If your business has reached the point where an ERP system is necessary and it’s time to decide which type of implementation is best for your business, there are a lot of factors to consider before taking the plunge. The two main discrete options for an ERP implementation are either an on-premise or cloud-based solution. On-premise solutions are privately hosted on your own local servers and network and managed by your internal IT resources.
Cloud-based ERPs are hosted online and the data, security, and infrastructure are all managed off-site and the system can be accessed from any location with internet access. Between uptime, security, accessibility, standardization, customization, and updates, both options have their benefits and drawbacks. But when it comes to cost, cloud-based ERP systems can have quite the advantage over on-premise solutions. Let’s take a look.
Lower Cost of Ownership
An on-premise solution has many costs associated with it that are at least partially absorbed by a cloud solution. On-premise ERP systems often require a large up-front purchase, the time and focus of IT staff, the cost of hardware, customization, training, maintenance, security, upgrades, and the general overhead to keep the lights on and your system running. Cloud ERP systems, on the other hand, are priced on a monthly or annual subscription that can take the pain out of the initial costs of implementation. This leaves a business with the freedom to cancel or choose a different level of service if necessary.
No Cost to Upgrade
Upgrades and patches, in general, can be costly and time-consuming. Where a cloud-based system comes with automatic updates, an on-premise system will require you to allocate the time of your IT staff to deploy the update in-house. A cloud-based ERP system provides you with the ability to redirect staff to focus on areas that bring the most value to your business.
Because these updates are online and automatic, and you are effectively subscribing to an ERP service versus purchasing the system up-front, you are not responsible for the cost of upgrades. Where upgrading an on-premise solution may require scheduling to meet budgetary needs and therefore leave valuable features waiting on the table that could benefit your business, a cloud solution offers these at the moment they are available, automatically and free of charge. This results in greater system stability and better opportunities to grow your business.
No Software, Security, or Hardware Maintenance Costs
When it comes to your business, security is paramount. With an on-premise solution, data is the responsibility of the organization. And it can be costly to maintain cutting-edge electronic and physical security layers.
In addition to security costs, an on-premise solution carries with it the cost of hiring an installation expert and purchasing enterprise-grade servers, operating systems, databases, and backup systems to support those servers. A cloud-based solution takes on these responsibilities and leaves your business more secure and less liable for the financial burden of additional maintenance and infrastructure requirements. A hosted solution also combines many of these costs at a lower overall rate. Most notably, cloud ERP provides your business with the ability to only pay for only what you need, whether it be number of users or amount of digital storage space.
Response to Business Needs
A cloud-based ERP system allows members of a business to communicate information in real-time, all the time. This improves collaboration and allows your business to adapt to any number of situations.
The standardization of a cloud-based ERP system means a reduction in time spent reconciling data, converting information, and bridging gaps between different systems at different locations. Whether it be customer questions or concerns, a need to adjust a line of supply to meet demand, vendor issues, or any other everyday requirement, a cloud-based ERP system can help provide clear, accessible, continuous communication.
Faster to Deploy Means Improved Time to Value
With an out-of-the-box solution, your business will spend less time on selecting the appropriate hardware, negotiating IT capacity, deploying software, training employees, and making the back-end adjustments and customizations necessary to ensure your solution is up to snuff and ready for business. A cloud-based ERP system means you’re up and running in no time, which reduces the often prohibitive costs of ERP implementation that can leave businesses pushing back their purchase and losing out on improved efficiency across all departments.
Anyone who has had their servers go down knows that it can lead to a significant financial hit. On-premise solutions leave the business in charge of ensuring uptime and keeping IT staff on call in case of emergency. In addition, network and system downtime can cost a business much more than simple dollars per hour. It can also impact the reputation of a business, and leave doubt in the minds of consumers as to whether the company they are investing their time and money in is dedicated to running a reliable business. With around the clock technical support, cloud-hosted solutions mean no scrambling to find someone who is still in the office to handle a system issue, and no expenses for additional IT and other employee hours or replacement of hardware or software infrastructure.
The crucial decision in choosing the best ERP for your business should not come lightly. Managing your ERP on-site versus opting for a cloud-based solution brings with it many separate decisions. But when it comes to comparing the costs of each implementation, one can find a great deal of financial value associated with a cloud-based ERP deployment. These include faster time to value, low cost of ownership, quick and painless upgrades, and a lack of hardware, security, IT support, and maintenance costs. All of these benefits can help you and your employees focus on the big-picture initiatives that keep your business moving forward.
By Aaron Continelli