What the fine print says | On-premise vs. Cloud ERP System for Small Business
By Simone Lomibao
Today I assume the role of devil’s advocate. It’s not a role I cherish, but one I feel I have to play.
There have been several articles circulating on the Internet extolling the virtues of on-premise enterprise resource planning for small to medium business organizations (ERP for Small Business / SME). Times have changed, the articles say, and ERP System is not as big an investment as it used to be.
One article, for instance, said that the cost components for an on-premise ERP are the following only:
- User licenses
- License maintenance
- Implementation services
Now if you’re somebody with a small or medium-sized business, this claim can really be good news for you. Imagine having the benefits of an on-premise system that only Big Businesses were able to afford before — centralized information, real-time updates, instant coordination between and among your units. There is no doubt that these benefits can make your business run better, thus making your organization more efficient and competitive than it has ever been.
And all for a price that is not as steep as you once imagined. In Singapore for example, a marketing article boasts of a popular on-premise brand for only SGD 60,000.
BUT here’s the catch: These claims are, in fact, downright misleading. My advice – don’t fall for it!
These marketing articles go on to assure would-be customers that the above cost components are the only ones they worry about if they decide to go the route of the on-premise ERP for Small Business or ERP for SME.
Wrong again. What the fine print says is that there are hidden, unpublished cost components in such an arrangement. Let me list them down here:
- Network Devices f (LAN, Switches, Firewalls)
- Operating System (for both the server and for the desktops/laptops of each user)
- Softwares and Software Maintenance (Anti Virus, Back Up Software)
- Electricity to be incurred for the Airconditioning and Lighting of the Server Room
- Manpower (Minimum of 1 System Admin) – A server-based software needs at least 1 headcount in charge to maintain the software.
- Version Upgrade Implementation Services – whenever the software will be upgraded, an implementation cost component is necessary for data migration, cut-over activities.
These items above among other things are those costs they don’t tell you despite the fact, that you deserve to know. You deserve to know the additional 40% operating cost you will incur in the maintenance of an on-premise software (e.g. around 25,000 in Singapore dollars more than the published rates ).
So is it true that small and medium enterprises can finally have an ERP system cost-efficient enough to fit their budget and be attuned to their unique needs?
Yes, but only when the ERP is on the Cloud.
In a Cloud ERP System or through a Cloud Accounting Software, the cost that is published and released to you in the proposal is all there is to it. For instance, in Year 1, the cost components are,1. Implementation, and 2. License subscription. In Year 2 and onward, only the license subscription needs to be budgeted. No hidden cost. No surprises. Customers pay for what they need, and only up to when they need it.
In the end, when we talk about on-premise versus Cloud for the small business or SME, we ask — is it even a choice?
So this reluctant devil’s advocate says: Let’s all be honest for once. And thank God for the Internet!
Simone is the Country Manager of CloudTech Singapore. She is an ERP professiosnal with 7 years of experience in sales, presales, project management and IT resource management. She spent most of her ERP experience managing sales and presales teams for ERP consulting partners carrying an popular on-premise ERP brand. She recently joined the Cloud movement, realizing the inevitable shift of the market from server-based softwares to the Cloud. She is an advocate of the underdog phenomenon. For her, the underdogs – those visionaries, innovators and idea-logists, are the game-changers and the ones who would later change the world.
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