ERP Cloud vs. On-Premises
When choosing an ERP (Enterprise Resource Planning) system like SAP Business One, one of the key decisions a small to midsize businesses (SMBs) need to make is whether to go for an on-premises OR a cloud deployment. The main differences between these two options are:
So, what does that mean from the perspective of an SMB?
By going with the cloud-based option a Small Medium Business:
1. Does NOT need to make any investments in infra-structure (servers, firewall etc.) which needs regular maintenance and upgrades and have a recommended shelf life of 3-4 years.
2. SMB’s IT personnel will have to handle all technical issues that may arise during daily usage, upgrades/updates and general upkeep of the server and database not to mention security and mobile accessibility.
3. There is no high up-front licenses purchases with no option to reduce the number of users in case of downsizing or miscalculations of required users.
Yes, but over time won’t the cloud-based option be more expensive than the on-premises one?
Let us compare the Total Cost of Ownership (TCO) of the two options based on five users over a period of six years. As an example, we will take a 6,000THB per month per user for the cloud-based option and a 115,000THB per license for the on-premises one which is pretty close to standard SAP-B1 pricing.
For the cloud-based option we need to simply multiply the monthly fees per user by the number of users to reach to a monthly cost of 30,000THB. Multiply that by twelve months we end up with a yearly cost of 360,000THB.
For the on-premises option our calculation we can start off with the license fees by multiplying the license purchase price by number of users to reach to a total purchase cost of 575,000THB. Now we’ll need to add the yearly maintenance fee at the standard rate of 15% from the purchase cost to come with an additional 86,250THB per year (starting from the first year as per SAP maintenance policy).
For the hardware we can use as a benchmark an upfront cost of 250,000THB (two servers for redundancy, firewall, database software etc.) and an average yearly upgrade cost of 50,000THB (starting from the second year).
Finally, we will add the IT personnel costs by allocating approximately 25% of IT personnel working time with a monthly salary of 60,000 to reach to a monthly cost of 15,000THB. Multiply that by twelve months we reach a yearly cost of 180,000THB.
We can now clearly see which option has a lower TCO over our designated time period.
Of course, there are other aspects that need to be compared between the two options, however, when dealing with an SMB the benefits of a cloud-based system by far outweigh the benefits of an on-premises one.
Contact us at [email protected] for a review of these numbers based on your business. Our team of industry professionals will be happy to help you make the best choice for your business!