Your business has grown to the point where a new Enterprise and Resource Planning (ERP) system is needed to solve the challenges you are facing with your current (possibly disparate) systems. You have come across software companies that offer cloud-based solutions, and others that offer on-premise solutions. How do you decide?
Above all, the final choice depends on your specific business requirements. It is important to know the differences and benefits of each deployment option.
What is On-Premise Software?
First of all, a good example of an on-premise software package is MYOB Exo. An on-premise solution requires server hardware, a server operating system such as Microsoft Small Business Server, and a software component called a database, such as Microsoft SQL. Server room and power are some of the associated costs. Likewise, server software updates, server administration and responsibility for backups can also be a hassle.
When comparing the alternatives, remember to consider the cost of each element.
Businesses that require an on-premise solution typically:
- require deep integration with other on-premise systems
- struggle with a poor internet connection
- have very specific functional requirements that a SaaS solution can’t fulfil
- worry with security concerns about hosting their critical and sensitive data in the cloud
- have a large investment in on-premise network infrastructure (servers etc)
- can benefit by extending the functionality of their current system by using “add-ons” (including cloud-based add-ons)
What is a Hosted Solution
More recently, some businesses choose to “outsource” their server and database, contracting a specialist company to provide and look after the hardware components. This alleviates the burden of having to look after a server yourself and shifts the associated costs and responsibilities to a contractor. The server is hosted in a data centre. The price of hosting includes all of these peripheral services and is typically a monthly fee.
Businesses that chose a hosted solution typically:
- no longer wish to own or look after their server(s)
- are happy with their current on-premise software but need to replace aging servers, and find it more cost effective to outsource their servers.
- prefer a regular monthly expense rather than incurring capital expenditure
- have a distributed network of users, with a poor internet connection at the current server location (typically Head Office)
- are growing rapidly and need to be able to quickly scale up the hardware component of their solution.
Assess the costs versus the benefits. A hosted solution is likely to appear expensive when compared to on-premise, but there are other benefits to take into account. An on-Premise solution such as MYOB Exo can also be hosted.
What is Software as a Solution (SaaS)?
There is an ongoing trend whereby many businesses are choosing cloud solutions or Software as a Service (SaaS). For that reason, the business “rents” software, usually via a monthly subscription. The software is accessible via a browser (Internet Explorer, Chrome, Firefox, Safari, etc.). In this situation, the user does not purchase the software outright, leading to a saving on the initial software cost. All the user requires is a computer, a solid internet connection and a browser. SaaS, therefore, eliminates some of the other costs and hassle associated with on-premise software.
Businesses that chose a SaaS solution typically:
- have a reliable and fast internet connection
- need to access their system from anywhere
- don’t want to invest in hardware and the associated costs
- require mobility and access from multiple devices
- do not require direct access to the database for integration purposes
- are able to integrate with other cloud services through an API
How do I know which deployment model is best for my business?
There are no hard, fast rules when it comes to choosing the best solution for your business. Most importantly, the system you choose must meet the functional requirements of the business. The choice of on-premise hosted or SaaS is secondary to your functional requirements.
A business owner should write a list of requirements that the system must provide, before looking at the delivery mechanism. They should then compare this list with functionality offered by on-premise, hosted and SaaS solutions.
Therefore, although cloud and SaaS are the new buzzwords in technology, there is no guarantee that they will be suitable for your business. Take the time to review your business processes and requirements. Once you have chosen the right ERP system for you, it is important to know what to expect from your enterprise partner, to ensure it is right for your business. If you are still at the beginning of the ERP journey, download our free Ebook that covers everything you need to know when choosing the right ERP for your business.
What about the cost?
Businesses starting from scratch do not have servers, server rooms, software or a network administrator. These costs come with an on-premise solution. As a result, a cloud-based solution may be more attractive as there is no investment in hardware or the associated maintenance of that hardware.
However, if a business already has access to a server, server room, other elements required for an on-premise software package, the cost comparison becomes more complicated.
Some software houses offer only SaaS solutions. MYOB have developed both pure SaaS and hybrid models that make the most of various features. This means that the definition of cloud technology is broader than what one may expect.
Above all, it is critical to do your research and have discussions with different suppliers, initially about your requirements and only then about the delivery mechanism.
- An On-Premise Software has a few elements that will add to the cost such as requiring a server room, power, responsibility and regular updates. It is suitable for a business who may have a poor internet connection, security concerns or already have a significant investment in on-premise network infrastructure.
- A hosted solution is located in a data centre and has a monthly charge. This solution is suited for a business who prefer a month to month fee, growing rapidly or are no longer interested in maintaining their server.
- Software as a Solution (SaaS) is hosted in the cloud and are most suited to larger, more complex businesses. The business should be able to integrate with other cloud services, won’t need direct access to the database and don’t want to invest in any hardware costs.
- To decipher what is best for your business, first, write a list of requirements the system must provide.