Cloud ERP vs. On-Premise ERPDissecting the Controversy

Cloud ERP vs. On-Premise ERP: Dissecting the ControversyTo cloud – or not to cloud? That may be the real

question businesses of all sizes have been pondering

lately. The convenience and flexibility that comes

with cloud-based enterprise resource planning (ERP)

technology is unquestionably terrific; but naysayers

continue to worry about the vulnerabilities inherent

in the Internet of Things (IoT). On-premise ERP

platforms offer a higher ability to customize specific

features, but you’re going to pay more upfront for a

less flexible platform.

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Cloud ERP vs. On-Premise ERP: Dissecting the ControversyAs small and medium sized businesses increasingly seek to utilize the big-business benefits

found in ERP software, there has been some debate about which is better – traditional on-

premise or cloud-based?

We thought we’d take a moment to walk you through the benefits and possible drawbacks of

cloud ERP vs. on-premise ERP and help you sort out the controversy.

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ON-PREMISE ERPLet’s start with what some would call “old school” on-premise ERP. The concept of “on-

premise” simply means that the ERP software is installed locally, housed on a server located

within the four walls of a brick and mortar business. Traditionally, these programs functioned

across multiple business functions, with a high degree of customized features, most often

managed by an internal IT resource or team, depending upon the size of the business. Typically

the IT support team spends a significant amount of time maintaining the on-premise ERP and

the infrastructure that supports it.

Of course the downside to extensive customization is that upgrades to the ERP software can

take a lot longer. Training could also be extended, as employees learn the functions of a

proprietary platform. The upside to customization is that you’re not trying to fit a square peg

in a round hole. If you have very specific business needs that cannot be met even by the most

robust ERP software solutions then it may be necessary to do some serious tweaking on your

on-premise platform.

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ON-PREMISE ERPAs you might imagine, there is a one-time upfront capital expense attached to installing

software; many businesses purchase a server to run the platform, in addition to paying license

fees. There are typically fees for support, training, and on-site software updates.

Speaking of updates, more customization typically means more headaches when it comes time

to upgrade an on-premise ERP.

The data stored within your ERP platform is some of the most crucial to any business:

financials, human resource information, lists of clients, and other proprietary information.

Many companies believe managing this data in-house is imperative to the security of their

mission critical business functions and important trade secrets.

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ON-PREMISE ERPHowever, this in-house data must still be protected and maintained against outside threats; so

the on-premise IT staff must stay alert to the latest security vulnerabilities and upgrade the

firewall appropriately.

Of course, on-premise ERP platforms and the equipment that house them are vulnerable to

those events that your insurance company probably calls an “Act of God.” Fire, flood, tornado,

or earthquake, could certainly put any equipment that resides in your business at risk.

Speaking of insurance, you know, of course, that any of these expensive equipment

investments are most likely covered. However, off-site backups and a business security plan

are an important consideration when you’re hosting data on-premise.

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CLOUD ERPCloud-based ERP is hosted on the vendor’s servers, and customers access the software on a

web browser. The fees associated with these SaaS (Software as a Service) arrangements are

typically monthly or other subscription. Low up front costs, coupled with predictable fees, are

a benefit of cloud ERP, especially for the cash-strapped start-ups or small businesses.

Cloud ERP platforms grow with a business, especially with the some of the latest flexible pay-

as-you-go arrangements; additional users are just added into the SaaS subscription and there

is no additional hardware or licenses to buy.

One big benefit of cloud-based ERP platforms is that updates occur automatically and

seamlessly as part of a regular service arrangement. On-premise updates mean an IT vendor

visit, with additional fees. SaaS was created so businesses can focus on their core strengths –

running the company – without the distractions of on-site hardware malfunctions, network

upgrades, or troubleshooting other IT issues. For the small to medium-sized business that

cannot afford IT talent, cloud ERP has extensive benefits over on-premise ERP.

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CLOUD ERP VS. ON-PREMISE ERP COMMONLY ASKED QUESTIONSBut how safe is the cloud, really?

There’s the rub for some people; when you’re in the cloud, the security of your data is the

responsibility of the vendor you select. That’s why we recommend a cloud backbone

entrenched across Microsoft’s five worldwide data centers; not only will your data be housed

across multiple redundant servers, you have, literally, thousands of IT experts working to

maintain the network and proactively shore up your data against any security threats.

Increasingly, businesses are moving critical functions to the cloud. A recent study showed that

the security of data in the cloud isn’t the number one concern anymore. In the case of ERP

platforms such as Microsoft Dynamics, businesses simply trust the brand based upon years of

successful management of the cloud infrastructure.

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CLOUD ERP VS. ON-PREMISE ERP COMMONLY ASKED QUESTIONSCan you customize in the cloud?

In the old days, on-premise software required a lot of tinkering to fit the exact functions of

your business. If you have a niche-based business, customization may still be a desirable part of

your ERP implementation process.

Today, cloud-based ERP technologies such as Microsoft Dynamics offer impressive out-of-the

box functionality across industry-specific functions, particularly for the small to medium-sized

business. But MS Dynamics also offers customizable reports and the ability to add-on modules

along with flexible licensure arrangements that scale well for any size business.

Increasingly, ERP platforms offer features that are interoperable across multiple businesses,

which is one of the more appealing features of the software. The benefit of the Microsoft suite

of products is the interoperability between legacy platforms, so employees can adapt more

easily from the ERP to the CRM, Outlook, Word, and more.

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CLOUD ERP VS. ON-PREMISE ERP COMMONLY ASKED QUESTIONSI drive a hybrid; could I adopt a hybrid ERP, too?

In a word: Absolutely. Many businesses have chosen to shore up an existing on-premise ERP

that handles core processes such as financials with cloud-based agility for business

intelligence functions.

When businesses have grown to the point where they find their legacy ERP confining, a cloud-

based add-on to their home grown system can suddenly make sense. Many legacy on-premise

ERPs have not even been adapted to mobile technology. Adding cloud-based mobile

functionality to analytics and business intelligence makes sense for many businesses seeking

to recoup on their on-premise investment without scrapping it completely for a newer cloud-

based model.

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THE FUTURE OF CLOUD ERP VS. ON-PREMISE ERPGartner released a study stating that heavily customized on-premise ERP systems are fast

approaching legacy status, thanks to the increase in cloud-focused platforms. They cited lower

costs as one reason for enterprise organizations to either shore up their legacy ERP with a

newer and more functional cloud-based system in a hybrid model, or discard their on-premise

platform completely. The study stated, “A system that is not sufficiently flexible to meet

changing business demands is an anchor, not a sail, holding the business back, not driving it

forward.” RightScale confirmed this prediction by releasing their fifth annual State of the

Cloud Survey at the beginning of the year. They agreed that hybrid cloud models increased

substantially, from 63% to 77%. Public cloud adoption continues to increase, and providers

continue to respond by adding robust expanded tools to their ERP software.

To find out more about cloud ERP vs. on-premise ERP or hybrid models, contact IES today.

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About IESIES is a leading Microsoft software reseller, development, implementation, and business process consulting firm dedicated exclusively to Microsoft Dynamics training, products, and supported services. Our expertise extends across Microsoft Dynamics CRM, MS Dynamics GP, Dynamics NAV, and beyond. We are based in the Miami and Tampa areas of Florida, but serve clients across the nation.