Are On-Premise ERPs Going Away?

In the world of business applications, cloud is king. Most new solutions are completely cloud-based and offer monthly subscriptions to their users. This is extremely common in CRM system and add-on or ISV solutions. In the ERP space, there is a lot of concern that on-premise applications will become a thing of the past.

I have clients that ask about this all the time, with panic in their voices. They want to know if they will be forced to go to the cloud.

On-Premise ERPs Won’t Disappear Anytime Soon

The answer to this is, frankly, no. A lot of tech companies, Microsoft included, are heavily investing in cloud computing and applications. This makes sense for them because it is an excellent source of reoccurring revenue. However, on-premise applications are still a huge source of revenue for all of the tech giants. Let’s take Dynamics GP, for instance. Dynamics GP has over 200,000 users worldwide. These users represent over $50,000,000 in renewal fees every year. Microsoft is not likely to cut off this portion of their business, and that figure does not represent on-premise renewal fees from Dynamics NAV, AX, or SL.

Other ERP companies, such as Sage, Oracle, SAP, etc. have on-premise ERP systems as well, and are not likely to cut off these users.

On-Site ERPs Have Established Clients

Another reason why on-premise isn’t going anywhere is that the users simply won’t allow it. Large companies that run on-premise ERP systems, such as GM, Hershey’s, Under Armour, etc. are slow cloud adopters. They have so much infrastructure and so many other systems connecting to the ERP that switching to the cloud is a long and difficult process. Also, many larger companies are resistant to having their financial data reside in the cloud.

Today, the cloud is just as safe, if not safer, than your on-premise server. However, with large companies such as Target and Neiman Marcus getting hacked, some organizations are not willing to move their data “out of house.” This became extremely apparent, last year, when Microsoft announced they would only continue to upgrade Dynamics AX in the cloud. The backlash was quick and furious from the AX community. These enterprise companies do not want to be forced to move to the cloud before they are ready, on a timeline that isn’t their own.

The Cloud is Still Growing

While on-premise ERPs are not going away, we do see a lot of other business applications moving to a cloud only platform. Microsoft Office 365 has become widely adopted amongst organizations of all sizes. It simply makes sense to have Office and Email in the cloud, so that IT does not have to worry about these applications.

Also, having an “always” upgraded Office suite makes it much easier when you are upgrading your ERP system. Now, you no longer have to worry about if your version of Office will be compatible with your accounting system. I have seen many an upgrade come to a halt because one person in the accounting staff was still running Office 2008. The security features that come with Office 365 also make the cloud experience a much more pleasant one for IT staff. They can easily see who has logged in and what they have viewed on SharePoint, easily archive all employee emails, and even force documents to be backed up to OneDrive.

Tech giants are “leading with the cloud” today and encouraging their customers to partake in the “digital transformation;” however, on-premise is here to stay for the foreseeable future.

Wondering how this will impact your business? Whether you want to optimize your on-site ERP or move to the cloud, KTL Solutions can help you optimize your systems for success. Get in touch with us online, or at 866.960.0001.

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