Buy or rent? Hardware vs. cloud

In today's post, I would like to take a closer look at the topic of SAP Business One Cloud vs. hardware, or buying vs. renting. Based on questions from our SAP user community and many of my conversations with new prospects, I often notice that this topic is becoming increasingly important to you. For this reason, I would like to briefly introduce you to the options available in connection with SAP Business One and discuss the advantages and disadvantages of each.

First, a brief explanation. The topic of cloud computing is not new. In the past, (mainly) very large companies had their entire software landscape provided by data centers and paid corresponding rental fees for this service. In this case, the data center acts as an application service provider. This model was mainly used by large companies because the services provided by data centers involved a great deal of manual administration and maintenance. The high provisioning costs therefore only paid off if there was a corresponding number of systems/users.

Let's take a look at the various deployment options for SAP Business One:

The classic in the ERP environment. SAP licenses are purchased and belong to you for life. In this variant, the SAP solution is usually installed on your own hardware at your premises. When preparing for an SAP project, it is therefore important to consider whether the existing IT infrastructure is sufficient or whether additional investment is required. Smaller companies in particular often underestimate the requirements of today's ERP systems. This is especially true when additional solutions such as mobile warehouse management, production data acquisition, or an online shop, for example, need to be connected. This can quickly become complex. It is important to consider: Is a server cabinet available/sufficient? Are the network components adequate? Is a UPS (uninterruptible power supply) available? How do employees access the systems externally? etc. Fortunately, at SIGMA we see ourselves as a full-service provider and can also assist you with advice and support in this case.

From a commercial point of view, you will have to dig a little deeper into your pockets at the start of the project if you choose the purchase option. If you don't want to do this, you have the option of leasing the entire project or entering into a software usage agreement/hire purchase agreement, thereby spreading the costs over three or five years. Please note: As a rule, the purchase of a license is linked to an additional software maintenance contract, which includes the provision of new software versions and support services. If you do not have your own administrator, you should also take into account the running costs for the new hardware and, in particular, for updating the system software (operating system, antivirus software, etc.).

Many entrepreneurs still consider the in-house option to be secure and appropriate because it allows them to retain control over their data. From a physical standpoint, this is indeed the case. Fortunately, many companies never have to put the security of their in-house data to the test. However, we all know how dependent we are on good antivirus and spam solutions these days in order to be able to read our emails or surf the Internet without hesitation.

At the beginning of the “cloud movement,” it was primarily project and service providers for SAP Business One who were interested in the cloud. In this industry in particular, there are often many field staff who want quick and easy access to the system. SAP Business One in the cloud is also interesting for large companies with multiple locations. The cloud version now appeals to companies from all industries and is particularly popular with start-ups. The use of cloud solutions is usually linked to a rental model. This is also the case with SAP Business One. You pay a monthly rental fee per user. This rental fee includes the SAP license, the database license (HANA or MS SQL), the software maintenance fee for the manufacturer's 3rd level support, and the provision of the software in the cloud. Depending on the SAP partner's offer, the contract can then be extended to include additional support packages (Enterprise and Premium Support). The cloud provider ensures that your SAP system runs smoothly. Except for a small, fixed time window for maintenance work, the system is available around the clock. To ensure that the cloud provider adheres to specifications and guidelines, there are quality standards (Tier 1 to Tier 4) and ISO27001 certification.

Overall, the investment required to provide the software at the start of an SAP implementation project is significantly lower than with the purchase option. With a minimum contract term of 12 months, you also retain the flexibility to reduce the number of users or even terminate the contract in an emergency if economic reasons force you to do so. Compared to the purchase option, where you only have to pay annual software maintenance fees after the initial investment, the SAP Business One Cloud option requires monthly rental fees to be paid month after month, year after year. This means you have a higher overall monthly expense. On the other hand, you don't have to worry about purchasing the IT infrastructure mentioned above, which usually has to be replaced every three to five years.

One important issue regarding the SAP Business One Cloud version should be mentioned. You need a working Internet connection – it doesn't have to be lightning fast, but it does need to be stable. For a five-user system, for example, 1.5 Mbit/s is sufficient. However, you need this connection to be permanent (when you are working). Unfortunately, I still often see companies (especially in industrial areas of smaller towns or in rural areas) being slowed down by poor Internet connections, which limits their strategy. This point must therefore still be taken into account when making your decision.

You purchased your SAP licenses years ago. Now it's time to renew your hardware, and you'd rather not have to deal with this issue. In this case, you also have the option of “moving” your current SAP Business One system to the cloud. Your existing software maintenance contract will remain in place. An additional rental agreement for the cloud environment (at SIGMA, for example, this is the Cloudiax Cloud) will be concluded. Due to the existing purchase licenses, the monthly rental fee for the cloud is, of course, significantly lower. You can see how to log in to your SAP system in the cloud in this short YouTube video.

Overall, it can be summarized that there is no good or bad. Cloud is not automatically cheaper, and hardware is not necessarily more complicated. It depends on the approach. I always use the example of a cleaning lady. You can hire your own person to clean your company regularly. In this case, you also have to take care of everything else: you need a mop, a bucket, cleaning supplies, and you need a replacement if the cleaner is sick or on vacation. But you can also hire a service provider who will perform a defined service at a defined price. In this case, the service provider has to find a replacement in case of illness. So the question arises: Do you simply want the job done, or do you want to take care of the job yourself?

With all these advantages and disadvantages, there is one thing that should not be forgotten. The world is becoming increasingly digital. Take retail, for example. Today, you have to be able to use a wide variety of channels to sell your goods to consumers. Whether it's Amazon, eBay, your own online store, or even the shipping companies you use to send your goods. Cloud solutions are everywhere! You will certainly be able to continue operating your systems in-house with your own hardware for many years to come.  However, the requirements and challenges you have to overcome are becoming increasingly complex and are changing much faster than was previously the case.

We therefore stand by our recommendation: take your time when developing your strategy. How can you differentiate yourself from your competition and drive your own business forward? This usually results in the requirements that we can use together as the basis for your “hardware vs. cloud” decision.

Sounds good? Then just give me a call (+49 371 2371-216) or send me an email and we'll discuss the next steps.