Cloud ERP vs On Premise ERP February 27, 2016

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3 Why Cloud ??? Cost Efficiency No licensing fees Eliminates overhead charges (Cost of data storage, software updates, management etc.) Convenient and scalable charging models (One-time-payment and pay-as-you-grow) Better cash flow by eliminating the capital expense (CAPEX) associated with developing and maintaining the server infrastructure Convenience and Continuous Availability Services are available wherever the end users are located irrespective of time zones and geographic locations Service uptime is guaranteed also multiple servers are used to ensure continuous availability incase of any system failure When servers are not used, the infrastructure normally scales down, freeing up resources and consuming less power Environment Friendly Scalability & Performance Cloud instances are deployed automatically only when needed and as a result, you pay only for the applications and data storage you need Clouds can be scaled to meet your changing IT system demands

4 Why Cloud ??? Quick deployment and Ease of Integration A cloud system can be up and running in a very short period Introduction of a new user in the system happens instantaneously, eliminating waiting periods Minimum effort in customizing and integrating applications Increase Storage Capacity The cloud offers almost unlimited storage capacity also it spares businesses the need to upgrade their computer hardware, further reducing the overall IT cost Device Diversity and Location Independence Services can be accessed through all the devices that have internet access e.g. smart phones, tablets etc. No limitation of place and medium, applications and data can be accessed from anywhere Smaller learning curve Very easy to adopt According to IDC, cloud computing is experiencing dramatic growth, and the market for cloud-based solutions is set to grow six times faster than the overall software market

5 Why not Cloud?? Security & Privacy For data security, provider’s reliability is very critical as a company gives away private & confidential information Users have to trust service provider that they will protect any data loss, password leakage & unauthorized users access Dependency & Vendor Lock-in It is very cumbersome to transfer huge data from a provider once you have rolled out with him and want to migrate to the new one Technical Difficulties and Downtime Outage and downtime is possible even to the best cloud service providers Also the whole setup is dependent on internet access, thus any network or connectivity problems will render the setup useless Limited Control & Flexibility Companies and users have limited control over the function and execution of the hardware and software as the applications and services run on remote ( third party virtual environments)

6 Cloud ERP VS On Premise ERP AttributesCloud ERPOn Premise ERP Alternate Labels On Demand Subscription Based Hosted Application Service Provider (ASP) Installed Hosted On- Premise Company Profile Fast growing companies who want to invest in an affordable solution, capable of growing with them and want the flexibility of anywhere, anytime access without investing in IT infrastructure Established companies with the ability to make the required upfront investment to purchase and implement the software. Minimum timeframe for an on premise solution should be 5 – 7 years Purchase Model Subscription Based License based with some lease and rent options Ownership Cost Much lower initial cost than On Premise ERP IT infrastructure is hosted and maintained by cloud provider Data security, all up gradations without effecting previously implemented customizations & also ensures the system is always running Users can focus on their core business instead of being obstructed by IT issues Better cash flow management by pay-as you-go subscription model Large upfront and ongoing investments to purchase and manage the software & the hardware/servers Additional time & money required to train employees if company doesn’t have experienced IT staff IT team to spend a significant amount of time and budgets to ensure systems are up-and-running when needed, including maintenance of hardware & server rooms At the time of up-gradation system should be redeployed across the various users' computers and re-implement various customizations and integrations When comparing the total cost of ownership of on-premise ERP solutions relative to cloud systems, study found that cloud-based ERP can cost 50 percent less than on-site ERP for a 100-employee company over a four-year period* * The TCO of Cloud Computing in the SMB and Mid–Market Enterprises; A total cost of ownership comparison of cloud and on–premise business Applications - Hurwitz & Associates.The TCO of Cloud Computing in the SMB and Mid–Market Enterprises; A total cost of ownership comparison of cloud and on–premise business Applications

7 Cloud ERP VS On Premise ERP AttributesCloud ERPOn Premise ERP Deployment Time 3-6 months 12 months Initial Investment Low upfront cost since no hardware or infrastructure investment Higher Cost due to licenses and hardware purchase Hardware Environment Virtually No cost, No maintenance required, no upgrades required, scaling is simple & fast Expensive, requires maintenance, upgrades required, scaling can be difficult & slow IT Infrastructure Limited or no internal IT resources and/or no desire to invest in or support additional IT infrastructure, Pay as you grow fee structure, per user per month fees End user oriented. Non-experts can implement and manage the solution with the assistance of the vendor Established IT support with software domain expertise and a solid backup and security strategy Complex software implementation and maintenance requirements necessitate hiring of in-house IT experts Software Investment License fee enables the company to use the software One predictable monthly payment covers everything from infrastructure and vendor software support to daily back-ups and software upgrades License fee enables the company to own the software Upfront purchase with annual maintenance / subscription renewals in the 20 – 25% range

8 Cloud ERP VS On Premise ERP AttributesCloud ERPOn Premise ERP CapEx vs. OpEx The subscription model converts traditional technology capital expenses into an operational expense, which can be positive for maximum cash flow flexibility Software and hardware are capital expenses Hardware Software and Hardware reside at the premises of the vendor Software and Hardware reside at the location of the customer Access Via the Internet or mobile device Client server for local workers or Terminal Server for remote employees Remote Locations Have multiple sites or many geographic locations but do not want to build or support remote access to existing network Have multiple sites across geographic locations and have a supporting network infrastructure System Upgrades & Enhancements Free & continually upgraded to provide the latest & most advanced version of ERP Paid & Sporadic two-thirds of mid-size businesses are running outdated versions of their ERP software* Ongoing Maintenance Vendor’s responsibility Customer’s responsibility *Why Cloud Computing Matters to Finance, Ron Gill, CMA, CFM: Strategic Finance, January As per a report from Gartner more than 90% of a typical IT budget is spent on maintenance, and as little as 9% is left for actual business process improvement

9 Cloud ERP VS On Premise ERP AttributesCloud ERPOn Premise ERP Initial Services Investment Implementation services tend to be less than on-premise solutions since installation, infrastructure prep, and some configuration are completed by the SaaS vendor Initial services investment is much higher Hardware / Infrastructure Investment A reliable Internet connection Traditional IT components including server hardware and software, data backups, storage, disaster recovery, and remote access and network connectivity User Interface Web technology that enables an intuitive, customizable interface and many of the user-friendly features Internet users have grown accustomed to in web-based applications Mature technology with a traditional Windows interface Security In 3rd party highly secure data center Responsibility of the customer Data Model Shared (multi-tenant) or dedicated (single) instance depending on the vendor Dedicated (single) instance on the customer’s servers

10 TCO Comparison : Cloud ERP VS On Premise ERP License & Subscription Cost Installation & Set-up Cost Customization & Integration Cost Data Migration Cost Training Cost Maintenance & Support Cost Hardware Cost Other Costs TCO Parameters Source:

11 References… cloud-erp.shtml premise.asp The Compelling TCO Case for Cloud Computing in SMB and Mid- Market Enterprises - A 4-year total cost of ownership (TCO) perspective comparing cloud and On-Premise business application deployment

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