Buy or rent? Hardware vs. cloud
![[Translate to English:] Hardware vs. Cloud](/fileadmin/_processed_/a/b/csm_hardware_cloud_magazin_8ec15af9b5.webp "[Translate to English:] Hardware vs. Cloud")
Jens DemutPublicationUpdate
Everything you need to know about hardware vs. cloud at a glance
The purchase option is the classic choice in the ERP environment and guarantees lifelong ownership of the licences.
With the purchase model, responsibility for the server and infrastructure remains entirely in-house.
Cloud models offer high liquidity savings for your company thanks to monthly rental prices.
Database licences for HANA or MS SQL are already included in the monthly cloud fee.
The basic requirement for working in the cloud is an uninterrupted internet connection.
Existing licences can be easily migrated to a cloud environment if your hardware is outdated.
Certified cloud data centres often offer higher security standards than local server solutions.
Small businesses benefit from low barriers to entry and high scalability in the cloud.
How has cloud technology evolved for small businesses?
The topic of cloud computing is not new, but in the past, due to high provisioning costs, it was primarily reserved for large companies that used data centres as application service providers. In the meantime, web technologies have developed rapidly. Specifically for SAP Business One, the Cloud Control Centre (example video) was developed. Based on this solution, the provider can now create and manage the various customer systems (tenants) much more effectively. This automation has also enabled a completely new pricing policy, which now makes the use of SAP Business One in the cloud attractive for small businesses and start-ups as well.
What technical requirements must be met for the in-house purchase option?
The classic in the ERP environment. SAP licences 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, for example, an online shop are 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.
What financial aspects and running costs need to be considered when purchasing SAP licences?
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 licence 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.).
How much physical data sovereignty does an in-house solution actually offer?
Many entrepreneurs still consider the in-house option to be secure and appropriate, as it allows them to retain control over their data. From a physical perspective, this is indeed the case. Fortunately, many companies never have to test how secure their data actually is when stored in-house. 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.
For which companies is the cloud version suitable, and what services are included in the rental price?
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.
How do the investment costs and flexibility of the cloud differ from the purchase option?
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 that you have a higher overall monthly cost. On the other hand, you do not have to worry about purchasing the IT infrastructure mentioned above, which usually has to be replaced every three to five years.
What requirements does cloud usage place on your internet connection?
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 held back by poor internet connections, which limits their strategy. This point must therefore still be taken into account when making your decision.
Is it possible to move to the cloud despite existing purchase licences?
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.
The personnel parable: result or expense?
The choice between hardware and SAP Business One in the cloud is not a question of better or worse, but rather a question of business attitude. Those who use their own hardware take on the role of organiser: they have to manage not only the staff, but also the work equipment and downtime themselves. The cloud, on the other hand, works like a booked service that delivers a finished result at a fixed price. Ultimately, the question is whether you want to manage the IT infrastructure yourself or simply expect a reliably delivered result.
How is advancing digitalisation changing the demands placed on your IT?
With all these advantages and disadvantages, one thing must not be forgotten in the end. The world is becoming increasingly digital. Take trade, for example. Today, you have to be able to use a wide variety of channels to get your goods to the man or woman on the street. Whether it's Amazon, eBay, your own online shop or even the shipping companies you use to send your goods. Cloud solutions are everywhere! It will certainly be possible to continue operating 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.
The stability of your internet connection is more important than pure bandwidth. For a team of 5 users, a constant connection of 1.5 Mbit/s is sufficient to work smoothly.
Companies in rural areas or smaller towns are often hampered by poor internet connections, which can be a factor against choosing the cloud.
The cloud is attractive for project or service employees with many field staff, as it enables quick and easy access to the system from anywhere.
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.
Jens Demut
Managing Director SIGMA Software und Consulting GmbH
Jens Demut, graduate in business informatics (Dipl.Wirt.Inf.), has 19 years of professional experience in the SAP Business One area. He joined SIGMA Software & Consulting in 2007 as an SAP Business One Consultant and later took on the role of Managing Director.
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