Choosing Between On-Premise or Cloud ERP

The top 10 questions small business managers and owners need to ask when choosing between on-premise or Cloud ERP.


All businesses today are asking the same question when it comes to implementing any software solution. “Do we move to the cloud, or stick with the more conservative approach and select on- premise?”

This can cause many sleepless nights for business decision-makers around the world. There are advantages and disadvantages to both systems, but as you move further through this blog, you will see that the world is changing and maybe a conservative approach is not necessarily one that holds the key to success.

Before we start, let’s think about what the decision would be five years ago when asked this question. You would not be far off the mark saying over 95% would choose the on-premise solution.


Fast forward to today and look at the way personal software is accessed. Millions of people use the likes of iCloud from Apple, Office 365 from Microsoft, Facebook, Snapchat and hundreds more, without a care for such things as security or privacy of their data. However, we all know in business we must be more conservative and pragmatic as we simply cannot afford to make a decision that is not only robust, but 100% bullet proof. The success of a company depends on a decision like that.

Over the last few years, as consumers have been embracing the cloud bubble, businesses have also been doing the same, but at a much slower pace. This is because mistakes are less tolerated in business. If the Chief Technical Officer makes a bad software choice without taking everything into consideration, then this could cost the business later down the track.


Now that we’ve covered the situation, let’s start asking those
top ten questions you need to ask yourself when making this decision.

I want to stress here that these questions must be answered in your decision-making process as they will all be important, some more than others, depending on the nature of your business. Then comes probably the most important decision, which vendor do you trust to take you on this journey.

I want to take you on the journey of John, the Chief Technical Officer at a well-known distributor with 70 employees. A decision has already been made to choose SAP Business One. But now the question looms: cloud or on-premise?


John’s company is a relatively conservative one and he knows he will have some challenges ahead discussing the options to his peers. This is when the palms start to sweat and friends become enemies albeit for a short period of time. John knows that many advantages to one department may be disadvantages to another (or sometimes that’s just the way it seems). John knows he will get the backing of his CFO, if he leans towards the cloud based solution, as budgeting becomes a much simpler process. On the other hand, he knows his IT manager will be very nervous around losing control and will probably lean towards the on-premise option. This does not need to be the case as he assures his IT Manager it will free up his time to work on more strategic tasks, that will ultimately bring a more profitable outcome to the business.

This would undoubtedly be the number one concern for any business today looking at a cloud solution. However, breaches could be from internal staff members who have access to the on- premise data. It would be much more difficult for them to access a cloud based solution with the restricted privileges assigned. John must work through the different hosting options available and the pros and cons of each. Does John go with a SAP hosting solution or does he prefer a local cloud company to provide this service? This is when John seeks the advice of an authorised solution provider such as Key Business Solutions to help him with the evaluation of each option.

Even though IP and Data are very closely linked and sometimes are one of the same thing, John is worried about having the companies data on someone else’s system, especially when it could possibly be in a different country. This is a very daunting decision for John and not one anyone would take lightly. Again, he engages again with an authorised solution provider to make sure he is clear on all the terms and conditions of the cloud data security policy.

John would have started thinking about this when answering question one, because these two items can mean different things to different people within an organisation. As we all know, cashflow is king in any business. Therefore, John needs to discuss with his CFO which solution is a better fit for the current monetary situation of the business. They realise the cloud solution is very tempting as they want to keep a drip-feeding cost structure around their software use. On the other hand, the CFO may already have CAPEX approved and an on-premise solution maybe a better fit. Just remember that one size does not fit all.

No matter how hard John and his team try and predict the future of their business, he knows he can never be 100% accurate. Therefore, he knows the scalability of a cloud solution has major advantages over the on-premise offerings. The flexibility of the cloud solution gives John a lot of comfort and takes the stress off planning actual licence numbers for the future. If their numbers grow or decline, then he knows the cloud solution will align perfectly with the situation and would provide a much lower long-term cost of ownership.

John needs to consider the downtime required to implement such a system. He is aware the on- premise solution will require not only resources from his solution provider but will also tie up internal IT staff. As the cloud solution is accessed via a web browser, John knows that all the installation is completed by the provider at the hosting site. Therefore, he will have very little down time.

Again, we touched this point when answering the first question. John starts to cast his mind forward to after the implementation phase is complete and looks at the resources required for the ongoing maintenance of the system. Only the on-premise will have local maintenance when upgrading the software patches, etc. The cloud solution is fully maintained by the hosting provider. John and his CFO are very happy that this would be a large cost saving and one that is sometimes overlooked when moving to a cloud based solution. John still needs to keep his IT department in the loop as it

will free them up for more strategic tasks to help the business in automation, configuration etc. Rather than installing and patching software.

John’s company has a lot of integration between systems. He needs to make sure the same level of integration can be achieved. Most people would think that a cloud based solution is an ‘out of the box’ solution with no ability to integrate with their current system. Nothing could be farther from the truth. Just because the data is in the cloud, does not mean that it is not accessible and cannot be linked to other parts of their internal systems. John speaks with his solution provider regarding what can be achieved to ensure the same level of integration can be maintained or in some cases bettered.

This is so important when choosing any software solution. John asks the question, “can I customize it to fit my needs?” Whether going with on-premise or cloud, it’s true both the solutions can be customised and configured.

John has read a lot about the performance of a cloud solution, especially when the hosting is provided from an overseas server. He decides the best way to prove this theory in his environment is to access a 30-day trial of SAP Business One Cloud. As John is on the NBN/Fibre connection at his business he can easily prove the speed is not going to be an issue once he tries it for himself.

There are many capable people in business nowadays who would embark on this journey without any local help. John however engages with Key Business Solutions, to help him start the journey and guide him through the first initial stages of implementation. He realises very soon into the early stages of implementation that this was not as daunting as first thought and he can quickly wean himself off the provider.


From the Blog Author, Stephen Taylor

It is my hope that these ten questions will assist you in your evaluation of cloud vs. on-premise software. Remember that what works for one company, won’t work for another. Take the time to consult all your business stakeholders and ensure you plan for the future, not just the right now.

About the Author: Stephen Taylor

Stephen Taylor

Stephen has over 30 years of experience in the information and technology sector. His experience with small, medium and large-scale enterprises has earned him accolades in the industry. Stephen made the move in 2012 from New Zealand to take up the role as Chief Information Officer at EMPR Australia. He is now the Director at Stephen Paul Consulting and advises multiple clients on how IT can shape and future-proof their business.

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