Which is better for my business: Cloud, On-premise or maybe a Hybrid?

Top 5 issues for SMBs to consider

Is the Cloud the answer?
The gas prices at today’s pumps will make any consumer stop in their tracks and wonder why they bought that big SUV. There will be intense family discussions about the value of keeping the vehicle, or if they should trade-in for a smaller, gas-conserving model or even go with a hybrid.

The comparisons are there with some of the management decisions that small and medium-sized companies are facing in today’s economy and what direction they need to take with their ERP (Enterprise Resource Planning) systems. This is a market that has come under the microscope with the introduction of many cloud solutions, alleging to be the key when it comes to saving company dollars.

The ERP solution of ten years ago that was going to carry the company to business success mayor may not have realized its potential, but the marketing hype and glamor-ads of today all suggest that you will get more MPG with less work by moving to a SaaS (Software-as-a-Service) alternative, placing your data and effectively your business in the legendary cloud.(There are really three options to consider; on-premise, hosted, and SaaS, but in this article we’re only looking to discuss on-premise versus Saas).

But is the reality that simple, or are there hidden considerations that can cause you to hesitate? “Once bitten, twice shy” so says the familiar idiom, and firms who had unpleasant experiences with their ERP project may not want to face similar upheaval and problems again.

It’s nice to have choices
Which model is right for your organization? What are the factors to consider when reviewing your options?  Here are 5 considerations that should help at least determine if a full assessment is needed.

  1. How complex is your business?
    If you have a simple, vanilla business model then you will likely not require anything too unique that cannot be accommodated out of the box (or in this case out of the web). But if you have complex business processes then make sure that these can be adapted to a web application. You may already have implemented customizations to your on-premise system, and it can prove costly or impossible to get the same functionality from the SaaS offering, which may not be as flexible due to vendor standards. If it is early days for your business, and you haven’t defined too many processes, then adapting to the SaaS software best practices is probably the best route. As most ERP vendors provide both flavors (on-premise and SaaS), then if you find a competitive advantage later that requires some process complexity, then it may just be a natural growth progression to bring the system in-house.
  2. How many locations do you need to manage?
    Small to mid-size companies should definitely consider cloud options. Typically, cost would be a consideration for these companies, and one of the benefits of SaaS is a lower startup cost. This would mean there would be reduced onsite infrastructure to be in place, just a reliable communications provider to enable access to the internet. Beyond mid-size, and for those companies who may have a number of diverse organizations under the same corporate guidance or globally may decide that an on-premise option suits their requirements better. Primary issues here are control of their data and applications, and the ever present security concern.
  3. What level of IT skills and support do I have?
    If you have in-house IT staff, then it’s a matter of the level of skills they will have to undertake an implementation project, or how much time they are currently devoting to supporting the existing system. If you have a well-oiled machine, then your ongoing costs may already have stabilized. If you have none of this, or perhaps have your IT support outsourced, then the low cost of startup and ongoing support make the SaaS option attractive.
  4. What level of integration with other systems?
    If you have specific applications that have been, or will control unique business processes, or have a need to customize or interface with legacy systems, then on-premise is a better option. It’s partly about what level of control you feel comfortable with, and partly a bandwidth issue. With specialization there could be large amounts of data involved, and therefore response times can be of concern.
  5. Do you have high-availability requirements?
    Most online systems have high availability levels, and have taken steps to ensure redundancy is built into their network. But systems still go down, as Amazon experienced recently. From a local perspective, everything works great until you lose your internet connection. If you are in a business that demands 100% availability, then you can’t beat on-premise as you rely only on your own network and contingencies. The deciding factor here is how much revenue is at risk for every hour, or perhaps minute, that you are down.

One size does not fit all
When an IT question is asked, the answer is invariably, “It depends.” The cloud / on-premise evaluation is no different, and indeed there is even a case for the hybrid approach that can allow for exceptionally dynamic business needs. Don’t make the decisions in a vacuum. Seek outside counsel from business partners and consulting firms who specialize in guiding organizations through these types of projects, and make the right decision to match your business needs for the future.

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