” to an on-premise ERP, either through a VPN or a software vendor’s app, there are some potential risks. Employing the right security tools—firewalls, secured VPNs, and multi-factor authentication (MFA)— in an on-premise infrastructure is critical. If you have already invested in a secure on-premise network, and have an IT team, an on-premise ERP may be a viable option for your organization.

If you’re concerned about security threats, enlist the help of a software-agnostic ERP consultant to help you upgrade securely.

Cloud vs On-premise: Mobility

Arguably one of the strongest features of any cloud-based solution is its mobility. According to Gallup’s 2017 State of the American Workplace report, 43% of employed individuals work remotely at least some of the time. And surprisingly, those spending 60 – 80% of their time away from the office had the highest rates of engagement. Just five years ago, the most engaged employees were those who spent the least amount of time off-site[2]. The reason for the flip is likely due to the flexibility of cloud platforms that allow easy access to data regardless of location.

That doesn’t mean on-premise ERP systems can’t be accessed remotely. But it does often require third-party communication between a mobile device and the on-premise solution, adding greater potential for security risks and communication failures. Either way, proper security precautions are a must, especially if employees access company files on their personal devices. A software-agnostic consultant can help determine your needs when it comes to mobility and which solution will not only be the most convenient, but the most cost-effective, as well.

Cloud vs On-premise: Cost

The greatest difference in cost between a cloud-based and on-premise ERP system is in how it’s billed. On-premise software is usually considered a capital expenditure, with most of the costs being paid up front. There will be the costs of the software and the licensing, as well as any additional hardware and IT support needed during implementation. While many on-premise software companies offer licenses as a concurrent user – meaning you purchase a certain number of licenses and they are handed out to anyone who has permission to log in until there aren’t any licenses left – some software companies are switching to a named-license solution. This offering makes you purchase licenses for each specific user.

A cloud-based system, on the other hand, is an operating expenditure, meaning that you’ll pay monthly for the life of the system. Although there are no large up-front costs in a cloud-based ERP solution, as the cloud platform vendor will own the hardware and the IT, you’ll pay a monthly fee to use it. This solution is ideal for companies that don’t have a great deal of cash to spend, and need to remain agile.

Remember that if you stop paying annual maintenance and license fees associated with your traditional ERP system, you won’t get any new updates or features, however the software and database that you were using will continue to function (for a period of time). With a cloud based subscription ERP, if you don’t keep current on your subscription licenses or decide not to renew, you lose access to the software. And while the provider won’t deny access to your data, the format in which your data is returned may not be easy to import into another software solution.

While the answer may seem clear cut, cost may be less of a deciding factor than you think. The truth is that in either scenario, you’re likely to spend the same amount over time. Keep in mind, too, that these won’t be your only costs. If you’re considering a cloud or on-premise infrastructure, you’ll also need to migrate your company’s data.

Whether you’re moving from an on-premise system to a cloud solution, or from an older ERP to a modern one, you’ll need to think about moving your existing data into the new system. Consider how:

  • Much data there is to move
  • Valuable the existing data is
  • Quickly it needs to be moved

While migrating from one on-premise system to another might be easier, it may be worth hiring a consultant to determine what data needs to be migrated, and how best to do it. Different solutions will have different tables and names, making it difficult to map the data from one system to the next.

Cloud vs On-premise: Scalability

Whether you plan to grow your business over time, or your business needs to be able to handle different volumes of data at various times throughout the year (Black Friday, for example), the ability to scale up or down as needed without adding unnecessary resources is valuable. A cloud-based ERP solution is the most flexible option for enterprises that require constant fluctuations in data. If an on-premise ERP looks like the best infrastructure for your company, choose space, RAM, and processing speeds that leave room for growth. An ERP consultant can ensure that your existing network can handle the upgrade.

Cloud vs On-premise: Implementation and Customization

When it comes to implementation speed, cloud has the upper hand on on-premise. That’s because cloud solutions aren’t usually as customized as their on-premise counterparts. In the cloud, you’re mostly limited to the out-of-the-box capabilities offered by your cloud vendor, which might be suitable for less specialized companies or those whose internal processes are not well defined.

An on-premise ERP solution may require more input up front during implementation. Developing workflows and processes that match how your organization does business is the bulk of work that goes into a traditional ERP implementation. While the upfront time may be greater, an on-premise ERP can offer greater customization for companies with unique needs. Keep future software updates in mind though; the more customized your ERP, the more difficult it could be to upgrade if your customizations are not done within the framework of the software. Additionally, you may be further limited by your industry’s requirements. Specific verticals or customers may have regulations that must be considered, and may require customizations since those requirements are not be available out of the box.

Cloud vs On-Premise: Decision time

Not all companies are created equal. A start-up might need more flexibility, perhaps, than an enterprise company. And a company with remote workers might be more inclined to look for mobility than a small company with an on-site office staff. Your industry, the make-up of your company and your team, and the type of products or services you provide, will have a strong impact on which infrastructure is best suited for your particular needs.

Choosing a flexible architecture model that drives efficiency, reduces costs and resources, and supports speed, flexibility, and rapid outcomes takes time, and can be overwhelming. A software-agnostic ERP consultant can objectively evaluate your current situation and point you in the right direction.

About ATB Technologies: St. Louis’ premier software-agnostic ERP consultants

ATB is a software-agnostic technology provider, with expertise in both cloud and on-premise infrastructure, software development and ERP implementation. Our expertise in the changing ERP landscape puts us in a unique position to develop a custom solution that fits the needs of your company. We manage every step of the process from design and architecture to implementation and ongoing management.

With a focus on what your company needs out of its ERP software, we research the best solution—regardless of brand—and hold ourselves accountable for the end result.

That means we’ll help you choose the perfect solution. And we’ll work tirelessly to ensure it runs seamlessly and provides the desired ROI.

We’ll serve as the buffer between your company and the software vendor, as well as between management and apprehensive employees, to safeguard against delays, conflict, and cost overruns.

Schedule a free consultation with our team of ERP experts and we’ll start looking into the right ERP solution for you today.

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