The cloud is the best way forward for businesses of all sizes, but growing enterprises are particularly handcuffed by the on-premise model of the past. By locking in to a single vendor's costly, infrastructure-heavy products, enterprises actually harm their own interests. Extending the typical "big iron" corporate ERP system(opens in new tab) to a new subsidiary or operating region is a costly and cumbersome process that can slow a business to a crawl, just when it’s looking for speed. Here are the five top reasons on-premise ERP is failing to serve the interests of growing enterprises.
1. The overhead and complexity of many "big iron" ERP systems are greater than many small and growing business units can take on or need to. Instead of providing tools to help these new operations grow, the on-premise system can actually stifle creativity, flexibility and speed.
2. Expanding an on-premise system to new territories and subsidiaries almost always means investment in servers and networking hardware, which can represent additional capital expense and increase the burden on IT.
3. Expanding on-premise ERP requires careful coordination with enterprise IT. In fact, expansion can be as costly and disruptive as a new implementation. But IT organizations are already so resource-constrained that in some large companies the wait for serious projects is as long as three years—not counting time needed to customize the solution. These holdups inhibit growth and innovation, and force business leaders to either defer their ambitions or expand the IT roster at significant costs.
4. Organizations that try to pass along the true costs of extending their on-premise ERP to newer divisions and regions sometimes actually steer those units towards underpowered, boutique software packages. Rather than take the hit on their own bottom line, these smaller entities will instead buy off-the-shelf software that supports their short-term goals. (IT delays, as mentioned above, can also drive a business unit to select an easy-to-install, underpowered boutique product.) But these programs are rarely able to interface with corporate ERP. That leaves the organization with no real-time visibility between headquarters and the division, and when the new unit outgrows the smaller system, a costly and time-consuming upgrade will be necessary.
5. Once an on-premise system is installed organizations will ultimately be confronted with an upgrade. Already expensive, time consuming and disruptive to the business, upgrading on-premise systems only gets more complicated if it’s spread across businesses and locations. Businesses can wind up with upgrades in some locations, older versions in others.
Global companies have experienced business pains using multiple, disparate on-premise systems that lack integration and provide little visibility into their business. Plagued by manual processes, bottlenecks, version control, an inability to consolidate global financials, and slow financial reporting, companies are limited in their business efficiency and growth potential. In addition, the high up-front costs and long implementation times for on-premise systems hinder growth even further. Version lock, costly upgrades and maintenance are the burdens companies have to deal with.
Fortunately, enterprise companies don't need to compromise on capabilities when consolidating an acquired business or expanding to a new continent. Two-tier ERP(opens in new tab) strategy preserves the investment in corporate ERP capabilities while providing a powerful, faster and less expensive alternative for growth units. Want to see how two-tier ERP can serve your interests and support your vision?
-Kishore Bhamidipati, Director, Product Marketing at NetSuite