Choosing the best system for your business
In the past, one of the most important decisions facing businesses was deciding on the right time to take the leap from off-the-shelf accounting packages, to an Enterprise Resource Planning solution. In more recent times, due to the emergence and popularity of the cloud, the importance of this decision has been further intensified and complicated.
Now, when choosing a new ERP solution for a business, one of, if not the most important decisions business owners will face is deciding whether to choose a cloud ERP solution of an on-premise ERP solution. And with all the bias misinformation available online from software vendors pushing their products, it can be hard to find real advice that isn’t confusing and misleading. So if you’re in this position – read on.
There is no denying that in recent years, cloud-based ERP systems like MYOB Advanced (Australia’s leading ERP system) have become increasingly popular. But there’s many reasons why some businesses continue to choose traditional on-premise ERP solutions like MYOB EXO Business. To find out why, a good start is looking at the differences between the two systems.
The difference in deployment.
The biggest difference between the two systems is how they are deployed. A cloud-based solution is hosted by the vender on their choice of servers and is accessible through any internet enabled device. For example, MYOB Advanced is hosted locally in Sydney by Amazon Web Services. In contrast, an on-premise solution is installed locally on a business’s own computers and servers.
In addition, some software venders offer “hybrid” deployments, which as the name suggests is a hybrid of on-premise and cloud based ERP solutions. This solution attempts to offer the user the best of both solutions by hosting cloud software on a company’s own servers.
The almighty dollar.
Always a crucial factor for businesses is the cost. While there are exceptions to the rule, cloud software is almost always subscription based – payable on a monthly or yearly basis. This is in addition to recurring fees for support and any training which may be required.
An on-premise solution is commonly priced under ongoing licence fees, based on the number of users and what features they use. There are also recurring licence fees for support, training and the installation of updates to the system. Other expenses to consider are IT support, computer hardware costs and more.
This is why on-premise solutions are often regarded as more expensive and viewed as capital expenditure) – there is no denying that the initial upfront investment is much larger than that of a cloud-based solution. On the other hand, a cloud-based solution is an operating expenditure, much like a monthly bill that the business will continue to pay indefinitely like a power or phone bill. It’s this low initial entry cost that has led to the popularity of cloud-based ERP solutions. A recent study showed that almost 70% of enterprises were using cloud-based solutions or system architecture in 2014. It should be noted that over time, the costs between a cloud-based solution and an on-premise solution will converge. While in some cases, the cost of online ERP solution may actually cost more over the life cycle of the system.
So essentially it’s not a question of which one is cheaper, but rather do you want to pay for a solution now and get it over and done with, or pay for a solution over time, that may cost you more in the long run. The answer to this question is often based on a company’s financial situation and their business model.
Advantages and disadvantages of Cloud-based ERP Solution:
|Cost||Costs are predictable. Cheaper upfront investment. No additional hardware costs.||Over the system’s life cycle may end up costing the same, if not more than an on-premise solution.|
|Security||Data security is in the hands of the vendor.||Data security is in the hands of the vendor and for some businesses, this may not offer total peace of mind.|
|Customisation||Greater stability and continuous updates result. Businesses may offer feedback to vendors and see what changes can be made.||Less customisable.|
|Implementation||Will opften take less time to implement.||Short implementation times are often a result of less customisation.|
Advantages and disadvantages of On-premise ERP Solution:
|Cost||Over time, the price of the system can be cheaper than a cloud-based solution.||Upfront investment and associated hardware and IT costs can be seen as a riskier investment.|
|Security||Data security is in the hands of the organisation.||Data security is in the hands of the business, and some may not be as adept at practicing proper data security protocols.|
|Customisation||Greater ability to customise.||Customisations impede implementation times and cause issues when updating software.|
|Implementation||Business has more control over the implementation process.||Longer implementation times.|
Cost, Customisation and Control.
The information stored in an ERP system includes sensitive data such as company financials, client and employee information, so security should always be a main concern for prospective buyers. In the past, it was a common view that cloud-based software was not as secure as on-premise software. However in today’s market, the reality is that cloud software can be as, if not more, secure than on-premise solutions.
For example, MYOB Advanced uses Amazon Web Services (AWS) a local best-in-class high availability data storage centre. Located in the Sydney region, Amazon is acknowledged as a Cloud IT infrastructure services leader, providing highly reliable and scalable infrastructure to support computing power, database management, load balancing, data storage, backup and other related services worldwide. They have established data centres around the globe including Australia, the US, Europe, Brazil, Singapore and Japan and within those locations multiple physical locations for full redundancy.
Moving past security, there’s several functionality issues to consider. In general, you’ll find many of the same features in both cloud and on-premise ERP systems. However, there’s a are differences you should consider.
For example, when it comes to customisation, on-premise systems solutions are generally easier to customize. While this will not be a major concern for some businesses, for large businesses the need for an adaptable ERP system that can meet their specific needs and requirements will be considerably important.
While cloud-based ERP solutions have in many ways made ERP systems more accessible for businesses due to lower upfront costs, in particular those that are just entering that growth zone which warrants moving up to an ERP system, the decision between on-premise or cloud-based ERP should not be taken lightly. The drawbacks in customisation that some cloud software have, and potential security threats that an online environment can cause should always be taken into account. This is why one should always look to a reputable vendor such as MYOB – one of Australia’s leading business software companies.
Conversely, on-premise ERP systems offer advantages in customisation and control. But these advantages can be countered by the increase in upfront costs. However, on average, the cost between on-premise and cloud-based software does balance out over the life-cycle of the product.
If you’re still unsure which ERP solution is right for your business, why not get in touch with one of our ERP specialists on 1300 553 228 or email firstname.lastname@example.org. We can help you determine your needs, and find the most suitable solution for you – whether it be cloud-based or on-premise.