Cloud ERP or On-Premise ERP? Answering The Million Dollar Question

We have written multiple articles looking at the pros and cons of Cloud ERP vs on-premise ERP.

I am often asked by existing and prospective customers “should my ERP solution be on-premise or Cloud-based?”.

My answer is “you, the customer should decide”.

The team at Leverage Technologies will provide you with all of the relevant information to make an informed decision but at the end of the day, the decision is yours – the customer.

There are no right or wrong answers when it comes to Cloud ERP. What works for one company might not work for another.

First of all, let me start by saying that I am a huge fan of Cloud-based ERP! Want to know why? Here are some numbers and statistics from our experience implementing ERP in the last year.

In 2017, roughly 60% of all our new ERP customers were Cloud-based. Last quarter, the adoption rate of new customers choosing the Cloud was 100% across our SAP, Sage and MYOB Acumatica(formerly MYOB Advanced) business units.

These numbers indicate what most ERP providers already know. There is a growing shift towards taking ERP into the cloud.

Why move to a Cloud-Based ERP system?

Many business applications (in fact almost all of them) can be moved to the Cloud. These include your e-mail, documents and other systems like Customer Relationship Management, Enterprise Resource Planning and more. The benefits of moving to a Cloud ERP system include:

• No need for onsite, expensive IT infrastructure;
• Pay as you use, just like a utility;
• Use Operational expenditure (Opex) rather than Capital expenditure (Capex);
• No large upfront software costs;
• Make use of cloud infrastructure for better security and scalability;
• Gain access to software, hardware and infrastructure “power” previously not available to SMEs.

Given the many advantages of Cloud-based ERP software, what prevents all companies from moving their ERP to the Cloud?

Here is our view on why some companies may prefer an on-premise ERP setup.

Why implement an on-premise ERP system?

Internet infrastructure. Slow Internet is the number one reason why businesses might decide to implement ERP on-premise. This is because slow or unreliable internet infrastructure just won’t work for Cloud ERP deployments.

On-going costs. A number of businesses tell us that they believe that cloud will be more expensive over five years. But let’s be careful with this assessment! When comparing the cost of on-premise vs Cloud over a particular time period make sure you consider all relevant on-premise costs including infrastructure, back-up, IT management etc.

Security. Some SMEs still consider Cloud-Based ERP to be a “security” risk. Usually, this is a false economy. A global ERP provider of cloud ERP Solutions usually provides more security than an SME running their own infrastructure and security. If anything, your Cloud ERP solution is likely to be more secure than an on-premise solution.

What happens to my data if I stop paying my Cloud fees? The feedback on this particular topic will no doubt differ from one ERP provider to another.

The fear that some businesses have is that if they stop paying the monthly or annual Cloud fees the Cloud provider will cut off access and hold the data to ransom. I would suggest that this is an unlikely scenario if you are working with a global, well-established, provider of Cloud-based ERP solutions!

Looking beyond the 5-year ROI

The main reasons to move your ERP to the Cloud are often overlooked.

SMEs often spend time comparing the cost of Cloud vs on-premise over five years or talking about security and other structural elements. This ignores one of the major reasons for moving your ERP to the Cloud – endless possibilities!

We live in a world where Cloud has given us access to unlimited computing for a relatively low monthly fee. In today’s world, even small businesses can access enterprise-grade computing resources at a small business cost.

The world of ERP is changing too. Customers want a single, integrated platform for all aspects of their business – ERP, E-commerce, CRM, Expense Management, Accounts Payable (AP) Automation, Human Capital Management (HCM), Payroll, Business Intelligence (BI) and more. Previously, these functionalities were exclusive to large enterprises but today any business can use such applications, all possible through the Cloud.

Let’s consider two examples, BI and AP Automation.

Ten years ago, under a traditional on-premise ERP model, BI and AP Automation software was only available to mid-market and enterprise customers. The computing power and internal IT infrastructure required for BI and AP Automation tools were beyond the budget and expertise of most SMEs.

In a Cloud-based, connected world. BI and AP Automation software is hosted in the cloud and available to be switched on at short notice.

Suddenly, you can access BI tools for $10 per user per month with pre-written integration to multiple databases and platforms. Time to value is quick.

The same is true of AP automation. A few years ago, AP Automation projects were beyond the budget of most SMEs. With the advent of Cloud-based AP Automation solutions, SMEs can now “rent” an AP Automation solution for a relatively low monthly fee.

Conclusion

When it comes to choosing between a Cloud-based or On-premise ERP software solution, there is no right or wrong answer.

From our experience, Cloud Computing is rapidly shifting the way ERP is adopted and consumed. This is because of the many advantages that a Cloud-based ERP system provides, even beyond the 5-year ROI.

On the other hand, some businesses still prefer an On-premise setup due to considerations involving mainly security and cost.

Our advice when considering the two options, is ultimately to factor in all costs associated and look beyond the 5-year ROI to truly understand the possibilities that one system will give your business over the other.

The truth is, Cloud-based ERP might not be for everyone. The good news is that the choice is yours and as a customer you can assess the pros and cons to make an informed decision.

Are you evaluating possible ERP options for your business? Call 1300 045 046 or email info@leveragetech.com.au to speak to one of our consultants.