This post helps you understand the difference between cloud, on-premise and hosted private cloud ERP implementations, including the pricing and why you might choose one over another.
New technologies have increased your options when it comes to how you’ll deliver the software you need to run an effective business. The range of choices and technical jargon can create confusion for decision-makers, especially when you’re undergoing a significant digital transformation such as implementing a new Enterprise Resource Planning (ERP) solution.
Let’s break it down, and explore the three main options.
Key differences between cloud, on-premise and hosted ERP deployments
On-premise ERP
On-premise is the traditional way that people have purchased and used software. You pay the total cost up-front and receive a product that you own the licenses to and is installed by your ERP provider and run on your own server. You need to own and manage your physical computer server or servers internally, and complete all the back-ups and upgrades to the software. On-premise software can be set it up so users can access it online and remotely.
How it compares on…
Technical deployment: Your ERP provider will install the software licences on your own office-based server. On-premise installations can overcome barriers such as slow or unreliable internet. You also need to maintain your server, which means you need access to technical expertise.
Cost: Often requires a large upfront capital expenditure to purchase the software and implement it. But there are no continuous subscription fees. You’re also responsible for all ongoing costs of managing the security, maintenance, and replacement of your server/s.
Software functionality: Your ERP provider will apply updates and patches to the software. The software is less scalable: if you need more bandwidth or users you may have to invest in more servers.
Cloud-based ERP
Cloud-based is a more modern and increasingly popular approach where a business pays a subscription to use software, which is made available to them online via a server that is owned and managed by the software vendor. Cloud computing means the server infrastructure, security, data integrity, backups and updates are all managed by the vendor.
How it compares on…
Technical deployment: It’s generally faster and simpler than an on-premise deployment. There’s no need for expensive, on-site infrastructure.
Cost: The prevalence of the cloud-first, Software as a Service (SaaS) model of software and efficiencies of scale it enables for vendors, makes it a more cost-effective option. Many businesses appreciate being able to pay monthly for their software subscription using operational expenditure. You also save on IT management and support costs.
Software functionality: It’s easy to create and build on a mix of integrated functionality, or increase the number of users – helping you scale your business faster if you grow or expand overseas. Updates are automated meaning your software remains current and highly functional.
Hosted ERP
Private hosted cloud means your software (whether you opt for a perpetual license or subscription) is accessible in a cloud environment that dedicated exclusively to your business, via servers hosted and managed either within your company (on-premise) or by an outsourced vendor. This provides the benefits of cloud computing but allows businesses to retain greater control over things like when to implement upgrades.
How it compares on…
Technical deployment: Private clouds are a more complex deployment because you either need to set-up virtual private cloud hosting, or have your own proprietary infrastructure on-premise to create a single-tenant cloud environment. You’ll require access to IT expertise to successfully implement and maintain a private cloud.
Cost: Because your cloud environment is private you will pay more than you would for a public cloud, especially if you need to maintain your own data centres. Added costs will depend on the level of support you require from your virtual private cloud hosting provider.
Software functionality: You can access all the real-time workflows and data-sharing, self-service and scalability that come with having applications available in the cloud.
Cloud vs On-premise vs Private Cloud Security: a comparison
It’s a persistent myth that cloud-based software is less secure. Leading ERP software vendors like SAP, Sage and MYOB are large andinnovative companies whose success has been built on a commitment to delivering top-notch, secure cloud infrastructure, and hefty investments in research and development.
While cloud-based systems significantly reduce the responsibility for managing IT within your business, they don’t significantly reduce the quality of IT management your business can depend on when it comes to the security of your ERP software and business data.
It’s an irony that having greater control over your server or data centres via an on-premise or private cloud deployment can actually make you more vulnerable. Ownership of your own infrastructure does not negate the risks of cyber attacks or downtime—it simply increases your organisation’s control and accountability. You need to have high levels of confidence in the people and systems you rely on to keep your on-premise infrastructure secure and well-maintained.
How to choose between cloud, on-premise or hosted?
It’s easy to see on the face of it how a cloud-based ERP solution could be more appealing because it reduces the resources you need, and increases the flexibility with which you can access functionality and your data. The majority of our clients prefer a cloud-first approach.
Cloud-based software is multi-tenanted, which means multiple companies run the same software side by side (although their data remains private). Conversely, a hosted private cloud has a single tenant—your business. That makes it ideal if you have an especially complex implementation, stringent security needs, or sensitive data: but you will pay a premium for the privilege.
An on-premise implementation can make sense for some companies, especially those that prefer to have more control over costs and their IT infrastructure. Limitations posed by patchy internet access can also make on-premise more suitable in some cases.
Cost is always a factor, but remember that regardless of which option you choose—you will still need to make an additional investment to ensure the successful implementation of the software, and any development work associated with customising the software for special use cases.
Ultimately your decision should be based on what will work best for your business by considering the pros and cons of each deployment option against factors including your budget, internal resources and future growth plans.
It can help to ask yourself:
What option best matches my internet and infrastructure capabilities?
Do I have, or want to continue to invest in, significant internal IT skills/resources?
What’s the best payment option, given my budget, cash flow or tax considerations?
How flexible and scalable does my system need to be to match my evolving business model, talent management approaches, or strategic plans to enter new markets/countries?
If you need more help weighing up the pros and cons of different ERP software deployment methods you can talk to an experienced consultant from Leverage Technologies. Call 1300 045 046 or email [email protected].
Think it might be time to embrace an Enterprise Resource Planning (ERP) solution or upgrade outdated systems to give your business a competitive edge in 2019? Gain total insight into the ‘why and how’ of modern ERP software implementations to help you take action.
In just a short time there’s been momentous leaps and bounds in the way technology enables us to communicate, capture and use data, and lighten the load on our human workforce when it comes to manual tasks and complex analyses.
The business world has changed enormously as a result. Innovation in business models, products, and services is now seen as essential to maintaining a competitive advantage.
However, there’s still room for progress in many organisations, who aren’t yet fully benefiting from technologies that streamline and automate daily tasks and provide the insight required to improve decision-making and customer experience.
Which is why many savvy C-suite leaders will make 2019 the year they harness the power of Enterprise Resource Planning (ERP) software.
If you want to tackle digital transformation in your small to medium enterprise in 2019, this up-to-the-minute guide covers: why an ERP solution is necessary; how to choose the most effective ERP software; and what makes for a successful implementation.
A golden era for ERPs: why 2019 is the ideal time to upgrade
The two most likely triggers for CEOs and CFOs to consider a new ERP solution in 2019 include:
You’ve outgrown your basic accounting software: Your company has grown larger or more complex and your existing software doesn’t allow you to report in a timely way and provide high-level advice to the Board. You’re tired of manually compiling consolidated financial reports and manipulating data to reveal details of costs and performance at the regional or team level.
You have an ERP or bespoke solution that’s past its prime: You implemented a solution many years ago butyour ERP hasn’t stayed current or hasn’t been well supported. Without the functionality you need now, your team is wasting time on convoluted workarounds (rather than benefiting from features that reduce duplication, save time and enhance productivity).
In the first scenario, you might wonder if moving from an accounting platform to ERP software is overkill or not a good fit for your industry or business type. In the second, you might be disillusioned with the idea of one platform that can ‘do everything’.
But in both cases, taking action to implement a robust, full-featured ERP solution in 2019 is a wise move. Here’s why:
2019ERPs are a dramatic improvement
The breadth and depth of what an ERP solution can do hasevolved significantly since the early days. In the 70s and 80s, the software was more limited to technical materials requirements/resources planning (MRP) functionality to support manufacturing and the associated management of shop floor, distribution and accounting tasks.
Infographic – A brief history of Enterprise Resource Planning Software
Today, leading ERP solutions provide a truly comprehensive way to manage whole-of-business workflows and data for every kind of business—often within a Software as a Service (SaaS) model that makes IT management more reliable and cost-effective.
ERPs you can implement in 2019 touch on every aspect of your business including:
Financials
Sales
Purchasing
Production
Inventory
Logistics
Customer Relationship Management (CRM)
Warranty and returns
Business Intelligence and more.
Your data is readily available in the cloud, consistent across every office or warehouse you operate, and upgrades can be applied easily (and often automatically).
You can facilitate a remote workforce or do business via your smartphone while ensuring all employees are working with the same data regardless of where you operate across Australia or around the globe.
Tailored yet flexible: modern ERPs grow with you
One of the most compelling reasons to choose an ERP solution over software that is purely ‘web-based’, is the granular level of customisation that’s possible. Reputable ERP solutions have experienced reseller partners worldwide that work with you to tailor your ERP to match the specific structure, workflows and reporting needs within your enterprise.
Which ERP Software modules are key to your business? Tailor your ERP to match the specific structure, workflows and reporting needs within your enterprise.
Yet customisation isn’t constraining in the modern ERP solution. In 2019,world-leading ERP vendors offer more flexibility than ever before: you can pick and choose from modules that reflect what you need right now and add new functionality as you grow—whether it’s additional modules from the same vendor, affiliated third-party providers, or via seamless integrations.
You might start out with a focus on financial management to support theCFOs growing responsibilities for corporate performance, but then it’s easy to build-out your ERP’s functionality in following years—say, to include an HR management component—as your team expands.
As your business grows or business conditions change, modern ERP solutions can adapt.
Avoid these pitfalls when choosing an ERP in 2019
We’ve established that implementing a new ERP in 2019 is smart if you need greater visibility, insights and automated workflows within your organisation.
Following the steps outlined further within this post will help CEOs and CFOs gain greater clarity around the factors to consider in selecting the right ERP and what to expect at each stage of the process.
But first, it pays to quickly cover where many people go wrong, so you can avoid common pitfalls.
What leads to choosing the wrong ERP software solution?
Factors that contribute to choosing the wrong ERP software – here is what to look out for
Delaying implementation despite an obvious lack of speed, capability and reporting finesse within your business (and growing internal frustration among your employees).
Failing to effectively consult internally in order to comprehensively define your technical requirements for each department and team.
Not weighing up the pros and cons of cloud versus on-premise early in the process.
Thinking in terms of costs alone, rather than how to best enable business process improvement and growth.
Not defining a budget in order to narrow your search parameters and establish clear expectations internally and with your third-party provider.
Here are the essential steps to follow to make a well-considered choice as you explore your ERP options in 2019.
1 – Define what success looks like for your business:
Start by imagining your future state.
How will you know if you’ve chosen the right ERP and had a successful implementation in 12 months from now?
Asking this question is designed to help you elucidate the operational improvements you expect and need your ERP to facilitate, for example:
faster reporting timeframes;
a reduced debtor days ratio;
or less machinery downtime on your production line.
In this early stage, it’s also important to reflect on the processes and structures within your business that must be mirrored in the ERP solution you set-up. It can be helpful to examine your current systems (digital or otherwise) and generate a list of the advantages and drawbacks for each—to help you identify gaps, and the functionality you want to retain.
2 – Explore your technology ‘must-haves’:
Always start with the business process improvements you need to address, but once those are clear in your mind—it’s time to consider the technological factors that will make your business run better. For example:
Do you need the scalability of cloud-first software? In comparison to an on-premise system, software hosted in the cloud is delivered via a subscription-based licensing model which means no large, upfront capital expenditure. There’s also no need for expensive, onsite IT infrastructure and ongoing support to maintain security.
Is mobility essential?Interfaces that can be easily accessed via mobile devices support a productive workforce now and into the future, with the rise of remote work and telecommuting. Also, handheld technologies are increasingly being used to support workers in the field, on the shop floor or in a warehouse to do their jobs better—which should connect to your ERP.
What kind of database do you need? Is big data management a current or potential future concern for your business or industry? What level of security, support and scalability do you need in relation to the database underpinning your ERP?
Are there tools you’ll be using that must be integrated?Identify any essential programs that you will continue to use that should be integrated with your ERP software, e.g., MS Office.
Will you be adopting IoT, AI, AR, VR etc. within your products or systems? When you consider the emerging technologies that may become commonplace in your industry, your choice of ERP is affected. An enterprise connected by a powerful ERP solution with automation and machine learning capabilities that can leverage data from multiple sources.
Is e-commerce and geolocation marketing important? Is being able to trade online seamlessly or implement location-based marketing tools like beacons vital for your future growth? Your ERP should allow for e-commerce, customer relationship management, and EDI integration.
Modern ERPs have the potential to provide your business with a mind-bogglingly vast array of features and functions. Before you delve too deeply into researching software products, prioritise the functionality that matters most. For instance, if you’re a wholesale distributor, you might focus attention on finance, inventory and purchasing functionality. If you’re a food processor, manufacturing functionality is key, but you might specifically be keen to improve your ability to manage traceability. Some tips for prioritising functionality:
Refer back to the notes you created in step one—was there functionality from the systems you currently use every day that must carry over into a new solution? What were the gaps?
Ask a ‘functional head’ from each department to review and document requirements based on their day-to-day activities.
Use your business structure and planning documents to help determine features you need: for example if you operate in multiple countries or have multiple ABNs, you need functionality to support cross-entity consolidation.
Don’t focus on features that you only might need. If you don’t currently have complex manufacturing management needs, don’t prioritise that functionality. You can grow into your ERP solution and add new functionality as needed.
Refine your notes into a high-level checklist (1-2 pages) that you can use to drill down into the detail as you know more about what’s possible within different software.
How much should you spend on ERP software in 2019? What’s the typical investment required for a company of your size? The answer will vary depending on your businesses requirements, number of users, customisations, integrations and your implementation needs. However, ERP investments tend to range from between $20,000 to more than $1 million for a larger corporation with more than 1000 employees.
In this day and age, there’s a treasure trove of free information available online to help businesses research their software options. There are excellentblogs, comparison sites, and case studies that can help you understand the ERP market and differences between products. Remember though that the information available online is general in nature, and pricing will not always be transparent. That’s because each company’s instance of ERP software licensing and implementation will be unique to them. If you have questions you can alwaysspeak to an experienced ERP consultant from Leverage Technologies—we’re genuinely interested in helping you find the best solution to function better, and we’ll be up-front if we think the ERP software we support isn’t right for your business.
6 – Obtain and interpret proposals for ERP implementation:
So, you’ve got a shortlist of products you think might be a good fit. The next step is to seek a proposal from atrustworthy ERP implementation partner, like Leverage Technologies. Because you’ve done the work to define what you want in terms of business process improvements, technology and functionality—this should help ensure you receive proposals that match your needs, which you can assess based on the investment budget you’ve allocated. Keep in mind that if you obtain multiple proposals, there can be differences in price depending on: the software and its licensing model; the providers’ understanding of functionality and customisation required; support options; implementation methodologies and process; and team size and expertise. Some providers may incorrectly scope a project or make assumptions that reveal their lack of experience, which means their proposal doesn’t accurately reflect the true time and effort required for a successful implementation.
Implementing new ERP software in a timely way, and within your budget will rest heavily on project management. Your ERP implementation partner and your internal project management team need to work in unison to ensure decisions can be made quickly, scope changes are minimised, and issues can be addressed through internal channels. It’s important toappoint an internal project manager that has the authority, respect and communication skills required to guide your implementation. Otherinternal muscle should be engaged during your ERP implementation to manage the configuration, training and testing required to deliver a great end result.
If you adopt a new ERP solution in 2019, user acceptance testing represents a key milestone in your implementation process. You can’t skip testing or do it sloppily and expect a smooth transition to your new ERP software. It’s important to consider:
When will you start and how will you phase testing in order to be ready for ‘go-live’?
What kind of test scenarios are required to understand if the system is up-to-scratch?
What different test environments are needed to replicate the product environment?
What will you measure and how will your record and present test results?
What is your change management plan to address issues that arise in testing?
Have testers been chosen, and is there a commitment to allocating the time required?
In 2019, ERP software is key to digital readiness
It has become unavoidable to use technology to support business process management in one form or another. Even if you don’t consider yourself a ‘digital business’, it’s likely you already use a wide range of software and hardware solutions.
The problem is these technologies are often applied haphazardly, creating a hodgepodge of infrastructure, data, skills and understanding across your business. That leads to increased risk, costs, confusion, information silos, and lack of visibility for senior executives.
Lack of continuity in the systems, data and supply chains you rely on to operate your business can bring things to a standstill when what you actually want is to accelerate and grow.
That’s why implementing ERP software in 2019 is worthwhile: especially for businesses experiencing rapid growth that are crying out for a more integrated, coordinated business landscape.
Start by examining your business, software and implementation needs step-by-step. Prepare to make this your year to transition to a more integrated, high-level ERP solution that will bring significant benefits to your business in both the short and long-term.
Want help to navigate the world of ERP software to ensure you reap the benefits of digital transformation in 2019? Call 1300 045 046 or email [email protected].
In the new world of ERP technology, business management solutions, cloud computing and mobility the outcomes that we are expecting from our ERP implementation need to be re-evaluated.
The outcomes that we expect are driven by technology and the fact that the deployment of technology is becoming quicker, easier and more relevant for SMEs.
Think of Cloud technology, mobility, analytics and other easily integrated functionality to increase your ERP deployment footprint.
What this means to your business?
You should be expecting more value for less investment – a quicker Return on Investment.
This is due to 3 key changes that we have seen in the market over the past five years:
Technology is advancing at an ever-increasing pace
Technology pricing and platforms are increasingly becoming available for SMEs – at a price point that SMEs can afford
Measuring the business outcomes of your ERP technology investment
The key with good ERP implementations is to ensure that these technological enhancements result in actual business benefits. Looking at your ERP Software return on investment you will most likely measure four key indicators:
Customer satisfaction
Cash flow improvements
Staff retention
Decision making tools and analytics
These four indicators referred to above are the typical KPIs that are assessed after the implementation of an ERP solution.
Here’s the heart of the matter – we should not be implementing technology for the pure sake of it.
We implement technology to make a difference by increasing customer satisfaction, improving quote to cash timeframes and the associated cash flow, keeping staff happy through easy to use systems that give staff the ability to do their jobs in less time and the all-important information when and where we want it – for better, timely decision making.
The key is to ensure that you view the ERP technology enhancements as an enabler to doing better, smarter and more efficient business.
Let’s look at an example – mobility.
Everyone is talking about the advantages of mobility for their business. The key is ensuring that we use this technology to enhance our business and achieve the desired outcomes. Let’s start by asking the question – where can mobility help improve your business?
4 areas where mobility can help improve your business
Sales / CRM – providing relevant data for sales people. Mobility devices can provide quick, easy access to customer and sales relevant information for sales people when and where they want their information. Most sales people spend a lot of time travelling to and from customer sites. Provide your sales team with the ERP and CRM technology to be able to review customer orders, customer status, customer history and pricing from their smartphone or tablet.
Mobile order taking – if a salesperson was to take on order from a customer whilst out in the field why not automate the entire process through ERP mobility. A salesperson should be able to check customer pricing, stock availability and delivery times from a mobility device whilst talking to the customer before placing the order. The order should be automatically checked for credit limits before creating a pick list in the warehouse. This use of ERP technology provides great service improvements for your customers and reduces the time from quote to cash to help improve your cash flow. Another smart use of ERP technology to help improve your bottom line.
Service requests and requirements – if your business has a service component associated with warranty or service contracts then you will, without doubt, understand the advantages that a truly mobile ERP / service component can add to the business. Service technicians should be able to schedule their day, receive updated service requests, book out stock, track labour billing (timesheets) and get the customer to authorise the job and job completion from their mobile phone, tablet or notebook. Saving time, saving money and providing better customer service should be the desired outcomes.
Reporting – on the move and want to access your analytics, dashboards and KPI’s when and where you want? Most reporting solutions are totally mobile – use your spare time at the airport or on the morning train to get an up to date picture of your sales.
Conclusion
As technology advances and users deploy and embrace cloud, mobility and e-commerce we will continue to increase our return on investment through quicker deployments, less upfront investment and increased returns.
This has evolved at a fast pace over the last few years and we see this trend continue and even ramp as new technology innovations enter the market.
Have we missed something? Let us know in the comments below!
Hi, this is part 1 of my 3 part blog on the secrets of successful ERP Software selection. Parts two and three will follow over the next few days.
Choosing an ERP / Business Accounting software solution for your business can be time consuming and costly. If you select the correct system and implementation partner the costs will be more than justified and your business will be rewarded with access to information for faster and more effective decision making with many key benefits including increased customer satisfaction, improved cash flow, reduced administration overhead and happier staff.
Make the wrong decision and you can end up spending hundreds of thousands of dollars on a system that gives you less information than you previously had and costs thousands of dollars in monthly upkeep. Once a new system has been implemented changing your mind can be very costly.
So how do we avoid these mistakes?
Most small to medium sized businesses (turnover of $5 million – $50 million) in Australia ask the Finance Manager / Business Owner or IT Manager to source a new solution and business partner / reseller for implementation. The challenge is that most people are only ever involved in one or two software selection processes during their careers and there is not much documentation available to assist in this area.
The team at Leverage Technologies has seen many organisations choose business accounting software /ERP Software solutions. We have taken the best methodologies that we have seen over the years and have come up with the following software selection methodology.
STEP 1 – WHY
Before you even begin searching for a new business management solution ask yourself the question – WHY are we going to market? Generally speaking companies who are going to start searching for a new business management solution do so for one or more of the following reasons:
– Outgrown existing solution
– Using a system which is no longer supported
– Looking to consolidate separate systems or solutions
– Wanting better reporting
– Looking for new technologies – mobile / BI etc.
It is important to know why you are going to market and to esnure that you can articulate these reasons to potential vendors and within the organisation – so that everyone understands the importance of the project.
STEP 2 – PROJECT TEAM, BUDGET AND TIMELINES
Many small or medium sized businesses in Australia don’t bother establishing a project team for software selection and this is potentially a big mistake. My suggestion is that you establish a project team who represent the various business units in your business. Also establish your budget and timelines at this point in time. Budget is very important as there is no point spending hours reviewing great software solutions that cost more than double your budget.
STEP 3 – REQUIREMENTS
Having established your budget and assigned a project team the next step should be to consider your requirements. This is generally done by appointing a “business lead” for each functional part of your business – finance, distribution, warehousing, manufacturing etc. Ask each business lead to put together a requirements list. For larger companies a requirements list might be a large and comprehensive document but for most Australian SME’s a requirements list should be no more than 2 pages per functional area and should focus on the more difficult, critical and unique business requirements. This functional list is not a scope of works – it is purely an initial guideline for potential vendors.
Thanks for reading….part 2 of this blog will be posted later this week.
