Nowadays there is no shortage of articles that promote Cloud ERP systems and pontificate the impending demise of on premise ERP systems and ‘don’t trust your data to the Cloud’ worries. What pains me with these articles is the blatant misuse of facts, misquoted Gartner predictions and the level that irresponsible ERP providers will go to in authoring their own articles, which then turn out to be nothing but ‘fake news’ or ‘click bait’ to help promote the sale of their own ERP system.
Before any business can constructively recommend a Cloud or On Premise solution without any bias, they must first engage in dialog with the ERP purchaser in order to understand and consider their requirements. This dialog must ensure full coverage of the associated risk and rewards associated with purchasing a solution for running on either of the platforms.
The typical dialog we witness would normally go…
Up Front Cost Vs SaaS (Software as a Service) and Upgrades
Customer:We are looking for an ERP solution on a monthly subscription, perhaps on a per user/per month model. We are looking to do this to put a flat line through our budget and avoid any lengthy capital expenditure proposals along the way.
Provider: That’s great, but note that leasing is now a common option for on premise ERP purchases, in the long term SaaS would always eventually cost more than an on premise solution. Regardless of Cloud or On Premise – they would both come with a minimum number of days to implement the software (on top of SaaS model), this could range from 15 to 5000 days. A business could also be locked into a 12-month contract with no visibility of the future price you would pay. You could also be forced into software updates on set dates, unlike the flexibility of on premise, where you plan, test and update when convenient to your business.
Provider: Whilst running your ERP solution, what services might you be looking for a real time connect to, for example, Finance management system, HR and Talent management System, procurement and warehouse Management System?
Customer: We are a growing business and want to ensure we have the opportunity to use these services as quickly and cost effectively as and when we need access to them.
Provider: Then you need to carefully research which ERP offering, regardless of platform, has the most open, reliable API and has a reputation for integrating to the best of breed software offerings on the market. You will probably find that, due to the maturity of most on premise solutions, they are often the most effective solution from this perspective.
Customer: It is critical for our business that the machine and labor tracking solutions that we use for monitoring and posting data to our ERP solution are up 24/7. Any downtime here would see us without visibility and the result could be a loss of vital customer contracts.
Provider: Although a Cloud ERP provider might be able to offer you the guarantee of very high up-time, you would typically have to pay for a very expensive internet connection in order to guarantee this.
Hardware & Administration Costs
Customer: As a business, we want a cloud solution because we can’t afford expensive hardware and software licensing just to run an ERP system. We also can’t afford to pay someone to administer this ERP system.
Provider: Financial leasing could help here, it would help you spread the cost of your investment and any expected ROI could help to pay for the investment. Separately, it cannot be emphasized enough just how important the role of the ERP administrator or business system owner is in ensuring the success of the ERP implementation and ongoing extraction of value for your business. Even Cloud deployed ERP requires a high level of ownership and management. Often those Cloud system providers will charge more for the backup and restoring of data. Some providers will also hold rights over your data and charge you to obtain your data in a database format should you need it for local analysis.
The above conversations are important in the Cloud Vs On Premise debate. They show that, at present, there is still a strong argument for on premise ERP, especially for a technically savvy, forward thinking business that runs its business in real-time and demands maximum value from its systems.
But this is only now. In 5 to 10 years’ time, the technological barriers governing our connectivity will be gone and the race for the mature ERP solution at the cheapest price with the most functionally will prevail.
This is why we find that Business DNA commitment to a cloud approach, covering aspects of deployment, flexible consumption, diverse accessibility and more, and the perfect answer to these upcoming advancements in technology.