Cloud ERP, Hosted ERP, SaaS ERP….What are the differences and which is best for your manufacturing company? The truth is no single ERP deployment method is right for every manufacturer. Your business may have strategies and needs that are not well matched to a traditional on-premises deployment or a strictly defined software-as-a-service (SaaS) deployment. The right answer often lies between these two options. The best answer is having a broad choice of deployment options and being able to pick the solution that is best for your business.
For context, here are high-level definitions of the major deployment options:
- On-premises: Perpetually licensed, traditional software, deployed on the native hardware and network of the business.
- Hosted: Perpetually licensed, traditional software, deployed in a third-party datacenter
- Managed Cloud: Traditional software licensed on a subscription basis, deployed in a virtual environment in a datacenter, with managed services
- SaaS: Software, which is licensed to multiple tenants on a subscription basis and is centrally hosted and managed by the SaaS provider.
ERP Hosting Consideration Options
There many more differences that fully define an ERP hosting model and should be taken into consideration before deciding what deployment option is best for your business. Your company needs to be empowered to choose from a menu of options in order to optimize your deployment and support your company’s growth and business objectives. Your comparison should take an in-depth look at:
- Software fit and functionality – above all else!
- Purchase agreement (perpetual or subscription licensing)
- Implementation and training
- Backup & redundancy
- You philosophy on IT and internal IT footprint
- Software update control
- Data access and ownership
- Total cost of ownership
Defining Myths and Realities of Cloud ERP
In addition to these factors you will need to sift through the mis-truths associated with each of the hosting options. There are many myths floating around that taut one hosting solution over another. Cost is widely mentioned as a key differentiating factor for cloud ERP. The truth is for companies that do not want to expand their IT footprint a hosted or cloud ERP solution may work well for them. However be aware that the most common cloud and SaaS pricing model is to recoup a typical five-year cost of an on-premises deployment in 36 months and then to keep charging that monthly fee for as long as you are using the software. Direct, out-of-pocket cloud subscription and support expenses could cost nearly twice as much a perpetual license model.
That difference may very well be worth it if your indirect or soft cost savings offset the increased direct costs of a cloud-based solution. (Soft costs include system administration personnel, hardware, networking, and redundant utilities.) The thing to be aware of here is your other internally based information technologies. You still will have a network, printers, email, desktops, and probably other on-premises software. And you will still need someone to support those technologies. The predicted cost savings may not add up if your business continues to retain a significant IT footprint for other reasons.
Cost is just one of several key differentiating factors that can be murky depending upon who you talk to. When it comes to evaluation ERP vendors it’s best to select vendors that provide a choice of hosting options who won’t try and sway you by playing one hosting option against another. You will be in the driver’s seat. You just need to be sure you have a good understanding of the true differences that fully define a deployment model so you can determine what attributes are important to your business and how they support your long term goals. For a more in-depth understanding of the key considerations and the truths associated with the primary differentiating factors with ERP hosting options download the whitepaper: ERP Deployment Options – Choice is the New Cloud