Cloud Vs On-Premise: What’s Right for Your Business Strategy?

Strategy follows the structure and vision of an organisation. In many, if not all cases, the ultimate goal of an organisation is to be successful in whatever business they are engaged in, with core focus on the customer. Over the years change has been one of the fastest trends – changes in the ways things are done and systems are set up. For example, conventional banking systems, to mobile banking, translating to the bank being your device. Today, now it has become more exciting that the bank becomes you! All this has been made possible through the technologies that we have and cloud being pivotal in all this.

The business case for enterprise resource planning systems has one that has grown from a need to a default, and today, business strategies are largely linked to them. One of the biggest choices that have to be made, thereafter, is the delivery model. To go the cloud way, or to go the traditional (on-premise) way.

Let’s look at cloud, through one line of technology, ‘Software as a Service’ (SaaS).

The high level view can be illustrated through the economics around Power System Engineering. A power utility in Africa, for a population averaging 15 million, has to invest not less than 10 billion United States dollars to ensure efficient delivery of services for home use only. What does this mean? The utility funds, through its own means, this investment which if otherwise had been left to the population (15 million) to raise, the politics around it would stunt the drive – let alone the means to raise such an amount.

How you make sense of that setup is simple: people connect to the service which has already been set up and they pay for what they use. That’s one way to look at cloud.

In business, funding is never easy to come by but there is always a need for companies to increase production and revenues. So how will companies bridge the inefficiency gap with high-value, effective enterprise resource planning systems? The answer is simple – cloud. In developing countries, up to 80% of companies which are aware of the technology and run on it allude to the fact that going cloud is one of the best methods of cost reduction since they only plug into an existing system without the need to worry about maintaining the infrastructure, thereby reducing capital expenditure.

That’s cloud. While at the moment the idea sells best for companies which hinge a lot on cutting operational costs as opposed to other related issues pertaining to the employment of software solutions running their enterprises, even big companies, which were once thought to favour having setups on-site seem to be swaying in favour of the cloud-way. How then does a company know that cloud is the strategy they need to take? One of the words that rise eye brows in any board meeting is COST, once your ICT related costs in terms of set up, maintenance have been ballooning, then it could be an indicator that cloud could be an option that cuts down on costs.

The structure of an organisation will also speak to cloud, nowadays business is no longer limited to geographical location for an office, and information accessed on time is more valuable than information accessed after its expiry. Thus cloud becomes a vital in access of information.

For some companies, on the contrary, on-premise setups still remain the policy (and the desired) which doesn’t change because of the incentives doing business on the cloud offers. The reason for this in the majority of the cases is that choice to stay connected using this model is not always financially motivated, but just “policy” – backed by perception on issues like security. Let me say at this point security is always an issue, on cloud or otherwise, and I will explore that in a later blog.

Looking back at power systems illustration I explained earlier, if individual entities decide to “generate” their own power through a standalone power systems, they would need expertise to always monitor factors like load, and other related issues. Down time becomes their “business”. However all this boils down to capacity.

The market trends have shown a transition from on premise based projects in relation to SAP, and SAP is also moving with market trends coming up with cloud based solutions for its chosen markets.

Run faster with SAP.

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