Cloud v. On-Premise: The Battle for Corporate ERP

Gregory Belt is the Senior Director of Oracle Practice for Fujitsu Consulting.

These days, when you hear a company announce that a solution or offering is now available in the cloud, chances are you don’t bat an eye. Nevertheless, software companies as well as service providers still take great pains to promote their cloud prowess in an effort to capitalize on the trend toward cloud migration. However, here’s the problem with trends: They can disappear as quickly as they came. As technology evolves in our personal lives, so do the options for businesses. With what seem to be limitless opportunities, many executives believe that organizations need to be all-in for cloud, but there are distinct advantages and disadvantages to being completely in the cloud or exclusively on-premise.

They Call it 'Being on Cloud 9' for a Reason

There are many benefits for an organization to use cloud services, which is why we continue to see widespread corporate adoption. One strong advantage of cloud is that it allows companies to streamline processes by taking advantage of best practices inherent in cloud applications. As organizations grow, restructure, merge, etc., processes often go out the window, and the ease of doing business both internally and externally becomes strained. It’s imperative that these business process challenges are addressed in a timely fashion throughout the company – and that cloud applications provide quicker “time-to-value” implementation.

Cloud-based services offer the best practice processes mentioned above, as well as data management and analysis capabilities, all delivered via relatively easy-to-use tools over a relatively short time frame. These points are crucial as they enable companies to spend less time learning the technical aspects of the platform and more time putting their services into action.

Cost is always an important consideration when deciding on a cloud service. When using the cloud, all hardware and software is taken care of by the provider, which reduces spending on IT infrastructure. This results in minimal upfront spending and lower TCO, while still maintaining access to corporate information.

The Benefits of On-Premise

Of course, cloud services aren’t always the magic bullet, and might not necessarily align with a company’s business needs. One disadvantage is that cloud customers need to play by the provider’s rules when implementing their business process in cloud applications. Cloud ERP suites cannot currently be modified to suit all customer needs, which might adversely affect a customer’s competitive advantage. This could be a deal-breaker for some companies and an advantage for on-premise solutions.

Another advantage of on-premise solutions is that companies have complete control and access to their information internally. Companies don’t need to go through their provider for access and are able to manage everything in-house. On-premise is becoming more attractive to companies now that there is no practical limit to affordable storage capacity. We are seeing more products hit the market that are able to meet this need.

As with cloud, there are disadvantages that come with on-premise. One of the main concerns is cost. As discussed earlier, cloud providers offer many services through a cost-effective “pay-as-you-grow” subscription model that can match hardware capacity and software licenses very precisely to a customer’s actual needs. This model also provides for continuing upgrades to IT infrastructure and removes that worry completely from the customer’s planning cycle. Companies that choose on-premise solutions must plan future investments based on anticipated growth; and if that growth does not materialize, they are stuck with unused hardware and “shelfware” instead of software. They also need to hire a dedicated IT staff to support that investment, which can be a heavy financial burden for companies.

Putting it All Together

Both on-premise and cloud have their advantages. Most companies should be able to get the best of both worlds by implementing a hybrid or co-existence cloud strategy. As noted earlier, companies don’t need to commit to one option. Hybrid cloud uses a mix of on-premise, private cloud and public cloud services with communication between the different platforms. Hybrid cloud provides companies the option to keep their competitive advantage by implementing their proprietary processes either on-premise or in a private clouds, while still using public cloud services for their other needs.

As has been said before, “The move to the cloud is a journey; it is not an event.” Keeping a competitive advantage while still utilizing cloud services in some capacity should be the right strategy for most companies moving forward. There’s a silver lining for everyone. Now it’s time to figure out just the right mix.

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