Cloud vs. On-Premise ERP – Weighing the Pros and Cons

The reality is that more and more companies are embracing the cloud faster and more broadly than many originally thought possible, including  enterprise resource planning (ERP) in the cloud.

Many finance executives are having greater enthusiasm for the financial flexibility and freedom that comes from using the cloud’s modular, pay-as-you-go approach to accessing the latest technology innovations. In fact, a 2012 survey by Financial Executives Research Foundation (FERF) and technology advisory firm Gartner found that 53 percent of CFOs believe that more than half of their enterprise transactions will be delivered through software-as-a-service over the next four years, up from 12 percent today.

If you’re on the fence and need some help evaluating if the cloud is right for your organization, let’s explore some pros and cons of when cloud ERP makes sense and when it doesn’t.

Pros: When Cloud Computing Makes Sense

The following are some of the most compelling reasons why cloud computing may make sense for your business:

• No Server Maintenance – You no longer have to manage your own hardware and software. This opens up office space, eliminates maintenance costs, and reduces electricity use.
• Reduced Costs - When you have your application running in the cloud, the IT staff doesn’t have to worry about servers, networking and operating system software support. Those things are being taken care of by the cloud provider.
• Improved Cash Flow - When deploying a large system on-premise that requires multiple servers and software, a large, up-front cash outlay is also required. When using a cloud, normal charges are billed on a monthly basis as an operating expense rather than a capital expense. This improves a company’s cash flow.
• Mobile Computing Made Easier - Most companies have complicated security protocols but with the cloud access, authorizations are taken care of effortlessly.
• Superior Integration With Other Systems – The cloud was purposefully designed for easy interoperability, which adds the option for current or future usage of additional products.
• Faster Implementation – Cloud ERP solutions are managed and hosted by the vendor therefore you do not need to set up or install any hardware or software.
• Data Back-Ups – As opposed to the horrible risk of crashing your in-house server(s) and losing data, third-party hosted ERP clouds have redundancy. That means that your data is copied to at least two locations, so if one fails you still haven’t lost anything.

Cons: When On-Premise Works

In some instances, an on-premise ERP deployment may be right for your company. Let’s explore some reasons why:

• Total cost of ownership (TCO) - Paying a low monthly subscription for software certainly helps a company’s cash flow. However, over the long term, the software can become more expensive.
• Outside risks - When software is hosted on-premise, everything resides within your company walls. When it is hosted in the cloud, the cloud provider has access to and control of the hardware and software. Before selecting a cloud-based service provider, evaluate and set the level of control in the service level agreement.
• Data control - Having an on-premise solution may make sense when you need to keep sensitive or regulated data local.

At the end of the day, moving your ERP to the cloud is a big decision that should not be taken lightly. It’s important that you do your homework before making the decision and contact an expert, like Borek Business Solutions, who can help you evaluate what’s the best solution for your business. Or if you want to jump right in and are interested in trying it, you can access a free 30-day trial of the cloud Microsoft Dynamics ERP tools here.

By Roger Borek, Borek Business Solutions, Microsoft Dynamics GP Implementation Partner, Eugene, Oregon