As companies increasingly venture into the realm of digital transformation, Enterprise Resource Planning (ERP) solutions have become essential tools. One important question when choosing an ERP system is weather to opt for a Cloud or a Hybrid solution. Each model offers its distinct benefits and potential drawbacks. In this blog post, we assess both models, on six different parameters, to guide your ERP decision.
The rise of cloud-based ERP, i.e. SaaS-solutions (Software as a Service), has been notable in recent years. A growing number of businesses are choosing this pay-as-you-go model where the vendor takes care of the software, hardware, upgrades and support.
Conversely, some businesses favor a Hybrid ERP approach. Here, they buy the ERP licenses and run the system on an Infrastructure as a Service (IaaS) or Product as a Servie (PaaS)-solution in combination with different service agreements.
Which model is the better choice largely hinges on your company's unique requirements.
A Six-Point Comparison of ERP-solutions
The cloud and hybrid models differ in terms of flexibility, control and cost structure. These in turn can be divided into six key areas, each one important to evaluate in order to find a good match to your company’s needs.
1. Deployment Options and Infrastructure Performance
• IaaS: IaaS provides a cloud infrastructure where users can deploy their own operating systems and applications. It offers great flexibility and control over the infrastructure, but performance may vary depending on the chosen VM configuration and network connection.
• PaaS: PaaS platforms offer a pre-built environment for running applications, including a platform-independent code execution engine. Performance is usually consistent and optimized for running applications quickly and efficiently.
• SaaS: SaaS services are web-based and require no deployment from the user's end. Performance depends on the provider's infrastructure and network capacity.
• On-premises: On-premises solutions run on the user's own servers and network. Performance can be optimized as needed but also requires the organization to have the right technical resources and expertise.
2. License Scalability
• IaaS: In the IaaS model, users pay for infrastructure resources like virtual machines, storage, and networking. Scalability depends on the user's budget and the need to purchase additional resources.
• PaaS: PaaS platforms often offer a simpler pricing model based on usage levels or resources like CPU and memory. It can be more flexible and scalable than IaaS depending on the provider.
• SaaS: SaaS services are usually billed per user or month, and scalability typically depends on the chosen subscription level.
• On-premises: On-premises solutions require upfront costs for hardware and software as well as maintenance expenses. Scalability is limited to the resources the organization has in place.
3. Support Levels
• IaaS: Support levels vary depending on the cloud service provider and the agreement. Users can often get basic technical support, but maintenance of operating systems and applications usually lies with the user.
• PaaS: PaaS providers typically offer support for the platform, including operation and maintenance of the underlying infrastructure. Users are still responsible for developing and maintaining their own applications.
• SaaS: SaaS providers usually offer comprehensive support, including infrastructure, applications, and user support.
• On-premises: Support levels depend on the organization's internal resources and agreements with software vendors. It usually requires more internal management.
4. Control over Upgrades
• IaaS: Users have full control over operating system and application upgrades on their virtual machines.
• PaaS: PaaS providers usually handle operating system and platform upgrades. Users need to focus on upgrading their applications.
• SaaS: SaaS providers are responsible for all upgrades to both the infrastructure and the applications. Users have minimal control over these.
• On-premises: Users have complete control over when and how they perform upgrades to both hardware and software.
5. Customization Options
• IaaS: In the IaaS model, users can customize their virtual machines and applications to a large extent, including the choice of operating systems and configurations.
• PaaS: PaaS platforms offer some customization within the provided development environment, but they may be less flexible than IaaS regarding infrastructure configuration.
• SaaS: SaaS services are usually less customizable and follow the provider's standard configurations and features.
• On-premises: On-premises solutions provide maximum customization, as the organization has full control over the infrastructure and software.
6. Total Cost of Ownership
• IaaS: The total cost of ownership includes costs for infrastructure resources, maintenance, support, and workforce to manage and administer VMs and applications.
• PaaS: The total cost of ownership includes costs for platform subscriptions, application development, any customization, and support and maintenance.
• SaaS: The total cost of ownership includes subscription fees, upgrades, potential customization, and support costs. It can be more predictable as there is usually fixed pricing.
• On-premises: The total cost of ownership includes costs for hardware, software, maintenance, support, and workforce to manage all aspects of the infrastructure and applications.
The ERP Model Best Suited to Your Business
Your company's needs, in terms of flexibility, control, complexity and cost will determine which type of ERP system is most beneficial. Ultimately, the right ERP software for your company is contingent on your specific business requirements. By objectively considering the areas above, you can make an informed decision that aligns with your operational needs and future growth plans.
In the Oracle portfolio there a two popular ERP-systems that cater to slightly different business needs. Oracle NetSuite is one of the fastest growing cloud-based ERP-systems on the market right now. Oracle JD Edwards EnterpriseOne is a robust and highly customizable ERP-system that can be run on cloud, on prem or hybrid. It is favored among enterprises with complex business processes in highly competitive markets.
At xperitus, we assist our customers with system queries, but also to a great extent with their process and business development. Furthermore, we support companies in the choice of an ERP system. If you have questions about ERP, feel free to reach out to us. We can probably assist you. Welcome to xperitus!