When talking or visiting with Clients and Prospects, I am often asked about putting their ERP solution in the Cloud. My first question is why are you interested in the Cloud? Are you interested in saving money, accessing the programs from remote locations or minimizing your IT infrastructure issues? Many times the answer is that the Cloud is all that they are hearing about.
My response to saving money is that, in the long run, you do not save money. The payback is usually between two and four years. The reason that you hear about the Cloud is because the software company makes more money when they can rent the software rather than license it. They know that once you are on Cloud software, you are much less likely to switch vendors. If you do want to switch vendors, many times your current provider will send you a flat file and it is your responsibility to figure out how to get the data into the new software. Of course your new provider is willing to help. However, the conversion expense is usually higher than staying with the cloud vendor.
If your reason for considering the cloud is access from multiple locations, this can be accomplished with premise based software. You may need additional hardware and a higher level of Internet access. However, over the long run, it is less expensive to maintain your own Network versus using the Cloud. The Cloud vendor is not doing this for charitable purposes.
The last issue is an attempt to minimize your software infrastructure issues. You will be able to get rid of your application server(s). However, you may need to increase your Internet Bandwidth as all of your users will now be using the Internet to connect to the Cloud application. If you are a single location, an Internet outage at your location or at the Cloud location will require you to revert to paper backup. You will need to have procedures where everyone is trained in case of an Internet outage. Multiple locations may allow you to ship from one location when another location has no access to the ERP software.
A hybrid solution is to host your software. Under this scenario, you will only be paying a premium for the server portion of your enterprise solution and will not pay a premium for the application software. Remember that you will still deal with your workstations if in a Cloud or Hosted environment and may also run into the issues described in the previous paragraph. Another issue with a Hosted solution is that you do not really control the environment. Many times the Hosting Company blames the software when they really need to look in the mirror.
Are the above issues and additional cost offset by the benefits of the Cloud? Every Company’s answer will be different.
My response to saving money is that, in the long run, you do not save money. The payback is usually between two and four years. The reason that you hear about the Cloud is because the software company makes more money when they can rent the software rather than license it. They know that once you are on Cloud software, you are much less likely to switch vendors. If you do want to switch vendors, many times your current provider will send you a flat file and it is your responsibility to figure out how to get the data into the new software. Of course your new provider is willing to help. However, the conversion expense is usually higher than staying with the cloud vendor.
If your reason for considering the cloud is access from multiple locations, this can be accomplished with premise based software. You may need additional hardware and a higher level of Internet access. However, over the long run, it is less expensive to maintain your own Network versus using the Cloud. The Cloud vendor is not doing this for charitable purposes.
The last issue is an attempt to minimize your software infrastructure issues. You will be able to get rid of your application server(s). However, you may need to increase your Internet Bandwidth as all of your users will now be using the Internet to connect to the Cloud application. If you are a single location, an Internet outage at your location or at the Cloud location will require you to revert to paper backup. You will need to have procedures where everyone is trained in case of an Internet outage. Multiple locations may allow you to ship from one location when another location has no access to the ERP software.
A hybrid solution is to host your software. Under this scenario, you will only be paying a premium for the server portion of your enterprise solution and will not pay a premium for the application software. Remember that you will still deal with your workstations if in a Cloud or Hosted environment and may also run into the issues described in the previous paragraph. Another issue with a Hosted solution is that you do not really control the environment. Many times the Hosting Company blames the software when they really need to look in the mirror.
Are the above issues and additional cost offset by the benefits of the Cloud? Every Company’s answer will be different.
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