- 31 October 2014
ERP Deployment Choice
The intrinsic complexity of ERP systems, combined with widely varying business practices and rapidly evolving technical considerations, can make the choice of a deployment model difficult or confusing. Cloud computing offers those implementing ERP with a range of options when deciding on deployment. The three most critical aspects of choosing a cloud ERP deployment strategy:
Software as a Service (SaaS) is typically, though not always, a specific combination of these aspects: subscription licensing, vendor management, and shared resources.
Critical Aspects of Cloud ERP Strategy
Approaches to licensing software have changed dramatically in recent times. For many years, ERP vendors have offered to host ERP systems for their customers using a business model called Application Service Providor (ASP) or Hosting. ASP is essentially the same as a traditional software project, except that the software is installed on machines at the vendor rather than the customer. Typically, for a monthly fee the vendor maintains the system and manages backups, upgrades, and other procedures. Like on-premise deployments, ASP agreements involve licensing software perpetually, which means the customer has a permanent right to use the software, even if the agreement for the vendor to host the solution ends. Subscription licensing means that the customer only has the right to use software for a set duration, after which the subscription must be renewed. Subscription licenses avoid substantial up-front costs for licenses, as well as (typically) annual maintenance charges for receiving updates. Subscriptions consolidate the license, maintenance, and many other costs into a monthly fee. Perpetual licenses for large solutions such as ERP have traditionally been significant capital expenditures, amortized over several years. Subscriptions require a smaller cash commitment and are usually funded as an operating expense, which lowers the barrier of entry for many companies. However, for systems such as ERP that have a very long project lifecycle (i.e., seven or more years), subscription license costs may eventually overtake the cost of a perpetual license.
Managing a production ERP system in a larger company generally requires dedicated staff and very good IT skills. ERP systems are obviously mission-critical; therefore, maintaining the system and having disciplines and procedures for backing up data are extremely important. ERP systems licensed on-premise place the system maintenance burden squarely on the customer. Managed hosting (ASP) shares maintenance responsibilities: the vendor manages tasks requiring physical access to the hardware (such as backups), while the customer installs upgrades and customizations.
Subscription-based systems put the management and maintenance responsibility solely on the vendor. This is by design, because cloud-based solutions share software and infrastructure across customers, which keeps costs down and system reliability up. Subscription customers have less control of how frequently the software is updated or when changes are applied, but vendors provide better services because they can improve the system almost continuously.
Sharing resources keeps service costs down and makes it easier for vendors to improve offerings over time. However, sharing data is obviously not desired. Cloud ERP vendors ensure that data is well partitioned, carefully delineated to avoid having data belonging to one system tenant (i.e., customer) seen by another. Partitioning data on shared hardware and software is the typical practice for subscription-based solutions running on multi-tenant systems.
ERP customers in regulated industries, such as medical products, may require certifications of their ERP systems. In these cases, system changes have to be audited and managed according to strict requirements. Consequently, it is impractical for the ERP vendor to retain full control of the system.
Cloud ERP vendors generally offer a “single-tenant” version of the solution, which runs on dedicated hardware or on infrastructure highly isolated from other tenants. Having a single-tenant option is also useful for ensuring that performance remains high during peak processing. Single-tenant subscriptions carry a higher price to offset the additional resources required of vendors; sometimes this is charged as a separate monthly premium.
Providing the opportunity to migration from one deployment model to another (such as moving from cloud to on-premises), or even within a deployment model (such as migrating from single tenant cloud deployment to multi-tenant cloud deployment) is central to the concept of application portability. Because business needs and technical preferences can vary wildly over the life of a typical ERP deployment it’s preferable to choose an ERP solution that provides the ability to easily ‘port’ or migrate from one deployment model to another. Understanding in advance any limitation of this portability is critical, as some vendors restrict your deployment to just a single model.
Epicor Software Corporation is a global leader delivering business software solutions to the manufacturing, distribution, retail, and service industries. With more than 40 years of experience, Epicor has more than 20,000 customers in over 150 countries. Epicor solutions enable companies to drive increased efficiency and improve profitability. With a history of innovation, industry expertise and passion for excellence, Epicor inspires customers to build lasting competitive advantage. Epicor provides the single point of accountability that local, regional, and global businesses demand. For more information, visit www.epicor.com.
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