Selecting the Right ERP: Cloud or On-premises?

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Your ERP system is sort of like your car: It's probably hard to imagine your day-to-day routine without it, even if you don't spend a lot of time consciously thinking about what it does. A car gets you to the office, the store and back home, while ERP underpins all of your key business processes and applications and drives your supply chain.

3 important ERP cost factors to consider:

Like a car that keeps breaking down or begins falling behind the feature curve, an ERP implementation can become too costly and risky over time if it isn't handled the right way:

  • A traditional ERP solution has to be continually maintained, or else it becomes outdated and less useful, much like a car that lacks airbags or power windows. If the ERP platform itself isn't flexible enough to evolve in lockstep with rapidly changing IT systems and business apps, your company operations may have to be modified instead, requiring employees to take time to re-engineer even their basic processes. Be sure to select a flexible ERP positioned for future technology innovations.
  • Expenses for hardware, licenses and contracts, while negotiable in many cases, can add up with on-premises solutions. Depending on your data requirements, a hosted (cloud-based) ERP may be the wise option in terms of cost and additional staff.
  • Many businesses require customization and integration with their critical line-of-business solutions. This can require support from both your trusted ERP partner and your internal IT team. Consider the out-of-the-box flexibility and customizability of your ERP solution, and select a solution designed to easily configure and adapt to industry needs. The more difficult it is to customize to your business, the faster your costs can add up.

All of these common issues create plenty of anxiety about ERP pricing. Plus, they up the ante for knowing how to pick an implementation partner who can provide a considerable breadth of services when it comes to planning your ERP setup, migration and upgrades.

"ERP systems that run in the cloud are an increasingly popular option."

The road to cost-effective ERP starts with figuring out what type of ERP - on-premises or cloud - is best for your organization in particular. Like buying a car, the choice can feel overwhelming, with lots of fine-grained details and features to consider - especially if you've made the decision to move from one model to another. Let's look at how you might size up each type's advantages and disadvantages, and what you might do to see the deployment through to completion.

Choosing cloud ERP: What you need to know

Tapping into ERP systems that run off-premises, in the cloud (i.e., on someone else's infrastructure), is an increasingly popular option for businesses of all sizes. Forbes contributor Louis Columbus noted in 2015 that this category was growing rapidly due to its cost-effectiveness and speed of deployment. There are indeed several fundamental advantages to taking this route for ERP:

  • Say you work with a partner who hosts Microsoft Dynamics in the Azure cloud. This frees you from the grind of the hardware upgrade cycle and the need to sink so much money into ongoing maintenance. Pricing for your Dynamics implementation can be made much more appealing under this model.
  • More specifically, large upfront purchases can mostly be avoided. Expenses on equipment, databases and licenses can be trimmed or eliminated altogether depending on the specific solution being put in place. Hosted Dynamics can be especially cost-effective when it comes to hardware-related expenses.
  • Deployment is fast and straightforward compared to traditional ERP. Most of the work is in setting up your logins and applications for different devices; provisioning resources is not the drawn-out process that it can sometimes turn into when you're working directly with hardware and licenses yourself.

A cloud ERP solution implemented with the help of a trusted Tier 1 Microsoft Cloud Solution Provider can be set up relatively quickly, allowing for accelerated time-to-value for businesses. Be sure to assess what you are getting with a cloud solution, namely what (if any) resources you will have to procure yourself, how your data is being managed and what cost structure that provider is offering.


Security and control are sometimes regarded as drawbacks to cloud implementations and should be taken into account in the context of your organization's requirements. However, Microsoft understands data requirements and continues to build community clouds for specific industries, as well as private hosting through key Microsoft partners. The other apps you use on a daily basis, particularly ones in the Microsoft Cloud such as Office 365, are also worth considering, since they can be integrated with your ERP system.

On-prem ERP: options and considerations

Depending on what version of Microsoft Dynamics is right for your organization, you may choose to do an on-premises deployment. This remains a common option for many companies since they prefer to maintain control of their data and need the freedom to perform customizations that make the ERP system a close fit to their needs. Close to 60 percent of firms choose on-prem, according to numbers from Panorama Consulting.

With on-prem ERP, consider working with an implementation partner to assess:

  • Requirements planning: What growth trajectory are you expecting, and how will your solution respond to it?
  • Implementation and maintenance options: How much time and money would you spend implementing and maintaining software and infrastructure that you own?
  • Consulting and customizations: What add-ons, custom developments, etc., might be of the greatest value to your business process?

Buying and implementing an ERP solution is not a process you want to enter into unprepared. Contact us and let's discuss your goals.


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By Turnkey Technologies, Inc. - Microsoft Gold Certified Dynamics ERP and Dynamics CRM Partner of Missouri, Illinois, Oklahoma and North Texas.

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