Different Types of Cloud ERP & How it will make a Difference to Your Business
Once you understand what cloud means, the next step is to establish the different ways cloud ERPs can be deployed and how that will affect your business. There are four core variations of cloud ERPs: On-Premise, SaaS, Proprietary, and White Label. Overall they offer many of the same benefits, but distinct differences in how they are set up can have a huge impact on your business in terms of security, finances and flexibility.
Different Cloud ERP Models
On-Premise ERP = Private Cloud
Private Cloud Models utilizing traditional on-premise ERP infrastructure are a common choice for enterprises. With data stored on servers owned and managed by your company, on-premise ERPs are considered to be both robust and secure. The benefit of on-premise is that you have the choice of running a hybrid-cloud ERP solution that combines your traditional on-premise ERP with a private cloud that you host yourself, or you can utilize your infrastructure to host your entire ERP solution on a private cloud. Out of the different cloud ERP variations, on-premise (aka private cloud) is the most customizable and offers a very wide range of functionality because it integrates with the majority of enterprise modules & tools. As a result, you can build a solution uniquely suited to your business and industry needs.
One downside of private cloud ERP deployment is that like a traditional on-premise solution, it requires a large up-front investment for local servers and databases. On top of that, you will have to pay for your licensing term, annual maintenance and support fees. The benefit of that investment is that you own both your hardware and software so you have full control over it. This is balanced by keeping in mind that you’re also committing to maintenance responsibilities, such as the costs involved in hiring an IT team (whether internal or outsourcing) to manage the ERP, as well as any costs that are associated with repairing or replacing hardware.
SaaS (Software as a Service) is the most common model for Cloud ERP. With industry-leading solutions such as Acumatica or Sage Intacct, businesses have plenty of options spanning across industry requirements, budgets and functionality. In this deployment, you don’t own your software, and your data is stored in a public cloud where users share a single instance of the software which is available online, with a monthly fee per-user.
Some businesses feel like their data is less secure when it is hosted in a public cloud, but it is important to note that data breaches in public cloud are rare. Deciding whether your data is better in a public or private cloud is largely dependent on the requirements of your industry and what you feel comfortable with.
One major benefit of SaaS is that it can be implemented very quickly. Patches (fixes to small issues and bugs behind the scene) are applied automatically, which will help resolve technical issues before your IT team has to get involved and before your company feels any impact from them. Additionally, updates are applied automatically so you can avoid long periods of downtime while your ERP solution is being updated. SaaS is subscription-based, which can be seen as a benefit or a downfall depending on whether or not you’re interested in owning your software. On one hand, this avoids the large upfront cost of an on-premise private cloud solution and allows for strong budget control with predictability for planning. However, on the other hand, support for certain industries is limited and while the solutions are configurable, they are not built to be customized. Additional functionalities can be added using add-on modules that integrate tightly with the solution. If these connectors or integrations are custom-built for your organization, automatic roll-outs of updates have the potential to ‘break’ the solution until the custom solution can be realigned.
Proprietary Cloud is the same as private cloud with one major exception: an ERP vendor hosts an instance of the ERP system in its own data center. This gives you flexibility with the options for patches to be applied automatically or only when approved, and whether to follow traditional billing (annual) or monthly billing per-user. In this scenario, since an ERP vendor is hosting the data in their data center, it is still effectively in a private cloud, with a clear sense of accountability and who is responsible for it.
A major benefit of Proprietary Cloud is the flexibility it offers. Businesses can start off small, and expand their cloud solution as their needs grow and change. Proprietary Cloud deployments are ideal for businesses that seek the functionality of an on-premise solution but aren’t prepared for the cost or commitment to IT – you pay for what you use and can scale as you need it.
White Label Cloud
White Label Cloud is extremely similar to Proprietary Cloud with one major difference: part of the ERP system is hosted in a public IaaS (Infrastructure as a Service), such as Rackspace or Amazon Web Services instead of in the ERP vendor’s data center. That said, the term “White Label” is often used to describe two very different cloud setups, depending on who is arranging the White Label Cloud deployment – the vendor or a reseller.
In one scenario, a large software vendor, such as Sage Software, uses a third-party public cloud, such as Amazon Web Services, instead of their own data center to provide their solution on the cloud. This is a common set-up used for Sage X3 (formerly known as Sage Enterprise Management), and from the enterprise business’ perspective, it provides the same benefits as SaaS, since the vendor is still responsible for the data center and has the size behind it to maintain strong service.
The other white label scenario is where a reseller (VAR) will use a public cloud to host an instance of software, and this can have some serious risks. It can be unclear who is responsible for the software’s reliability and updates, and who the business should go to if there is an issue – the VAR or the data center.
Deciding what’s right for you
There’s no ‘one size fits all’, and there’s a long list of difficult questions that need to be answered before figuring out what fits. Working with a partner that provides the full range of cloud solutions will ensure that you end up with a solution and deployment that facilitates the goal and interests of your business. Each cloud deployment has its own set of benefits and limitations, so with the long-term in mind, consider the functionality and level of integration you need your cloud ERP to have, the financial commitment you’re willing to make (and when), where you’re comfortable with your data being in the cloud and who you want managing it.
Once you’ve decided on a cloud deployment, we have some tips and tricks for getting the absolute most out of the solution. Check out our short blog on the topic here.