The advent of cloud computing has injected new life into the world of ERP. New, more flexible deployment models have made Enterprise Resource Planning accessible to manufacturers across the turnover spectrum. But with more options come more headaches as the flexibility of the cloud has added more factors into the decision making process. Total cost of ownership is often at the forefront of the decision making process, but with so many deployment options available it can overwhelming to weigh up which method will actually deliver the best result for your business.
Understanding the Deployment Methods
There are many analogies for making Cloud Computing a more digestible concept but by far the most applicable for ERP is a car.
ERP and a car are both just a means to an end. Whether that end be a fully automated supply chain or just some milk from Tesco. The deployment method is the difference between you getting to Tesco and back in your car, a leased car, a hire car or a taxi. The end result is the same, the car could even be the same, but the deployment method and the reasons for choosing it can vary depending on the circumstances and requirements of the user.
On Premise ERP (Owned)
“On premise” is the traditional implementation model for ERP and is, as the name suggests, on the premises of the user. It’s generally (but not exclusively) the territory of large manufacturers which have their own IT team. Implementing on premise requires more capital expense than implementing via the cloud but in the long run can be cheaper. This is due to sites investing not only in the ERP solution but the infrastructure to run it too. Once the infrastructure is in place however, you have complete ownership. You’re not paying for the privilege of using someone else’s resources. You can customise it and use it as and when you see fit without fear of usage caps. The downside to this though, is if something goes wrong – you have complete ownership. You can, of course, take out a support contract with your vendor, but this is an additional cost to consider.
The one off cost of an in house implementation can have a great return on investment for firms with the resources to acquire the ERP infrastructure and employ the relevant staff. However this relies on full utilisation of the system, so is best implemented in cases of high server demand. If going to Tesco for milk is just one of many trips you ask of your car, and each of the trips will be taken regularly, then it is worth owning it.
Cloud ERP consists of Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a Service (SaaS). All these deployment models make ERP a service rather than an asset. Just like choosing between on premise or cloud, the choice between IaaS, PaaS, or SaaS generally (but not exclusively) boils down to company turnover and the number of users.
Infrastructure as a Service (Hardware)
IaaS is an attractive option for sites with high server demand that maybe don’t have the resources, space or capital to acquire the infrastructure on their premises. With IaaS you would pay for a hosted server, network and storage services on a monthly subscription according to what you use. There is no difference with the end result, you still get the same ERP system, and you have a lot of control over how you use it, but with reduced capital expenditure. IaaS is the least ‘serviced’ of the service options; it’s as if you’re running your own ERP system but the capital expenditure of infrastructure has been moved to an operational expenditure. Like a leased car, you are able to choose a Ford, a hatchback, a 4×4, a BMW, Maserati, and in any of the standard colours but can only use it as you see fit within certain parameters. Capped mileage, and usage restrictions will be imposed on you and you may not be allowed to make modifications such as fitting a tow bar or additional lighting.
Platform as a Service (Middleware)
‘Platform’ consists of hardware, operating system, storage and network. This will provide ERP with very little fuss. It gives you the freedom to tailor your system and handle data yourself but without maintenance and upfront infrastructure costs. As you only get the platform and not the software as the service, any issues or upgrades with the software are dealt with by the customer and not the vendor. This is comparable to hiring a car. Everything is looked after on your behalf, but you’re in charge of the journey.
Software as a Service
Everything is hosted. The software, the platform, the infrastructure. All you do is pay the monthly subscription and everything else is looked after for you. This deployment suits businesses with a lower server demand. It allows you to get all you need out of a best of breed ERP system, but with zero maintenance or fuss and upgrades are performed for you. You only pay for what you need – number of users and service level – but this is flexible and can scale up and down with your business needs. It’s the complete package. Due to the service level, it is of course the most expensive ERP value for money deployment model but can be the best fit for some businesses.
You’d be forgiven for thinking an on premise ERP system is more secure than a cloud system. An on premise system is more isolated than the cloud but this doesn’t make it less of a target for would be attackers. Most of the high profile data breaches of the past few years (Sony and TalkTalk for example) have been from internal databases. Anything linked to the internet is a potential target but whether your data is safer in the cloud with the IT department really does depend on the quality of the cloud provider or your IT department. An on premise deployment is as secure as you make it. Hosted services on the other hand, have a reputation to uphold so it is in their interest to provide the best security possible.
In the government commissioned Information Security Breaches Survey conducted by PwC 7% of respondents had a security or data breach in the last year relating to one of their cloud computing services. Granted, this a relatively low figure but it is a 2% increase on the previous year. A Small increase on a small figure increasing nonetheless. This increase reinforces the need for those taking the cloud route to choose a vendor with ISO 27001 certification to help keep assets secure. In the same survey 75% of large organisations and 31% of small businesses suffered staff related security breaches last year proving security has to be addressed at every level in your business. However, a certified vendor isn’t a watertight solution to your cyber-security! Some threats, such as ransomware, come via your e-mail inbox!
No Easy Fix
Because of the amount of variables within ERP there is a solution for every business. However decision makers often find themselves overwhelmed by the volume of options they have to consider. In many cases the deployment method is reflected in the size of the company; the larger turnover and number of users, typically the more ownership the business wants of its ERP system. Be that as it may, there is no straight forward decision, each system is bought and sold on a case by case basis. Even if a person can justify owning a car with the miles they build up over a year, sometimes the convenience of leasing, hiring or ordering a taxi is better suited to them. The same applies with ERP. Somewhere between convenience and total cost of ownership is the correct deployment method. Once you have found that ratio, the deployment method should be clear.