ERP in the Cloud: Dispelling common myths to help you make the move

April 24, 2017

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There aren’t too many decision-makers in the Canadian business world who are unaware of the value of today’s ERP systems. But questions arise when they have to decide what type of ERP solution will best fit their needs – and how it should be deployed. Should it be a traditional, on-premise deployment? Or would a cloud-based solution be superior?

ERP, or Enterprise Resource Planning, is the set of business software solutions that encompass a wide range of business functions – administration, support, HR, compliance, accounting etc. – allowing them to be managed and automated with greater efficiency and lower cost. ERP has become an essential component in any successful enterprise today.

Many decision-makers lean toward an on-premise solution – it’s familiar, tried and tested. And for some businesses, that is indeed the right choice. For most, however, today’s cloud-based ERP solutions offer valuable advantages – yet still many decision-makers have questions about the benefits of cloud computing. This article is intended to address some of those frequently asked questions, to help you better evaluate your ERP options. For convenience in this short space, the focus will be on SaaS or Software-as-a-Service solutions.

Cost: Aren’t cloud solutions more expensive?

It seems easier to simply buy the solution your business needs, at a one-time cost, and install, manage, and monitor it yourself in-house. This is the traditional on-premise deployment. But there are many unconsidered costs in this approach. You can buy the software license outright – but then you need the hardware, which will only last five years on average, and need to be maintained over that time. You’ll need to have a network in place, a server room with power and air conditioning, and purchase technology licenses, such as Windows Server and SQL server, on top of the application license. You should then also have a disaster recovery plan in place, which means either more hardware or a contract with a supplier. You’ll need a database administrator to provide performance management, backups and other necessary services. You’ll need to periodically replace your hardware, at an additional cost that is often six-figures, and allow perhaps two months to get the new system fully operational. And you would be wise to buy an extended maintenance warranty, since standard warranties run for one or two years only. If you have growth plans, you’ll then need more hardware and more of everything else, and will have to choose to buy it now, or wait until your need becomes more urgent and then upgrade.  To sum up, on-premise costs are not only significant and ongoing, but they are difficult to predict and plan for.

By contrast, cloud costs are fixed, and clearly spelled-out in your contract, or Service Level Agreement (SLA). You know exactly what you’re getting, and how much it will cost you every month, based on the number of users. And you can scale up the number of users, the disk space, or anything else, as required, at a predictable and predetermined cost.

Security: Isn’t my data safer in-house?

Security is critical to any business, and growing security threats make it more important every day. Consequently, many business leaders instinctively want to keep that responsibility in their own hands, and on their own servers. There they control it, decide who has access, and put in place the systems they need. This is a normal human reaction – aren’t we more likely to keep our own assets safe than some stranger?

This overlooks the state of cyber security today. As threats have increased, the cost of protecting against them has grown as well. When you move to the cloud, those costs fall to the provider – they’re stipulated in your contract and predictable. Moreover, the level of security offered by a provider like Microsoft – which has invested millions of dollars in data and cyber security, and in skills and expertise developed over many years – is arguably beyond the capacity of any other single organization. 

Availability: Will it be there when I need it?

If your ERP solution isn’t available, it’s worse than not having one at all – all your operations are dependent on it. A cloud supplier who does not meet or exceed its contracted availability levels will be out of business very quickly. If anything, your availability is more important to your supplier than it may be to you!

You can subscribe to different levels of guaranteed uptime, specified in your agreement – with the lowest level usually 99%, more than adequate for most organizations, and going as high as “six 9”, or 99.9999%. Maintenance is regularly scheduled, in off-hours, and announced in advance, and enterprise providers like Microsoft have multiple data centres, so you can switch to a different server if you need availability at those times. They have built-in redundancies and fail-safes, multiple network connections, duplication of disk storage, and other systems to ensure your connection. Cloud availability is almost certainly greater than any regular organization can provide for itself.

Performance & Latency: Will it be slow? Will there be lags?

This might have been an issue in the past, but with faster systems, and the increasing deployment of broadband around the world, this is no longer the case. Your performance service level should be specified in your agreement, and failure to meet it will qualify you for a rebate. An in-house solution can provide predictable performance – but how much will it cost? And what if you grow, have multiple office locations, or have remote employees? 

Many organizations operate on several continents, and long distances can result in latency or slower “ping” time. Large cloud suppliers offer multiple continental server sites that can eliminate this issue. An in-house solution can do this too – but then you are the one who has to create and maintain server sites on different continents.

Data Sovereignty: Where does my data call home?

Some organizations – financial services firms, defense contractors, government offices – are required by regulation to store their data in Canada. Others may want to ensure it’s not stored in the US, for tax or other reasons. Where your data actually is, physically, can be an issue. Here again, large cloud suppliers offer multiple sites – Microsoft’s are in thirty different countries, for example – to meet this requirement, written into your SLA.

Customizability: Isn’t it a one-size-fits-all solution?

Each business operates its systems in its own way on different parameters – requirements, business logic, user interface and more. Today’s cloud solutions are nearly always immediately adaptable to your needs. Where it’s not, BDO works with clients and servers to ensure your solution is customized to your specific requirements.

Integration: Will it work with my existing software?

Today’s cloud-based solutions work right out of the box with different software, like Office 365 or Power BI, or use apps to integrate with solutions like Salesforce. Data moves in and out of modern cloud-based solutions quite seamlessly, making integration an issue of the past.

Control: Can I trust the cloud?

Business leaders prefer to trust their own ability to look after their own interests. It’s also human nature to value more highly something tangible you can hold in your hand, rather than something as intangible as a “cloud”.

Nevertheless, for most businesses, cloud-based ERP solutions offer advantages in almost every area – security, availability, performance, adaptability, and most importantly - cost.

You’ve Changed my Perspective: What Now?

BDO works with our clients to identify the costs and benefits and trade-offs of both solutions. If you choose a cloud-based solution, BDO is a Microsoft Tier 1 Cloud Service Provider (CSP), and has the expertise and experience to advise, support and consult with you on cloud technologies and components. We also support non-SaaS cloud and on-premise solutions for clients who require them.

To learn more about ERP solutions, about any of BDO’s IT services, or for an analysis and consultation of your options, we ask that you contact your local BDO office today.

David Linton
Partner | IT Solutions | BDO Canada LLP