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ERP In the Cloud vs. On-Premise

Enterprise resource planning (ERP) See also:software runs businesses large and small and consists of integrated applications tasked with storing, managing and interpreting data. ERPs can be used to provide an integrated view of your core business processes that generate data regardless of the type of activity involved with each process. Enterprise resource planning software is usually deployed using two major options—through cloud computing or via on premise infrastructure—and herein lies the major difference between ERP in the cloud and on-premise.

A very basic explanation of these two options show that: while on-premise ERP requires an IT team for the installation and continuous management of the applications stored locally on your company’s hardware and servers, a cloud ERP deployment is provided as a service managed by the cloud provider and can be accessed and collaborated on from anywhere, via the web. Hence, before choosing a deployment option, it is important to understand the pros and cons of each.

 

Ownership Costs

All enterprises are concerned with managing costs and understanding the true ownership cost in relation to ERP is quite important. Software can be acquired on either a perpetual or subscription basis.   When acquired as a subscription (software as a service or SaaS), it is deployed in the cloud. When purchased in the form of a perpetual license, it can be deployed either in the cloud or on premise. The cost of the software acquisition needs to be evaluated over the useful life of the software to determine a total cost of ownership (TCO).

On-premise ERP deployments require higher upfront costs. With on premise ERP comes responsibilities such as purchasing the required supporting software and infrastructure needed to run the system. If your organization lacks experienced IT personnel, one or more individuals must be hired on a full-time basis to ensure every component of the infrastructure running your ERP system functions optimally. As expected, purchasing this equipment is expensive and the on-going cost of hiring a dedicated IT manager and staff makes on premise ERP a costly investment.

With a cloud based deployment option, all the necessary servers and related software and infrastructure are made available by the cloud provider. As expected, the managed ERP services all come with a subscription cost, which when compared to the upfront and ongoing expenses are quite manageable.

The large upfront cost needed to set up an on-premise ERP makes it a capital expenditure which can be undesirable for many businesses vs. the lower upfront cost associated with setting up a cloud ERP solution. As cloud ERP comes with re-occurring monthly fees, this makes this installation an operating expenditure.

 

 Gauging System Performance Levels

To accurately gauge the performance level of cloud ERP and on-premise ERP over time, certain criteria must be employed to streamline this discussion. The criteria to be used here are:

  • Availability: this criterion covers application availability, provision of on-demand solutions and ability to manage surges relating to business uptime or spikes.
  • Storage Options: the integrated storage options provided by both deployment options will be covered
  • Security: each deployment option’s ability to mitigate risk in real-time and secure data
  • System Upgrades and Enhancements: This criterion will discuss back-up procedures and the upgrade/enhancement process.

 

In terms of availability; one of the most important issues that determines how effective your ERP system is the deployment option’s ability to eliminate downtime and handle spikes in business transactions occurring through your servers. For on-premise ERP, the ability to handle down time as well as traffic surges is relatively dependent on the skill of your IT personnel and the size of your infrastructure. Occasionally, your IT manager will come up short due to human error, forecasting errors or budgetary limitations. Cloud ERP infrastructures are built from the ground up and designed to be intuitive when handling traffic upsurge, thereby making it more adaptable to your needs at any given time. Therefore, in terms of availability, cloud ERP provides an on-demand ecosystem that performs optimally in real time unlike its on premise counterpart.

 

When considering storage options, the handling of input/output operations per second (IOPS) must be considered. This is because processing IOPS require a storage system equipped with the task of handling every activity that is initiated when different transactions occur randomly through the applications on your servers. Flash storage provides more versatility for handling high level IOPS than the traditional hard disk storage device and your high performing cloud ERP takes advantage of this.

On-premise ERP deployments generally make use of either a hard disk storage system or a hybrid array which combines hard disk storage with solid state storage devices. These on premise systems often avoid the additional expense of flash storage technology that is typically provided in cloud deployments. A predominantly hard disk system will encounter limitations because they function through mechanical procedures instead of intuitively. Conversely, hybrid systems are more intuitive typically using ’tiering’ which allocates storage based on the performance requirements of an application.

Cloud based systems are highly intuitive and typically leverage massive amounts of flash storage. These systems combine additional features which include compression and deduplication. Storage compression improves the storage efficiency and performance while lowering the cost associated with the high-performance flash devices. Data deduplication can reduce the amount of disk storage by 10x – 50x, is a cost-effective alternative to tape, and shortens backup and maintenance windows – especially when you have multiple files that are similar. Therefore, for applications that demand high IOPS performance, such as transaction processing in e-commerce stores, flash storage integrated with a cloud ERP is your best option.

 

In terms of data security, cloud provider can leverage a larger and more skilled resource pool to manage the multiple layers of security and updates required to secure your data, while for on-premise ERP, your IT department will be responsible for putting in place security measures and ensuring that the appropriate data security protocols are in place.

An experienced cloud ERP security specialist will assess your security needs and implement stringent security protocols to mitigate risks, thereby, delivering more control and security over the data and activities.

 

Handling the system upgrades and enhancements of an ERP regardless of the option, cloud or on premise, requires the backing up of old files and upgrading of applications. But for on-premise ERP, this responsibility falls solely on the shoulders of the IT department who must develop this from scratch before deployment. Contrast this with the cloud where the cloud vendor handles the upgrades and enhancements of your infrastructure remotely with very little required from your organization which leaves your staff with more time to focus on delivering value against your strategic initiatives.

 

Mobility and Accessibility

As the world continues to go mobile, the need for an ERP solution to be accessible from anywhere cannot be overstated. Mobility enables access to data in real-time on your smart devices, regardless of your location. A reputable cloud ERP service makes this possible and assures a high level of security in compliance with SSAE16 SOC certification standards, which means that the services they provide work as advertised, are secure and are effective for your organization’s needs. The centralized nature—which ensures all data is in one environment—inherent in cloud ERP systems, also enhances accessibility as everyone is privy to the same information and can access it when needed.

Today, there are certainly more options than ever for businesses looking for an ERP solution that fits their particular business model. These solutions range from cloud ERP to on-premise ERP as well as a hybrid of both options. As ERP experts since 1972 and an award-winning cloud provider, Syntax has the perfect solution which can be customized to your company’s needs.

You can consult one of our cloud specialists to discuss your enterprise’s needs, learn more about our Enterprise Cloud benefits and solutions.

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