ERP system in the cloud or on-premise? 

Having regard to the uncertain economic situation, companies must re-define the importance of resource planning as well as develop new methods of its implementation. Commonly used terms such as SaaS (“Software as a Service”) and “on demand” refer to such new methods that involve software licensing and distribution models in which software applications are accessed over the Internet.  

The SaaS model and open source code that ensure reduced ERP project risks and costs are perceived as big advantages by many businesses, compared to traditional locally installed ERP systems (the so called on-premise systems) . However, potential hazards that result from using these solutions must be considered. Nowadays, users have a vast array of possibilities when choosing an ERP system.

A guide to selecting the right ERP system

They may decide to install the software their on-premises i.e. on their own servers (traditional ERP installation) or on hosted servers (SaaS). Before the final decision is made, six crucial aspects should be taken into account: 

Simplicity

The Software as a Service model simplifies the implementation process and makes it possible to avoid the necessity to purchase additional servers and install the software on your own. To start work with the system, all you need is the Internet access.  

Flexibility

The traditional software distribution model involves the installation of an ERP system on user’s servers. Software is the property of the user who can tailor it to the needs and requirements of the business and integrate it with other programs. As a rule, ERP software allows flexible customization. However, in SaaS model, this flexibility is very limited.  

Control

As mentioned above, many companies see limited control possibilities as a drawback of the SaaS model, compared to traditional ERP installations. Especially medium-sized and large businesses have a negative perception of the Software as a Service model because of their strictly defined processes that are more difficult to modify. Process customization is much easier in the case of smaller companies. In the SaaS model, there are also limitations concerning the delivery of the software with more complex functionality. 

Availability

In the SaaS model, the software is installed and hosted on an external provider’s servers and services are delivered over the internet. However, such a solution also involves the risk of unscheduled downtime or lack of access to the network. With a traditional on-premise ERP installation, interruptions in data access do not bring about serious risks. 

Cost

Basically, the costs of SaaS installation and maintenance are considerably lower. Companies do not have to incur high costs related to the purchase of a license, advanced hardware, infrastructure management and development of IT solutions. Lower expenses are definitely a major advantage, but ERP software licensing in the SaaS model has some disadvantages. As SaaS applications are delivered on a subscription basis, monthly fees for using the ERP platform are higher. This is like leasing, not owning, a car, which involves regular subscription payments. The Software as a Service model may be a costly idea, especially when the number of employees and processes is on the increase.

Integration

Companies that have decided to invest in an on-premise ERP installation have access to all applications and services located on one platform. As a result, integration problems can be avoided and control over application performance can be enhanced. Integration is a vital issue for SaaS providers. Customers report their expectations regarding the integration of locally installed systems with cloud-based applications. A great challenge is to harmonize applications hosted by multiple SaaS providers. The Software as a Service model is dedicated to companies that do not require as big investments as it is the case with on-premise software. It is of paramount importance, especially in the adverse economic conditions. 

Even though each software distribution model has advantages and disadvantages, it is possible to work out a compromise. When deciding to select and implement an ERP system, it is worth considering the above-mentioned factors. 

Basically, the costs of SaaS installation and maintenance are considerably lower. Companies do not have to incur high costs related to the purchase of a license, advanced hardware, infrastructure management and development of IT solutions. Lower expenses are definitely a major advantage, but ERP software licensing in the SaaS model has some disadvantages. As SaaS applications are delivered on a subscription basis, monthly fees for using the ERP platform are higher. This is like leasing, not owning, a car, which involves regular subscription payments. The Software as a Service model may be a costly idea, especially when the number of employees and processes is on the increase.

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