Posted on: Thursday March 22nd, 2018

Author: Ronnie Baskind

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?

The final choice depends on your specific business requirements, but it is important to know the differences and benefits of each deployment option.

What is On-Premise Software?

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.  There are associated costs such as a server room and power. There are also associated hassles such as server software updates, server administration and responsibility for backups.

The costs of each of these elements need to be factored in when comparing alternatives.

On-premise solutions are typically required by businesses that:

  • require deep integration with other on-premise systems
  • have a poor internet connection
  • have very specific functional requirements that cannot be fulfilled by a SaaS solution.
  • have 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.

Hosted solutions are typically chosen by businesses that:

  • 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.

The costs versus the benefits must be assessed. A hosted solution is likely to appear expensive when compared to on-premise, but there are the 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). This means that the business “rents” software, usually via a monthly subscription. The software is accessed 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.

An example of a SaaS package is MYOB Advanced, which is hosted in the cloud and targeted at larger, more complex businesses. MYOB Advanced is hosted locally via Amazon Web Services in Australia.

SaaS solutions are typically chosen by businesses that:

  • 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 and 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.

Although cloud and SaaS are the new buzzwords in technology, there is no guarantee that they will be suitable for your business. Try not to get caught up in the hype. Rather 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.

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. This means that 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 and the other elements required for an on-premise software package, then 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.

It is critical to do your research and have discussions with different suppliers, initially about your requirements and only then about the delivery mechanism.