ERP vendors come in all shapes and sizes, offer varying levels of functionality as well as functional integration and offer different options for installation. On the face of it, there are three basic installation options, and each enterprise has to decide which the best fit is for their purposes: a traditional on-site one-time payment installation; an over the internet on-demand, software as a service (SaaS) model on a pay per-user/per-month basis; or an on-premise deployment, also on a pay per-user/per-month basis.
Traditional On-Premise Installation – One-time license payment
Although SaaS and hosted software are the buzzwords of the day, traditional on-site implementations provide some companies with the sense of security and ownership they require, with a one-time license fee instead of an ongoing monthly expense. There is often an additional yearly maintenance fee which must also be taken into consideration. While this model requires an investment in the purchasing and maintenance of hardware and infrastructure, it can sometimes be more cost effective in the long run then a per-user/per-month installation. Once you’ve paid the initial license cost, the service charges are usually fairly stable and hosting and other charges (including testing environments, which in on-premise installations can be a back-up or test server) shouldn’t surprisingly increase as time goes on.
To summarize some of the benefits of an on-premise installation:
- Ownership vs. monthly fees: This might be most cost effective in the long run
- Security: You control of the security of the environment including back-ups
- Accessibility: Connectivity to the system is intrinsic, without the need for internet connections throughout the organization
Software as a Service (SaaS) – Hosted Option
The SaaS model provides an ERP option for companies who need the solutions provided in ERP software, without forcing them to make a capital investment in on-premise IT infrastructure: software, hardware and implementation.
The hosted option has a number of benefits over an on-premise installation:
- Fees: Ease of use, no costly set up fees, and no need to invest in IT infrastructure or personnel.
- Automatic upgrade: Upgrades are handled automatically on the hosted platform so you are always using the latest version of the software.
- Accessibility: Connectivity is available online, anytime, from any common web browser.
- Low-risk: With no large up-front investment or long-term commitment, this model allows you to “try-before-you-buy,” as it were, though migration from an existing system does need to be considered.
- Security: In general, data is protected by the platform security; systems and backups should be in place to ensure uninterrupted service.
When the SaaS model is offered a pay-as-you-go, per-user/per-month basis, with its own advantages:
- Initial cost: No major initial outlay of capital
- Stability: Your fees are ostensibly stable and on a regular basis with no surprises
- Functional Scalability: Often, no additional fees required for most of the functionality (e.g. begin using ERP software for CRM and expand to Accounting, Inventory Control etc., at either scalable or no additional cost, depending on the package)
On-Premise Installation – Pay-As-You-Go
For companies that want to take advantage of the pay-as-you-go per-user/per-month basis model, while maintaining their ERP system in-house, many companies now offer the option to do so, though it’s a mixture of both benefits and disadvantages or each approach. The benefits are, as above for the SaaS option:
- Initial cost: No major initial outlay of capital
- Stability: Your fees are ostensibly stable and on a regular basis with no surprises
- Functional Scalability: While often no additional fees are required for most of the functionality (e.g. begin using ERP software for CRM and expand to Accounting, Inventory Control etc., at either scalable or no additional cost, depending on the package) – there might be some configuration involved and updating which would be automatic in the regular SaaS solution
Mixed with advantages from the traditional on-premise installation:
- Security: You control of the security of the environment including back-ups
- Accessibility: Connectivity to the system is intrinsic, without the need for internet connections throughout the organization
The many flavors of ERP systems now give you the power of choice. So it’s important that you consider both the short and long term requirements of your organization. If you’re not sure, try to find a solution that offers as many variations as possible so that you can move from SaaS to on-premise if the need arises, without costly migration expenses and the headache of switching such a major part of your business operation.
By Rebecca Haviv
