With an on-premises ERP deployment, the server infrastructure and software are owned by the company, reside within the organizational boundaries or firewall, and are handled by a dedicated internal IT team. This allows the company to maintain full control over the data and applications. Moreover, the system availability, uptime, security, and disaster recovery objectives are at the customer’s control.
On-premises ERP deployment ensures that data compliance is effectively met for certain industries, such as in the financial and healthcare industries, that have strict regulations on where the data is stored and managed.
Although deploying an on-premises ERP solution is typically associated with an up-front capital cost, over the long term and with user growth the solution can offer a lower TCO (Total Cost of Ownership) than a cloud-based subscription model. Companies should evaluate the reasons below and check whether this is true for their organization:
• There is usually a break-even point where the initial investment is paid off; however, with cloud, the subscription costs are recurring.
• Since cloud-based services are paid for as a utility (variable costs), the solution can prove to be less cost effective as the organization continues to grow. With user growth, subscription costs can become higher than amortized capital expenses.
• With growth, network bandwidth costs can significantly affect company’s budgets.
Before picking an ERP deployment option for your company, it is a good idea to evaluate the ROI achieved from each of the different scenarios.
This should be done from a long-term view that also accounts for user growth. Moreover, the chosen deployment option should make sense not just from a cost perspective, but also from the perspective of achieving your business, security, compliance, technology, and operational or performance goals.
A criteria that you should examine with ERP deployment is:
Do you prefer your ERP investment to be an up-front capital expense, as is applicable for an on-premises deployment, or an operating expense that is seen in a cloud-based subscription model?
Download the complete guide: ERP Deployment Scenarios: What’s Right for my Business
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