Technology continues to trend towards cloud-based ERP systems, but many businesses still desire the benefits offered by on-premises solutions. These may include one-time pricing under a licensing fee, greater control through on-site data and direct access to your resources for configuring the system.
As the market evolves and shifts further away from on-premises solutions, businesses may need to consider the future viability of their legacy software. All the leading ERP vendors are pushing their on-premises users to transition to the cloud, with many no longer even offering on-premises options to new customers.
So, we know the industry is generally moving toward the cloud, but how urgent is it for your business to migrate? Let’s look at the top risks to staying on your on-premises system.
1. Cyber Security Risks
Business executives are becoming increasingly concerned with the cyber security risks threatening their on-premises solutions. Not only are your servers housed in an easily accessible location, but your network may also be vulnerable. Human error is the biggest threat to your system — something as simple as a busy employee clicking on a phishing email that installs malware could do real damage to your system.
Once a cyber security attack has started, there are fewer, less sophisticated mitigations available for the system than if it were cloud-based. And unfortunately, some attacks will render the system completely unusable if you don’t have a solid backup solution in place to recover your data.
ERP vendors have the latest in cyber security technology for their cloud-based systems, and the larger vendors have crews of full-time resources dedicated to cyber security support. If your cloud-based system is under attack, the vendor will act quickly and mitigate most anything that can occur. Additionally, cloud-based systems provide a backup of your data and application, helping prevent major losses if an attack does occur.
With an on-premises system, that support may come from small, overtaxed teams. And as ransomware and malware evolve alongside ERP software, the potential damage to your business could be catastrophic.
While cloud-based systems are not exempt from cyberattacks, it is far easier to combat the risk and efficiently resolve than on-premises. There may be a business case for on-premises solutions when it comes to feeling in control of your data. However, it requires heavy financial and IT investments to keep it secure.
2. Storage/Infrastructure Difficulties
ERP system architecture has changed significantly thanks to recent technological developments. Cloud-based systems are built on a three-tier architecture, with the platform strategy at its core. This means the system is built for future growth. Legacy on-premises systems are instead built to achieve an end result.
These differences in how the system frameworks are built allow more modular flexibility within cloud systems, improving scalability and access to functionality. By relying on outdated and expensive-to-expand architecture, on-premises solutions have a much harder time upgrading their infrastructure enough to scale to support a business’s rapid expansion. The system will eventually be limited in its ability to access data, integrate new technologies and more, making cloud-based solutions even more appealing to growing businesses.
3. Maintenance Issues
Maintenance is another major concern with on-premises ERP solutions. Upgrades are difficult and require uniquely skilled resources to successfully pull off. If you don’t have someone on your internal team to maintain the system day to day, you will need to outsource those efforts to people who won’t understand your business as well as you do. Any breakdowns during the upgrade process can be difficult to overcome.
Alternatively, a modern, cloud-based system upgrade is heavily supported by the vendor and any glitches or bugs can be handled in real time.
Customizations also present a unique challenge for businesses to maintain, especially the longer they run an on-premises ERP. With an on-premises system, customizations are often ingrained in its processes, making it difficult — and in some cases, impossible — to upgrade your system without the customizations breaking.
If customizations bar any upgrades, your business could end up falling behind, losing important compliance updates, functionality or support. On the other hand, cloud-based systems have benefitted from recent technological developments, making customizations easier to implement and maintain.
On top of paying someone to maintain the system, software vendors may charge a premium for continuing/extended support of non “go-forward” products. With heavy investments into their latest cloud-based products, vendors want to move away from supporting older systems and encourage customers to upgrade.
This also means even fewer support options for your system, putting your business at greater risk. When you are already paying for the software, resources to maintain the system and the infrastructure, why should you have to keep paying for outdated technology?
Cost and Resource Requirements
With on-premises ERP deployments, your employees will be maintaining and developing the software. Over the years, these staff have likely heavily customized your software heavily to meet individual department wants, needs and processes.
But what do you do if the expert who maintains your software retires or leaves? With a cloud-based system, your processes will be built on “best practices,” and the solution is maintained online by the vendor. By adopting the system in the cloud and going with the vendor’s “go-forward” product, you are ensuring substantial resources and support for years to come. Remaining on-premises usually leaves businesses with few developers who know how to maintain the system or even code in that language, so even small glitches or updates become problematic.
External resources for legacy systems are continuing to diminish. Many providers who specialize in legacy on-premises platforms, like Sage on-premises products and Microsoft GP, are moving to provide support for cloud-based solutions. If these trends continue, it will be more important than ever to get off your outdated on-premises solution.
4. Lack of Access to New Technologies
There will continue to be massive changes to how software is written, deployed, supported and enhanced. Embedded tools and third-party solutions are no exception. These advancements are transforming what is possible in your ERP.
As the industry matures, software has become structured differently from older on-premises solutions. With an on-premises deployment, adding new technology to your ERP will be incredibly difficult or, potentially, impossible.
Developments in AI are already embedded in modern ERP solutions. For example, improving processes through automation and real-time data retrieval at a level never seen before. A lack of access to new transformative technologies, such as AI, could anchor your business behind your competitors.
Potential Benefits of Migrating to a Cloud-Based ERP
- Lower IT maintenance costs
Cloud-based ERP allows you to rely on the vendor or implementation partner for many aspects of cybersecurity, essential updates and hotfixes. With a cloud solution, you are also no longer reliant on expensive internal resources to manage issues and maintenance in-house. - Scalability
While every ERP has its limitations, a cloud-based ERP is built to grow with the business. The platform approach enables the system to scale and offer expanded functionality as needed. Additionally, prebuilt integrations with additional modules and third-party solutions make it much easier for businesses to “plug and play” to achieve their goals. - Ability to evolve into the future
When implemented correctly, you should be able to stay current with the vendor’s upgrade schedule, maintain integrations and add new apps, and generally retain agility. We hesitate to say, “It will be the last ERP you’ll ever need,” but the risk of a cloud-based ERP becoming outdated or your business outgrowing it quickly is much lower. - Easier deployment of AI and business intelligence tools
Recent technological advancements were built for the cloud. As a result, businesses can implement new solutions with fewer obstacles and benefit from advancements while they are still on the cutting edge.
Conclusion
For a long time, on-premises solutions reigned supreme in the world of ERP and remained a strong contender long after cloud deployment arrived. To this day, there are circumstances and business cases needing an on-premises deployment.
But with ERP reaching unprecedented levels of innovation, the time to start considering an upgrade from your on-premises system is now.
Need Help?
If you want to learn more about transitioning to a cloud-based ERP like NetSuite, contact us here or call 410.685.5512.
