The decision to implement or change ERP platforms is often met with an early question. Should the company deploy an On-Premise or Cloud based ERP? The answer is based on a number of factors that include budget, resource expertise, industry and even company culture. In the end, the selection of the ERP hosting platform can set the stage for a successful deployment. Don’t make the mistake in assuming a cloud system offers the exact same benefits and challenges as the on-site configuration.
Although there is a plethora of platforms to entertain, we decided to look at three primary options available to the ERP landscape. At a high level, organizations can choose between:
- On-Premise – All hardware is owned by the client, and hosted from a facility they own or lease. Licensing is an annualized spend, with options for support. On-Premise typically requires in-house resources to manage the technical environment, and deal with application performance and availability.
- IaaS – Infrastructure as a Service. Many providers in the industry offer different flavors of IaaS. “Private Cloud” (dedicated hardware) and “Public Cloud” (shared hardware) variants of IaaS can be considered in the mix to blend an array of economic and control options for subscribers. While IaaS provides hardware and software hosting, thus avoiding upfront CapEx investments, it is built with the same flexibility as the On-Premise install. The environment is configured to spec and is accessible by end users remotely. Availability of the environment is handled by the provider, shifting technical resource requirements to the vendor.
- Hybrid Models – With all the hype of centralized cloud environments, we’ve found many organizations using or considering ERP platforms still prefer a hybrid cloud environment. A Hybrid approach combines benefits of on-premise controls with cloud scalability. ERP and other system workloads can be configured in any of the different environments mentioned above to offer the best financial, performance and flexibility for the business. While this variant may seem the best of all previously mentioned alternatives, it should be carefully reviewed before diving in. System integration points and adequate network connectivity across platforms are key considerations for a successful hybrid deployment.
With these options as our backdrop for review, let’s dive into five consideration factors, with questions you should assess within your own organization to choose wisely.
- What’s the budget? – Starting with a budget in mind is smart, and opens a dialog the company must address based on their financial status. What are the initial and on-going costs for both? What are the direct and indirect costs? What timelines should you review in a TCO (Total Cost of Ownership)?
A common misconception in today’s “cloud first” approaches, is that a cloud implementation will always be a more economical option. This is just not the case. A cloud ERP implementation (SaaS, IaaS or Hybrid) can certainly have cost saving benefits, but the big picture of the company’s financial philosophy plays an integral part of the decision. Assess OpEx vs CapEx spending, short and long term cash flow, asset and labor allocations and other accounting measures to help prescribe the next step.
Tip: In many cloud (SaaS/IaaS) implementations, low or no hardware is required, which allows for an inexpensive start-up. However, the lifetime of hosting the app can actually prove more expensive. Be sure to forecast costs.
- Custom or “off the shelf”? – A true understanding of the organizations requirements is really important when you evaluate ERP options. For instance, a fabrication firm may have developed a competitive advantage they feel differentiates them in the market. They want to incorporate the associated processes into the ERP platform. This means the ERP will likely require custom code or modules to fully recognize those advantages. While a few key changes may seem reasonable, this can grow out of control. While all three options, On-Premise, IaaS or Hybrid may offer some customization choices, carefully review these questions to identify needs and risks.
- How many customizations are required to meet the requirements of the organization?
- Will the cloud (IaaS/Hybrid) environment allow for extensive customizations?
- How much additional time to implement ERP customizations in each configuration?
- How much will those customizations cost?
- How well does the ERP support customizations post upgrades?
- Is there a Technology roadmap? – Alignment of the ERP initiative with an IT cloud strategy is also a smart way to ensure success. Architect ERP with an “end in mind” perspective and look at all the data channels. Think about user and customer experiences, integration points, and business analytics. How will the system connect to each other, and provide meaningful data for decision making? “Our customers have a vision for the future.” Says Clint Greeson a OneVision partner. “We are noticing trends in our JD Edward deployments that leverage cloud options in creative ways to provide functionality, scale, performance and control to the organization.”
Tip: Hybrid solutions are key for many organizations today. Leveraging expertise from multiple cloud partners along with internal skills and knowledge creates a powerful design for modern enterprise.
- What control is needed for cybersecurity? – Today, most organizational executives, especially IT leaders, believe cybersecurity is a growing threat to their company. With this in mind, increased scrutiny is placed upon cloud providers of all types when choosing ERP or other cloud-based IaaS or Private Cloud solutions. At the same time, many firms are trying to “outsource” the headache of cybersecurity, as they don’t have the current staff and skills to adequately secure their environments. The choice for ERP cloud vs on premise should strongly consider the cybersecurity landscape, risk tolerance, and abilities of the organization to support the growing threats. Evaluate your internal security practices and policies and compare them to the ERP provider. Be sure that your selection provides compliance and regulation checkpoints and mitigates major risks that are critical to your organization’s operations.
- Speed of implementation? – Like many critical projects, the speed at which the platform can be deployed to generate an ROI is a major factor in the ERP selection process. While cloud-based solutions may seem like a good choice to reduce implementation time, it can have downfalls. While cloud vendors may claim the fastest deployment times, broad assumptions are made to achieve this. Consider these implementation factors.
First, if the cloud provider does not have a standard deployment methodology, it can slow things down. Although, on-premise systems will create obstacles with new hardware and infrastructure, there should be a solid review and comparison of these areas to ensure an understanding of each. Remember, with IaaS and Hybrid setup, the provider will play a substantial role in your timeline. Ensure you understand their project backlog and key resource availability. Assume they will have constraints that impact your timeline.
- Secondly, there are fundamental project and change management processes that are required in both cloud and on-premise scenarios. The key is navigating the implementation considering the most efficient ways to leverage the benefits in either case. Working with a proven cloud partner and consulting firm to avoid pitfalls of cloud or on-premise options helps keep the project on track.
A modern ERP deployment is based on a healthy alignment with the organization’s strategy. In a cloud centric technology era, it may seem logical to adopt a trending platform. In the end, there are more ERP options than ever before which may heavily complicate the selection process. Technology leaders should vet out vendors, and ERP software platforms with a basis of knowledge. The brief considerations above should provide a good start to understanding the ERP deployment landscape.
Take time to fully understand your organization requirements, timeline, budget and “must have” features. The choice between a Cloud, Hybrid or an On-Premise ERP solution is the foundation for your new system. A logical approach with adequate research using a sound understanding of organizational goals will help your ERP assessment team make the right choice.