How to choose your ERP system? A confusing question that may have several answers, because of different point of views about different measurement aspects. In this article, you will explore how to choose your ERP system, whether it is your first implementation or you would like to change your current ERP solution.
Choose your ERP!
In this article, we will compare between the main 3 types of ERP implementations available in the market using different dimensions.
There are 3 main methods of ERP systems implementation, On-Premises, Private Cloud Server and Cloud SaaS (Software as a Service), each of them have its impact on selection criteria that suits your business like IT infrastructure and security, IT team qualifications and cost. In the following tables, we will summarize the impact of every implementation type on your selection criteria, and its positive or negative impact based on its suitability for your business.
To reach your conclusion of the best ERP model for your business, you should ask yourself and your team several questions as follows.
1. Infrastructure
Infrastructure components are necessary to host and protect any software application, its cost and components increase as the importance of the software to the organisation. The ERP systems considered a core value of the business, so it is very critical software and should be hosted on a very reliable and secure infrastructure.
The question here: Do you own this infrastructure or willing to invest in it?
In the below table, you will find a simple comparison for every infrastructure component and its impact on the ERP implementation model.
| On-Premises | Private Cloud | Cloud SaaS | |
|---|---|---|---|
| Hardware Servers | You should buy your own hardware servers and manage its depreciation, setup, operation and support. | You should book your own private cloud server based on your requirements from various cloud providers like Microsoft Azure, AWS or others, and you still need to manage its configuration, operation and support. You may outsource these services. | No hardware or Cloud Servers are required, It is included and managed by the vendor. |
| Security | You should buy your own security devices like firewalls, intrusion prevention systems, antivirus and certificates and manage its depreciation, operation and maintain its support. | You should subscribe to cloud security services and administrate it and maintain its support. Your ERP application security will depend on how strong the cloud security services are, and how it is configured by your team. | It is included in your subscription and fully managed by the ERP vendor. |
| Network | You should purchase your internal network devices like routers, VPN devices and switches and manage its depreciation, installation, configuration, operation and support. | Network connectivity comes with the infrastructure cloud services, but you still need to manage it and monitor its traffic consumption. Internally, you need to maintain your organisation internet connectivity to be able to connect to the cloud servers. | Network management and traffic consumption comes with the SaaS service, it is fully managed and maintained by the SaaS ERP vendor. You still need to maintain your organisation internet connectivity. |
2. Topology & Technology
Every model of ERP systems implementation can be built with specific technology and use a certain topology. So, which technology you should use? There is no right or wrong answer for this question. Any latest technology can serve the purpose, also you should choose an updated technology to make sure that your ERP technology will not obsolete soon. Also, you may choose a specific technology because your team has a good experience using this technology.
| On-Premises | Private Cloud | Cloud SaaS | |
|---|---|---|---|
| Topology | In this model, the topology can be a client server application or Web based application. It is up to your preferred topology, meanwhile if you choose the client server topology you will not be able to move it to the cloud in the future. | The ERP application should be Web based topology. | In this model, the ERP application is by default based on Web topology. |
| Technology | You can choose an ERP built with your preferred technology and suite your team skills and knowledge. Available technologies like (Microsoft .Net and Microsoft SQL Server, Open Source languages like PHP, Python, Java with database like MySQL, MongoDB, Postgres). You should pay attention to the technology lifetime and stability and make sure it will not obsolete soon. | You can choose an ERP built with your preferred technology and suite your team skills and knowledge. Available technologies like (Microsoft .Net and Microsoft SQL Server, Open Source languages like PHP, Python, Java with database like MySQL, MongoDB, Postgres). You should pay attention to the technology lifetime and stability and make sure it will not obsolete soon. | In this model, you will not be able to choose a certain technology, because the ERP application is created, maintained and upgraded by the vendor. |
| Access | In this model, usually the plan that the ERP access is permitted only from inside the organisation, but some people can be allowed access from outside the organisation with VPN permission. In some topologies, you need to give permissions to other services like virtual desktop service or terminal services. | You ERP will be on your private cloud server, so it can be accessed from anywhere at anytime based on the user credentials. | SaaS service is by default can be accessed from anywhere, anytime 24×7, using any device with web browser and internet connection. |
3. The Internal Team
Your internal team is a very critical aspect of your ERP implementation, but the question you should ask yourself is what is the size of the team, and what are their qualifications?
In the below table, we will list the required team members and their qualifications level for the 3 ERP implementation models.
| On-Premises | Private Cloud | Cloud SaaS | |
|---|---|---|---|
| Team qualifications & Experience | You need to hire a highly qualified internal team with a deep knowledge about ERP Software, Infrastructure operation, network and Security. | You need to hire a highly qualified internal team with a deep knowledge about ERP Software, Cloud Infrastructure operation and Cloud Security. | You need to hire fair qualified internal team with knowledge about ERP Software usage, in this scenario will be your superuser/s. |
| Number of team members | You need relatively a big team to manage the infrastructure, servers administration, network and security, plus other roles like superusers, database admins and internal business ERP roles like process management and project management, which affects the ERP implementation ongoing cost. | You need almost the same number of roles as the previous scenario, because you still need to maintain all your ERP environment aspects, and manage your infrastructure, which also will add high ongoing implementation cost. In this scenario, you have the option to outsource the operation. | In this scenario, you need a relatively smaller team as you will not manage the infrastructure, network or security. Depends on your organisation size, you may hire all or part of the ERP business roles. |
4. ERP Application Features
ERP application features is one of aspects that confuse customers and let them question, if this application suits your business or not?
Most of the ERPs, even the small ones, has rich features that customers will not use them in full, but there are some differences that can differentiate between every ERP implementation model, which we will include in the below table.
| On-Premises | Private Cloud | Cloud SaaS | |
|---|---|---|---|
| Business Features | ERP features come as ready-made, and should be customizable through development, and the vendor is able to do this during the implementation. This depends on your business requirements and level of customization needed. | It is the same as previous scenario. | Cloud SaaS ERP comes with standard features which are ready-made by the vendor, with relatively minimal customization available. |
| Expandability & Future Requirements | As the ERP system is on-premises, so there should be no limit for customization and development, and you can extend the functionality as you are desired. It is always better to have API for easier integration and data security. | It is the same as previous scenario. Also, if you are planning to integrate with other online services or platforms like e-Commerce or e-Payment, then the API becomes mandatory. | Usually comes with an API by default, also it may come with several ready-made integration with famous platforms. This allows you to develop your own features extensions. |
5. Support
Support is crucial for ERP systems sustainability, so you need a level of support in all implementation models, the question here what level of support that my business needs, and what will be included in it?
In the below table, we compared the support level available for different implementation models.
| On-Premises | Private Cloud | Cloud SaaS | |
|---|---|---|---|
| Support | Daily support should be performed by your internal team, and escalate the important issues to the vendor ERP consultant or vendor ERP support team, Vendor support services are not included and should be purchased separately. | In this scenario, the support also is performed by your internal team. | Usually, support is included in your subscription. |
| The SLA (Service level Agreement) | Usually in this scenario the SLA takes longer time, as the ERP consultant should travel to customer location to check and fix the issue, in some cases the customer allow external connection to their servers over the Internet for support. Because of the travel time and its cost, the support contract in this model usually costly. | In this scenario, the SLA takes less time as it is done through the internet, and it also cost less than the previous scenario. | The SLA comes as a standard with the service and depends on every vendor policy, you can also ask the vendor for a higher level of support with a separate contract. |
| Data Backup | Completely customizable according to your needs and level of resilience required, and managed by your internal team. | Completely customizable according to your needs and level of resilience required, and managed by your internal team. | Usually included in your subscription and managed fully by your vendor team based on every vendor policy. |
6. Cost & Investment
| On-Premises | Private Cloud | Cloud SaaS | |
|---|---|---|---|
| Initial Cost | High Cost/ High Total Cost of Ownership (TCO) Involve high upfront infrastructure and license cost. | Moderate cost. Involve cloud servers subscription cost and ERP software license. | Relatively low cost. Involve only Monthly or annually users subscription. |
| Implementation and Professional Services Cost | Usually high cost, because of the long implementation period and travel of the resources to company location | Usually less than the op-premises scenario, as it can be done remotely with less travel time. | Usually low, as the implementation time is short and done remotely. |
| Running Cost | Usually high running cost, because you need to maintain a large team and curry out the cost of running your hardware. | Usually high running cost, as you still need to maintain a large team for running the system. | Low running cost, as you need a small team and vendor takes care of all aspects to run the system. |
| Total Cost of Ownership (TCO) | High TCO, as you curry out all the costs to implement and running the system including the staff, the hardware and vendor professional services. | Lower TCO, as you still need to curry out all the cost of running the system. | Low TCO, because the lower initial cost and smaller team required, plus the vendor is curry out all the cost related to running the system. |
| Return On Investment (ROI) | Slow ROI, because of the high cost, and long implementation period, the cost should be depreciated on a longer period. | Moderate ROI, because part of the cost is converted to running cost and the implementation time is faster, and depreciation is on a shorter period. | Fast ROI, because all the cost is a running cost, the fixed cost is small and the implementation takes relatively shorter time, no depreciation needed in this case |
Conclusion
There is no right or wrong if you decide to follow any of the mentioned practices to choose your ERP solution, it is all about your business requirements and how you form your future strategy for the benefit of your business. You have to consider the cost and your business ability to maintain a qualified team.