On-Premise Versus Cloud ERP: Q&A with Michael Medved

Part 2 of a 2-Part Series – Click here to Read Part 1

Michael Medved is the Director of Business Technology at Synergy Resources. Michael, who has twenty years of B2B technology experience, has the worked with many dozens of manufacturers and wholesale/distributors. We recently spoke with Michael about On-Premise (“On-Prem”) versus Cloud computing.  Michael shares insights for well-informed decision makers.

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Q: How do you help customers weigh their On-prem versus Cloud decision?

Michael: All technology decisions are driven, first and foremost, by the customer’s individual business requirements. Both our Business Solutions Consultants and Technical Consultants do their best to understand the customer’s objective. We then align our technology solutions accordingly.

We ask probing questions to better understand the customer. Is the customer in a fast or slow-growing industry? Does the customer plan to scale the business through an acquisition? Does the customer have internal IT resources available to support its technology infrastructure? What are the customer’s data requirements? And so on.

It’s very important to have an accurate technical assessment of the Internet services that may be available at the customer site. Some options may or may not be feasible. Since the quality of Internet services varies from place to place, there may be technical constraints imposed by virtue of the customer’s specific location.

Q: What is the promise of Cloud computing?

Michael: Many businesspeople are looking at the Cloud because they don’t want the hassle of setting up and maintaining their own computer hardware systems. Some may not want to incur a large, upfront capital expense. Others might want to free up their internal IT resources from doing routine maintenance in order to focus on higher, value-added tasks that have greater benefit to the company.

Q: What is the advantage of On-Prem computing?

Michael: For most manufacturers and distributors, the Enterprise Resource Planning (ERP) application is mission-critical. The business shuts down if the ERP can’t be accessed. Keeping computer resources on the premises ensures a level of certainty, assuming the customer does a good job of maintaining and backing up their systems.

In fact, many of our ERP customers ask us to provide technical consulting services to help support their computer network infrastructures.  And when we do, a best practice is to virtualize the customer’s data center. We’ve found that virtualization improves data systems performance and redundancy, while providing a fail-safe in the event of unforeseen circumstances.

Q: What are the implications for the customer’s data?

Michael: In an On-Prem configuration, of course, data is stored locally.  In that case, we also strongly recommend Cloud backup services to protect against a localized event such as a fire, flood or theft. We should highlight that the data, whether it’s stored onsite or offsite, unambiguously belongs to the customer.

When considering Cloud solutions, you need to be astute about data ownership and use. It’s advisable to take a critical look at the terms and conditions. For instance, if you stop paying for a Software as a Service (SaaS) application, will you have the right to download your data at a later time? If so, does the Cloud vendor store your data in a format that can be usable when it’s imported into another application?

Q: What should customers who prefer using a specific data reporting or Business Intelligence tool know about the Cloud?

Michael: Cloud vendors tend to build ‘ecosystems’ that, for right or wrong, feature specific products that are frequently requested by business.  However, the products on offer may not be the ones you like to use. You may need to investigate how an Application Programming Interface (API) can be used to exchange data from the Cloud to your preferred data analysis software. It’s an important consideration because your decision making processes are vital to your business success.

Q: Talk about IT staffing. What does it look like for the typical small to medium sized business (SMB), and how might the Cloud provide a benefit?

Michael: Many small manufacturers and distributors have small or fractional IT staffs. In fact, the IT management role may be a shared responsibility where that person might also be the company’s Controller or Operations Manager. In some of these cases, Cloud computing is positively perceived as a way to drive an unwanted IT role out of the company.

Q: You said that Cloud requires the customer to have a reliable Internet connection. Can you talk more about this?

Michael: One of our customers in Pennsylvania was interested in implementing a Cloud-based solution for the service department. The problem is that in this customer’s rural location, connectivity to the Internet is lost about once a month. The disconnect might last 15 minutes or perhaps the better part of a day.

We advised the customer to think about how they might fulfill their customer’s service requests. If the Internet goes down, what is the customer’s plan to work through the outage? It’s a matter of being realistic and planning accordingly.

Q: Do some applications lend themselves better than others when the Internet connection is known to be spotty?

Michael: You can have Customer Relationship Management (CRM), financials or other specialty applications hosted in the Cloud. You can probably get by if the Internet connection is lost. You can write down information or wait until you get reconnected. However, a mission-critical application such as Enterprise Resource Planning (ERP) requires an always-on connection. It won’t do to write Work Orders on paper, for example, because you need to have the system online to get the information you need.

We ask our customers if the application they plan to run in the Cloud is critical to keeping their businesses up-and-running. If the answer is yes, then we need to be sure that the Internet connection support their business needs, too.

Q: Are there financial considerations?

Michael: The individual business’ strategy can often guide this decision. On-Prem requires a greater upfront investment but the long-term payoff can be significant when the resources are managed for longevity. Cloud, on the other hand, has a lower upfront investment but can scale rapidly. So, if the business anticipates rapid growth, it may be financially advantageous to pay for incremental Cloud computing resources only at the time when they become necessary.

Authored by:
Thomas M. Birdwell, III
Birdwell International