Key Considerations for Enterprise Business Systems Modernization: On-Premise vs. SaaS/Cloud-Based Deployment
Many organizations are currently facing the concern of their ERP (Enterprise Resource Planning) and HRIS (Human Resources Information System) systems sunsetting. These systems have been the backbone that underpins their operations for years, but with advances in technology and the ever-changing dynamics of the workforce, legacy systems often become outdated and unsupported by their vendors. This means that the companies will no longer receive necessary technical updates, security patches, or customer support for their systems.
This poses a significant risk, as systems may become vulnerable to security breaches, which could also result in potential compliance issues. Moreover, the lack of updates and technical support may lead to system failures, which can disrupt their operations, drive inefficiencies, and cause significant financial losses.
To address this concern, companies are exploring various options, such as upgrading their systems, migrating to cloud-based or Software-as-a-Service (SaaS) solutions, or adopting new technologies such as AI and automation. However, these options come with their own challenges, such as high costs, complex implementations, and resistance from employees who are comfortable utilizing legacy systems.
Overall, the sunsetting of legacy systems is a significant challenge for companies, and they need to carefully evaluate their options to plan their transition to new systems, helping to ensure a smooth and successful transformation at the enterprise level. A major consideration for organizations looking to modernize current systems to a new ERP or HRIS system is whether to implement on-premise, or to migrate future state systems into a cloud-based or SaaS solution. While there are some nuances between SaaS and cloud-based options, they have many similarities when compared to on-premise instances.
Below is a comparison of key considerations for each type of system implementation that can help an organization determine which approach best fits their current needs and future state enterprise transformation strategic initiatives.
Key Considerations
| Consideration | On-premise systems | Cloud / SaaS Systems |
| Cost | Requires higher upfront investment in hardware, software, and IT resources. | May have higher recurring license fees but requires less initial investment and offers a more predictable monthly subscription-based pricing model. |
| Security | Offers greater control over data security, as the data is stored on local servers. May be more vulnerable to cyber-attacks such as ransomware. | Requires trust in the vendor's security measures, which may or may not be better (generally better due to their scale and specialization). |
| Scalability | May require additional hardware and software investments to scale up. | Tends to be more flexible and scalable due to higher capacity to handle changes in demand and growth. |
| Accessibility | Requires on-site connectivity or a secure VPN login to access the data, with potentially greater latency. | Can be accessed from anywhere with an internet connection. At the same time, may require greater level of administrative burden to access back-end data due to vendor security standards and protocols. |
| Maintenance | Requires internal IT staff to maintain and update the system. | Managed and updated by the vendor. |
| Customization | Offers more customization flexibility, as they can be tailored to meet specific business needs. This could be beneficial or problematic depending on the business needs. | May have limitations on customizations due to the need for a certain level of standardization for all vendor customers. Cloud hosted systems may have greater flexibility to add customizations than SaaS models. |
| Integration | May require greater effort and resources, but more flexibility, to integrate with other systems and applications. | Often offers pre-built integrations with other cloud-based tools via APIs or other third-party Integration Platforms as a Service (IPaaS). |
| Disaster Recovery | May require implementation and management of disaster recovery plans. | Fairly robust built-in disaster recovery and automatic backup options. |
| Reliability | May be vulnerable to hardware failures, power outages, and other infrastructure issues. | May be more reliable since they are hosted on powerful, highly secure, and redundant data centers. |
| Implementation Speed | May require more time to set up the infrastructure. | May have faster implementation times since hardware installation and configurations are not required. |
| IT Resources | May require dedicated IT resources to maintain and manage the system. | Less IT overhead may be required since the vendor manages the system infrastructure. |
| Data Ownership | Provides more comprehensive and complete control over data. | Requires trust in the vendor's data management and privacy policies. |
| Compliance | Provides more control over compliance measures, which could be good with strong controls, while also risky with lack of adequate controls. | May have more stringent compliance standards due to regulatory requirements. |
| Network Infrastructure | May be operated on local networks. | Requires a reliable and fast internet connection to access the system. |
| Software Updates | May require manual updates and upgrades. | Receives automatic updates and system upgrades based on vendor-provided schedules. |
| Vendor Support | May require more support from your IT staff or third-party consultants. | May offer greater levels of support, training, and resources from the vendor. |
There are various pros and cons to each implementation approach when considering a business system modernization. SaaS and cloud-based platforms offer easy access, regular updates, and scalability, while on-premise platforms provide control, customization, and integration possibilities. SaaS and cloud-based solutions have subscription-based costs and shorter implementation times, while on-premise solutions require upfront investments and longer deployment cycles.
The selection of a new or upgraded system is a significant investment and requires intense due diligence to ensure the following:
- The solution is widely accepted as an industry best-in-class business system for your organization.
- Users of the system agree that it is the most compatible solution to meet the business’s future state functional and technical requirements.
- The solution improves overall organizational operations and efficiency.
Regardless of the solution that an organization is planning to modernize, the decision of upgrading a particular system or choosing the ideal deployment approach is dependent upon the business needs and circumstances specific to your company. Final decisions regarding system upgrades should also be framed within the context of an enterprise-wide transformation effort. This allows employees throughout your organization to acknowledge the importance of strong project and organizational change management for the implementation to be successful.
BDO works with organizations to gain a thorough understanding of their unique needs to evaluate and select a variety of solutions. Our professionals work closely with management teams to understand organizational strategy, growth plans, systems, functional and technical business requirements, key decision factors, and other relevant aspects for the implementation of a best-fit solution to ultimately meet current and future state business objectives. If you are considering a potential system upgrade, contact us today to speak to our experienced systems selection team to learn how we can help your organization make a selection best suited to your business-specific needs.
SHARE