With so much ERP industry discussion focused on the cloud, you may believe that on-premise ERP is on its way out – and while cloud ERP is better for some companies, on-premise ERP is still a better choice for others.
Which deployment type is best for your company? The answer depends on several factors.
In this post, we describe cloud ERP’s three major deployment models and compare them with on-premise ERP. The three cloud versions include public cloud, private cloud, and clouds hosted off-site.
With public cloud ERP, 100% of your ERP applications and architecture live in the cloud, and your employees access all functions via an internet connection. With all your applications and back-end security managed by the service provider at their facilities, you have virtually zero infrastructure and IT management costs for your ERP.
The business flexibility offered by cloud ERP is unmatched. You get a fully-integrated application stack and seamless process flows between applications, which your people can access from any location at any time and from any device with an internet connection and a web browser. And because the cloud vendor focuses on ERP applications as a business, they’re continuously upgrading/updating without any interruptions, giving you faster access to application innovations.
Another advantage of public cloud ERP is its scalability. You can start small and grow your ERP footprint over time; rather than building an infrastructure only to find that two ERP apps are all you need, public cloud ERP allows you to purchase a software-as-a-service subscription to a single app, then grow if necessary. This removes the “build-it-first” investment risk and spreads your costs over more time.
However, public cloud ERP has drawbacks. First, because your deployment is shared on the service provider’s servers with other companies’ app deployments, you could experience performance degradation. Another example is that integration points are limited due to the way in which a public cloud or multi-tenant environment is deployed.
Private cloud ERP is also hosted at a provider’s facility and accessed via the internet; the difference is that you do not share any infrastructure with other customers. The deployment is dedicated fully to your organization, removing your risk of being affected by another organization’s problems.
Another advantage of private cloud is that it doesn’t require the high levels of automation and self-service found in public clouds, offering more flexibility and customization to meet unique business requirements like food processing and other complex manufacturing.
Of course, the single-company focus of private cloud ERP can make it more expensive than public cloud ERP – or it can reduce your current costs. For example, if you have a data center running at just 10%-50% efficiency, you can save substantially by moving from that data center to a service provider’s facilities.
The service provider will work with you to plan upgrades to newer versions. You control when you get upgraded on a private cloud environment as opposed to a public cloud environment where upgrades happen automatically. In the end, private cloud is more expensive than public cloud, but you gain significantly in the areas of performance management and flexibility in terms of integrations and apps that can be deployed.
In a hosted ERP deployment, the customer typically purchases the software and installs it on a remote server and in their facility – meaning they own all the assets. Employees usually access this type of ERP through a virtual private network (VPN).
If you choose hosted off-site ERP, you must manage the hardware and software installation as well as most IT issues (in addition to the responsibilities you would have with private cloud deployment). But you gain several advantages:
In the end, the cloud deployment model you choose should come down to your customization and security needs versus your need to save costs and increase deployment time.
On-premise ERP applications are installed locally on your company's hardware and servers and managed by your IT staff. This isn’t much different from the hosted off-site option except that because all hardware, software, data, and connectivity exist and occur in-house, you gain the following five advantages:
Ultimate data control. Not only does your data stay in-house, your IT team establishes all the rules around accessing and using it. You nearly eliminate data vulnerability by cutting off access via the internet and by employees of a third-party provider.
Lower total cost of ownership. The costs you incur up front when hosting your own ERP deployment may pale in comparison to the long-term service and subscription fees charged by cloud and off-site hosting providers. Remember, you plan to use your new ERP apps for 5, 10, or even 15 years; the lower up-front cost of a cloud ERP may not be worth the ongoing cost.
Critical customization. Cloud apps are great for companies that can sacrifice the way they do business in exchange for app savings and business flexibility. But if your company wins because of your unique way of doing business, you may risk throwing that advantage away when you genericize your apps in the cloud.
The choice you make between cloud ERP and on-premises ERP will come down to three factors: the uniqueness of your application needs; your appetite for risk; and your level of in-house IT talent. At Sapphire, we can help you evaluate both the available service options as well as your company’s readiness for each. Contact us today to learn more.
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