In this article we explain why Cloud ERP solutions are leading to the slow death of on-premises ERP software. With the emergence of the Cloud as a viable computing platform that is much more efficient and easier for users, older technology models and methods are fading away. Estimates of how far advanced the transition is vary but most industry specialists believe that spending on Cloud infrastructure already exceeds on-premises. Cloud-based software and storage is now the dominant delivery model. You have only to look at how user-facing applications are now delivered by Microsoft (Office365), Google (Workspace), Adobe (Document Cloud), for example, to see the change. Large government agencies such as DOD are moving their most sensitive systems to the Cloud. Similarly, ERP software, the largest enterprise software application, which was once solely offered as an “on-premises” solution has now moved into the Cloud. At the upper-end of the ERP market large enterprises have already made the transition to Cloud. For mid and small enterprises, their slower but nonetheless, clear transition has meant that on-premises ERP software is on a path to a slow but inevitable death.
ERP Software 101
ERP stands for “Enterprise Resource Planning,” and refers to business software that is used to store an enterprise’s data on a common database, making information accessible throughout the organization. The main feature that compels businesses to purchase ERP software is its ability to integrate all transactions, across departments, with a single accounting core.
The older model of ERP software installed on a user’s own on-premises server is becoming archaic and is being replaced by Cloud ERP solutions which run on Cloud servers. The Cloud servers range from simple, single managed servers to complete platforms offering computing, storage, backup, etc., offered by organizations such as Amazon Web Services (AWS), Microsoft Azure, Google Cloud. True Cloud ERP solutions use a web-services architecture and can be run on any device and need no software installed on the device other than a standard web browser. Hosted ERP software is not the same as Cloud ERP solutions. Hosted ERP software is essentially on-premises software running on a simple stand-alone data center server and the user accesses it through RDS (remote desktop services) or other remote access software.
The Question of Security
When many people hear the word “Cloud,” the first thing that comes to mind is security. They mistakenly assume that on-premises software is more secure because the server itself is under their control. This is a major misunderstanding. Any server that has an Internet connection is vulnerable to attack irrespective of the physical location of the server. On-premises servers, often managed by outside IT specialists or even your own IT personnel, are orders of magnitude less secure than a Cloud platform like AWS. For an organization like AWS, a security breach is an existential threat – and so AWS’s security management, intrusion detection, isolation and remediation capabilities reflect this. No on-premises server can hope to match the hardened protections or the specialist knowledge and training of the security personnel of a public Cloud provider. This is apparent from the trend of major government entities and corporations gravitating to the Cloud. Even the DOD has Cloud projects to move the nation’s most important defense data to the Cloud. There is very little debate among industry professionals that the Cloud is extremely secure. Moreover, with true web-services architected software delivered through a URL, there is very little a malicious bot or virus can do to attack this since no access to the operating system of the server is available, only a front-end website. In this era of constant Ransomware and other attacks, Cloud ERP solutions have a distinct advantage over on-premises ERP software. For more information on this, download our e-Guide: Key Concerns Raised with Cloud Software - Addressed!
Pricing is one of the key benefits of Cloud ERP solutions. Cloud ERP solutions avoid the big upfront investments in hardware, configuration and software that are required for on-premises software models. Distribution is already a capital-intensive business requiring big investments in warehouses and inventory. Why add to this with investments in servers, network infrastructure and software? On-premises software is typically considered a capital expenditure as a large, one-time investment upfront, while most Cloud-based systems are available with monthly SaaS (Software as a Service) pricing and are classified as operating expenses. With a considerably lower entry cost and reduced spending required for IT maintenance, many smaller companies are able to get Cloud ERP solutions up and running right away to help streamline their business processes. The huge up-front and maintenance expense of on-premises ERP is one of the several reasons contributing to the slow demise of on-premises ERP software.
Mobility is another relevant element of modern computing, and Cloud ERP solutions deliver it much more seamlessly than on-premises software. With Cloud ERP solutions users access the software as a URL using any device that needs to run only a web-browser and access can be from anywhere that has an Internet connection. In contrast, on-premises ERP software requires a defined Remote Access path, that becomes a magnet for malicious actors. There are droves of bots that do nothing but “sniff-out” remote access flows and target them. Also, all on-premises software needs some sort of client on the user’s access device, either the ERP client itself or a Remote Desktop Services (RDS) client. This limits the user to accessing the software only from the device that has this software installed. As mobile devices proliferate and become more and more powerful, not being able to easily access your Cloud ERP solutions will become more and more of an impediment to productivity.
Another major contributor to the slow death of on-premises ERP software is that it is more difficult to scale up during periods of growth or scale down to respond to unforeseeable circumstances such as the recent Coronavirus lockdowns. With on-premises ERP software the investment in hardware and software has already been made. This limits the ability to respond rapidly to changes. If business booms you have to buy a bigger server; if business slows, you cannot do much; if business slows greatly like what just happened with the global pandemic, you have to write-off the sunk cost of the server and invest in a smaller system to reduce operating costs. With faster business cycles and the rapid pace of technological advancement driving changes in industry models, the inability to react quickly is a fatal problem for on-premises ERP software. Cloud ERP solutions can handle all these kinds of environment change much more quickly and simply. Cloud ERP solutions SaaS subscriptions are on a per-user basis so just increase or decrease users to address the changed environment. Spinning up new users on a load-balanced auto-scaling Cloud-based ERP platform takes minutes.
Don’t Put Off Addressing Your On-Premises ERP Software
If you are still running on-premises ERP software, you are running a big risk, and you may be missing out on profitable opportunities. This is not just an opinion, companies like Microsoft and Adobe have already made the transition. They have, for the most part, given up selling packaged and installed software, opting instead to move all their offerings to Cloud solutions. Don’t wait out the slow death of on-premises ERP software, get in touch with us to learn how Accolent ERP Cloud ERP solutions can work for you.