When speaking to clients about the cost effectiveness of the cloud vs on premise solutions we receive a wide variety of reactions.
Most agree that the initial upfront cost of an on premise ERP are surprising. Of course the software and implementation costs are significant but many forget up upgrade, hardware, and related IT costs. When investing in a new ERP typically new servers, workstations, and other related costs to that hardware must be included.
With cloud ERP many are surprised by the monthly or annual subscription fees of cloud based solutions. They do some quick math and then feel that the cost of on premise ERP looks much more attractive. Often ERP buyers will perform math that indicates that the cost of a cloud based solution will equal the cost of an on premise solution in X years and therefore it is better to purchase an on premise solution and finance it to avoid the up front costs.
As we have become so accustomed to the on premise world we again forget about what a Cloud based ERP offers in terms of hardware, uptime, upgrades, maintenance, backups, etc.
When performing the math please ensure you include the hardware that is included in Tier 1 Data Centre with a cloud solution, the database and operating system maintenance that is performed by the staff at that Data Centre, the uptime guarantees that Cloud Solutions offer as compared to the uptime you might get from your server stored in closet in your warehouse or staff kitchen, nightly backups and data restores to less than a few hours from when you may have had a problem. This is only a small sample of what is included in a cloud solution but is often not included in the cost comparison formula between on premise and cloud solutions. I will discuss upgrades and the related costs in a future blog post.
Now after all the math is performed some will feel Cloud is more effective and others will feel on premise is more effective. We are not writing this blog to persuade you one way or the other.We are telling you to make sure your calculations are correct and your math is sound as for the most part from what we see in this space this is not happening.