A Wider Perspective for the Cloud ERP Cost vs. On-premise ERP Discussion

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[fusion_builder_container hundred_percent=”no” equal_height_columns=”no” menu_anchor=”” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” class=”” id=”” background_color=”” background_image=”” background_position=”center center” background_repeat=”no-repeat” fade=”no” background_parallax=”none” parallax_speed=”0.3″ video_mp4=”” video_webm=”” video_ogv=”” video_url=”” video_aspect_ratio=”16:9″ video_loop=”yes” video_mute=”yes” overlay_color=”” video_preview_image=”” border_size=”” border_color=”” border_style=”solid” padding_top=”” padding_bottom=”” padding_left=”” padding_right=””][fusion_builder_row][fusion_builder_column type=”1_1″ layout=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” border_position=”all” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” center_content=”no” last=”no” min_height=”” hover_type=”none” link=””][fusion_text]While cloud technology is becoming ever more powerful and secure, the broader business conversation about the cloud is not always as sophisticated. When we discuss the cloud fundamentals that play into important strategy decisions—for instance, what really determines the total cost of ownership (TCO) of cloud solutions—it helps to set the right context.

Expanding the Definition of TCO

In December 2016, ERP Software Blog provided guidance on calculating the TCO of cloud compared to on-premise ERP after Microsoft had released a tool to do so. The blog post points out that “the real answer of what’s more beneficial—cloud or on-premises—goes much deeper than the cost of a new server or a year’s worth of cloud service subscription fees.”

The Microsoft tool includes the costs of virtual machines, networking, storage, and IT labor, so it goes well beyond the basic cost elements of subscription services. That is definitely useful. But let’s open the curtain a little more.

The Best Fit Matters Most

In our experience, we find what makes the most difference in any ERP deployment, in the cloud or on-premise, is how well it fits the way your business works and how you want to manage your customer relationships, resources, processes, and growth. When companies decide for NetSuite, Microsoft Dynamics 365, or their on-premise counterparts due to the functionality and extensibility they need, that’s really the most consequential TCO decision.

If you can make a solution work with minimal customizations and enable your employees to work productively with it after a short familiarization period, you can likely keep your TCO reasonable and generate the hoped-for benefits sooner. Staying close to the standard also keeps the costs and complexities of future upgrades under control.

You Don’t Need to Make an Exclusive Cloud Commitment

After you’ve determined which solution most closely meets your requirements, you may still need to decide whether cloud or on-premise is the more practical way to go, considering what will work best for the business and its users. That’s when it helps to think about the less obvious costs, such as IT time, user training, the ability of mobile users to access information, how you will accommodate mergers and acquisitions, or other business conditions in your organization.

Very often, we find that the answer is neither, or both. Many companies can generate the benefits of both on-premise and cloud-based technology by combining them in a hybrid environment that integrates the two. You won’t go wrong if you keep all viable avenues open.[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.


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