If you are considering a new or upgraded ERP system for your company, chances are you are being faced with many choices. As you consider your ERP options, one of the decisions you will make is whether to select a locally-installed ERP solution or one that is cloud-based. Traditionally, software is purchased and installed on computers in your company, also known as an “on-premise” system. With this type of ERP, you are responsible for managing all servers, software upgrades, and workstation upgrades, backup, etc..
However, Software-as-a-Service (SaaS) or “cloud computing” has become more prevalent as an option to upgrade your software or when purchasing new. With this type of deployment, the ERP software and its associated data are centrally managed on the Internet “cloud” by the ERP vendor, and customers access the system via a web browser.
While the difference between on-premise and cloud ERP system is clear, the type of deployment model you should choose might not be as obvious. The ERP system can significantly impact all areas of your business. It is important to consider the following key factors when weighing whether to use on-premise or cloud-based ERP software:
Cloud-based ERP systems involve much lower initial start-up costs than on-premise, mainly because you simply implement the software based on your requirements and then access it through your Internet connection. The cloud ERP provider maintains and hosts all of the IT infrastructures for you, ensures that the data is secure and that the system is always running, and painlessly rolls out product enhancements without breaking your previously implemented customizations. All of this allows your IT resources to focus on helping to grow your business rather than spending time on managing and maintaining the on-premise system. The ongoing costs for cloud may exceed the ongoing costs for on-premise in year 3-5 or more.
On the other hand, on-premise ERP systems typically require larger upfront but lower ongoing investments to purchase and manage the software as well as the related facilities, servers, and hardware necessary to run it. If your company does not have an experienced or any IT staff, you may also find yourself investing more money and time in additional personnel and training them or outsourcing your IT services. More importantly, on-premise systems require your team to spend a large chunk of their budgets and time to make sure your system is up and running when you need it, including upgrading the software periodically, maintenance of server rooms, hardware and workstation operating systems, and more.
System Enhancements and Upgrades
Cloud ERP solutions such as; Acumatica, Intacct, and Netsuite are continually upgraded by the provider, so companies can be sure they are always using the most advanced, latest version of their ERP software. Due to the cloud platform on which leading cloud applications are built, your previously implemented integrations and customizations automatically carry forward whenever the solution is updated without a headache or hassle.
Although on-site ERP software is customizable, those customizations are directly linked to your current software and can be difficult to re-implement with future versions. As the ERP vendor releases new enhancements and product updates, your previous customizations will need to be upgraded or redone as well. For this reason, many highly customized businesses avoid upgrading on-premise software and instead settle for running their companies on out-of-date technology.
System Performance and Accessibility
Compared to on-premise solutions, cloud ERP systems typically deliver better performance since the software architecture is designed from the bottom up to gain maximum network performance. Cloud-based ERP also offers optimized system performance that quickly adapts to the needs of your company. For instance, if there is a spike in your business, cloud ERP systems automatically adjust and provide additional resources to handle the surge. A local IT department may not achieve these results and might not routinely report their system uptime results to management. Cloud-based ERP solutions also provide real-time data that you can access anywhere at any time, meaning your staff can see accurate information on tablet devices, smartphones, and laptops while they telecommute or travel — all without ongoing costs or extra setup fees.
On-Premise or Cloud or . . . .?
If you feel that neither on-premise nor cloud ERP systems are right for you, another option is to have a third party host (called Hosted Solutions) your software on their computers. With this deployment model, you still own the software and are responsible for the updates, upgrades, and maintenance. However, someone else has the IT infrastructure to perform backup and manage your server thus eliminating the need for an internal IT services team that supports the traditional on-premise solution but gives you remote access capabilities for multiple locations or remote employees
So, which is the best deployment model for your company? It all depends on your business needs, company culture, and existing information technology infrastructure. Chortek LLP’s Technology Consulting Group can help you wade through all of the options available for your business. The bottom line is this: Cloud solutions are not a fad, and after years of anticipation of marketplace domination, they are finally beginning to gain a greater percentage of the market and should be considered when selecting or upgrading an ERP system for your business.