On premise vs cloud: which is better for your business?

A major choice facing any business evaluating Line of Business or ERP software is what type of infrastructure model to adopt: on-premise or the cloud.

Will you rely on a traditional, but tried and tested on-premises infrastructure, or true public cloud-based infrastructure? Cloud-based ERP systems have certainly grown in popularity, particularly for small businesses. Yet on-premise ERP has stood the test of time, and is still attracting businesses across the spectrum. It’s a hard choice!

We’ll take a closer look at the main differences between the two options, and the advantages and disadvantages of on-premise and cloud for your business. Firstly, let’s define exactly what these terms mean.

What is the difference between cloud and on-premise?

On-Premise

How can we define on-premise ERP systems? The simplest way to think of it is that the system lives in your servers, on your premises. With this type of infrastructure you’re responsible for everything related to the running of the servers and the software system it hosts. You purchase the network infrastructure, power the equipment, purchase servers, operating systems, database software, etc. You also need to maintain all of this to keep it running, secure and up to date. Once you purchase a license for the software from the vendor, such as a Microsoft Partner like Netitude, the software is installed on the server or servers you own.

Cloud-based

Cloud-based ERP systems, however, are hosted in the cloud. There are two different forms of Cloud-based ERPs: public cloud, and data-centre hosted. Using a Software-as-a-Service (Public Cloud) model, you don’t have to purchase any licenses or hardware. The only cost is recurring fees for the services, which includes the servers, network and the operating systems required to host the software. This is all maintained by the public cloud provider, the most common being Amazon AWS, Google Compute Engine and of course Microsoft Azure.

Deciding between these options largely depends on the current state of your business, your existing infrastructure… and the direction you want your organisation to take in the future!

Sounding like a difficult decision? Let’s break this down into a more in-depth comparison of on-premise and cloud-based ERP systems, and take a look at the benefits (and drawbacks) to help you come closer to the best solution for your business.

If you already know which system you want to go for, but want to discuss this with an expert, get in touch with the team at Netitude! We offer this type of guidance as part of our fully managed IT service. Read on for more information.

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On premise vs cloud: which is better for your business?

Control

On-premise

So what are the benefits of having an on-premises data center? The main one is control. All deployment is done in house. Given that on-premise ERP systems are installed natively on your networks, it will be the responsibility of your organisation to maintain these systems. While this is a more involved approach, you know you’ll have complete privacy.

Cloud

If your ERP system sits in the cloud, everything is web-based. The system’s vendor therefore has access to your encryption keys and data remotely and will take control of maintaining the systems and processes.

If you’re looking for a more hands-off approach, a cloud-based system is the clear winner! But if you’re looking for more control over your own processes, head for the on-premise option.

Pricing

On-premise

If you opt for the on-premise option, you should typically expect a large initial investment. Given that you’re responsible for the ERP system, it’s unsurprising that you are also responsible for the hardware, maintenance and operating costs, as well as any additional infrastructure that you may require. Luckily, however, you’ll pay a one-off license fee at the beginning, and only need to pay for related services as and when!

Cloud

With a cloud-based system, you can expect to pay a monthly or annual fee for the provider’s service. This way, you won’t receive any unexpected costs, as well as no hardware investments, and therefore less capital upfront. So, is cloud cheaper than on-premise? While it may be cheaper initially, given the continuous fees, it may actually work out to cost near enough the same as an on-premise option in the long haul!

Security and compliance

On-premise

You’ll probably be noticing a trend here, but the responsibility for security and compliance falls on the organisation. If you have adequate infrastructure to deal with this yourself, this is a great option, to give you more control – after all you’ll have one less organisation’s security policies to worry about! On the other hand, this does give you as an organisation a lot to be responsible for; there are many laws and regulations to comply with, as well as a lot to think about when it comes to your company’s security.

Cloud

On the other end of the spectrum, when dealing with a cloud-based system, it is the third-party’s responsibility to take care of data security tools and to comply with regulations. So is cloud more secure than on-premise? Not necessarily. You’ll need to make sure that you can place that trust with the provider. We recommend conducting an audit of the provider before signing the dotted line!

Interested in finding out more about Netitude’s cybersecurity services? Take a look at our dedicated page!

Customisation

On-premise

When it comes to customisation, on-premise is a great choice. You can adapt processes to your exact business needs and create a bespoke system. This is great if your budget and infrastructure allow it! These customisations can, however, cause issues when your vendor comes to update the system, so make sure to check this with your provider before jumping head-first into the bespoke route.

Cloud

Sadly, with a cloud-based system, it’s more difficult to customise. This is something that you would need to discuss with your provider, and ultimately depends on their flexibility with creating a bespoke cloud system. The inability to customise, however, makes it far more stable when it comes to providing updates.

Flexibility

On-premise

When it comes to employee flexibility, however, on-premise isn’t the most elastic of systems. Given that it’s installed natively, it can be more difficult to operate if you have many employees working remotely. You would have to install the software to their devices and ensure that correct security measures are in place, as per company-owned devices. That’s not to say it can’t be used remotely, but you’ll often need to contact the service provider to sort out the access.

Cloud

With Cloud’s ability to move across devices with a stable internet connection, this system is far easier to use for companies with remote staff – particularly, if they tend to move around a lot.

So, which should you choose: on-premise or cloud?

Let’s summarise the pros and cons:

On-premiseCloud
ControlPro:

  • All deployment done in house

Con:

  • All responsibility lies with the organisation
Pro:

  • Vendor takes control of maintaining the systems
PricingPro:

  • Cost-effective in the long-term 

Con: 

  • Large initial investment
Pro:

  • Low upfront costs
  • Predictable monthly or annual fees

Con:

  • Continuous payments, expensive in the long-term
Security and CompliancePro:

  • Security lies with the organisation
  • One less organisation’s security policies to worry about

Con:

  • A lot of responsibility for the organisation
Pro:

  • Responsibility for data security tools and to comply with regulations with the vendor

Con:

  • You will need to conduct due diligence when choosing a trustworthy provider 
CustomisationPro:

  • Perfect for customisation

Con:

  • Customised systems can cause compatibility problems when it comes to software updates
Pro:

  • More stable for vendor updates

Con:

  • Harder to create a bespoke system for your organisation
FlexibilityCon:

  • It can be used remotely, however much more difficult to implement as software must be installed natively
Pro

  • Easy to use remotely as everything is web-based; simply needs a good internet connection. 

If you already have the infrastructure in place and plan on keeping it, it might make sense to stick with an on-prem deployment. If you’re looking to customise the system and make it bespoke to your particular needs, on-premise is likely to be the better choice. Another thing to bear in mind is your internet connectivity, if it’s low speed, an on-prem solution may still be the best option, as the cloud is founded on internet connectivity.

If you have neither infrastructure nor the money or desire to invest in it (or upgrades to current systems), the cloud just makes sense. If you’re weighing up on-premise or cloud-based ERPs as a small business, your best bet is also the cloud. You’ll have cheaper upfront costs, you’ll have a predictable monthly or annual fee, you won’t have to buy upgrades or additional maintenance plans, and you’ll also receive a more supported service; plus, you’re unlikely to need the customisation that you benefit from as an on-premise user.

If you are evaluating options, or feel it’s time for your business to review the systems you have in place, contact Netitude! We can help you navigate to the best solution for your business.

This type of advice is supplied inclusive to our fully managed IT service customers. Imagine having an experienced IT Director on hand to guide you, without the costs associated with running a full IT department!

Have a query? Contact the team today!

 

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Adam Harling Adam Harling

02 June 2020

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