contd… Comparing On-premise | Hosted | Cloud ERP (p1)
ERP application licenses are typically the most straightforward cost component. Licensing costs are normally driven by a combination of users and modules; in other words, how many people will access the system and what functionality will they be able to use. Cloud application users are typically licensed on a named user basis, meaning that you must purchase a license for each specific user who will access the system.
Some on-premise vendors use named user licensing while others use concurrent user licensing. Concurrent user licensing can reduce costs for applications where many users need access but the same users are not continually in the system. Concurrent user licensing allows setup of unlimited users with unique security profiles but only allows a certain number to access the system simultaneously.
Most on-premise ERP vendors charge an annual fee for software maintenance. This fee supports ongoing development, patches and bug fixes for existing versions. It’s a good idea to stay current on maintenance as computing environments and business regulations are constantly evolving.
From a longer-term perspective, maintenance provides access to updates and new versions of the software with new features without repurchasing the product. Cloud ERP applications are typically patched, fixed and updated by the vendor as a part of the Software as a Service (SaaS) model.
In addition to the actual software code, there is labor that goes into deploying the code. This can be minor in the case of some small patches or very significant in the case of a major version upgrade. This labor is included in the subscription for cloud solutions, but costs should be expected for consultants or internal staff for on-premise solutions. A hosting partner may or may not include these tasks in their hosting fee; however, since upgrades typically occur every 12-24 months, they are not usually included.
ERP systems generate an enormous amount of data. That data is stored in database software which requires an operating system, antivirus and malware protection, and backup software. These costs should be anticipated with on-premise deployments, but become the responsibility of the vendor in cloud solutions. A hosting provider will typically include these components in their hosting fee.
Additional software may be required for on-premise, hosted and cloud deployments in order to get maximum value from the software. This software can range from third-party reporting and integration tools to something as simple as Microsoft Excel.®
Computing hardware platform
The clearest difference between on-premise and a hosted or cloud solution is the need to purchase servers and related hardware. In addition to servers, an on-premise solution will need disk storage and backup systems. Often overlooked when projecting initial costs are the racks, power supplies, cabling, cooling and physical security required to maintain enterprise systems.
For organizations with stricter change control processes, hardware costs for development and testing environments should be planned in addition to production hardware. While hardware is not a concern for cloud solutions, it should be noted that cloud vendors typically charge additional subscription fees for access to development and testing environments.
The process of implementing a new ERP system usually requires consultants with specialized knowledge of applications and business processes. A cloud or hosted solution may not require fees for software installation, but otherwise, the costs are very similar. These investments include the discovery, design, configuration, integration, data conversion, training and testing to make the system serve the needs and goals of the business.
An element that cannot be ignored when choosing an ERP system is risk. The needs of your business can change quickly as a recession could negatively affect business or you could experience rapid growth following a rise in popularity. With cloud subscription models, the number of licenses can be amended on an annual basis, controlling costs and managing risk. In the traditional on-premise licensing model, if 10 licenses are purchased, it is a sunk cost, limiting future agility. These risks only magnify the importance of choosing the right system and configuration and correctly projecting your system requirements.
With the amount of variables, modules and capabilities available within ERP systems, there is no one-size-fits-all solution and comparisons are often difficult. A careful analysis of the differing technology and licensing models and your specific needs will dictate the most beneficial ERP solution for your business. A trusted advisor can assess your needs and formulate a road map to select and implement the optimal application for your organization.
BrightStar has the knowledge and expertise to be your trusted consulting pratner. From installs and upgrades, conversions and roll-outs, to end-user training on Release 12.2.x, our consultants have the technical proficiency and hands-on industry experience needed to make the E-Business Suite work for your business.
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