Cloud-based ERP implementation is generally cheaper than deploying the same system on-premises. However, as with any other aspect, there are some caveats.
So, what does it really cost us?
The implementation process typically follows a similar path. In advanced, industry-tailored ERP systems, it’s necessary to analyze the processes within the organization, map them in the system, and test these settings with a selected group of employees. This phase also includes setting up the test and production infrastructure. On the test infrastructure, you can check how individual modules function and how the system integrates with essential external tools. Afterward, training is conducted. This is where the similarities end.
On-Premise ERP Implementation
On-premise implementation often involves purchasing a data server and a database server. These could be the same machine. But due to security reasons, many manufacturers recommend keeping company data and the software on separate machines, linked only to each other. A significant one-time cost is the purchase of software licenses, which is not a concern with cloud-based implementations. The maintenance of infrastructure, servers, networks, personnel, and ensuring appropriate security procedures is handled by the software provider. Data security is often a key argument for opting for cloud solutions, especially since large cloud providers can allocate significantly more funds for data security, both physical and software-based, with dedicated, highly trained staff.
When Are Cloud Solutions Less Cost-Effective?
This situation may occur when looking at the entire organization holistically. From an ERP system’s perspective, cloud-based ERP implementations become unprofitable if the cost of the license is too high. In all other cases, cloud solutions are simply more affordable.
Why Should We Look Holistically at Such Solutions?
The reason is simple. It is rare that an ERP system is the only solution hosted in the cloud. There are many technological solutions available on the market that can be hosted on-premise, where cloud-based counterparts, while popular. And can become more expensive over time due to rising subscription costs. There are excellent CRM solutions, great communication tools for the entire organization, as well as tools for project management, warehouse management, production, and logistics. An extreme example would be a situation where an app we’ve built is used by enough users. This would require a redundant network infrastructure hosted in the cloud. . This happened with 37 signals, a project management software provider. They had so many users that maintaining network infrastructure and storage space cost them over 3 million euros annually. Building local infrastructure, consisting of over 4,000 processor cores, 70TB of RAM, and 14PB of storage, cost them the equivalent of half the savings. So they made by discontinuing hosting services. They moved their data, server services, storage, and ERP to the cloud.
In summary, this issue requires an individual analysis. Every business decision should be examined in the context of the specific company, through its own lens.
