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Hardware vs. Cloud

In today's article, I would like to take a deeper look at the topic of hardware vs. cloud or buying vs. renting. Based on the queries from our SAP user family as well as many of my conversations with new interested parties, I often notice that this topic is increasingly on your minds. For this reason, I would like to briefly introduce you to the possibilities in connection with SAP Business One and discuss the advantages and disadvantages in each case.

First a short explanation. The topic of the cloud is basically not new. Even in the past, (mainly) very large companies had their complete software landscape provided by data centres and paid corresponding rental fees. In this case, the data centre acts as an application service provider. This model was mainly used by large companies because the services of the data centres involved a lot of manual administration and maintenance. The high provision costs therefore only paid off with a corresponding number of systems/users.

In the meantime - web technologies have developed rapidly in recent years - providers have completely different options at their disposal. Especially in the case of SAP Business One, SAP has developed the so-called Cloud Control Center (example video). Based on this solution, it is now possible for the provider to create and manage the various customer systems (tenants) much more effectively. Through this automation, a completely new pricing policy is now possible, which makes the use of SAP Business One in the cloud now also attractive for small companies and start-ups.

The Purchase Option:

The classic in the ERP environment. The SAP licences are purchased and belong to you for life. In this variant, the SAP solution is usually installed on your own hardware. It is therefore important to consider in preparation for an SAP project whether the existing IT infrastructure is sufficient or whether additional investments need to be made. Smaller companies in particular often underestimate the requirements of today's ERP systems. Especially if additional solutions, such as mobile warehouse management, production data acquisition or an online shop, for example, are to be connected. Things can quickly become complex here. The following should be considered: Is a server rack available/sufficient? Are the network components sufficient? Is a UPS (uninterruptible power supply) available? How do staff access the systems externally? etc.? Fortunately, we at SIGMA see ourselves as a complete service provider and can also assist you in this case with words and deeds.

From a commercial point of view, you will have to dig a little deeper into your pockets right at the beginning of the project. If you don't want to do this, you have the option of handling the entire project through leasing or a software usage contract/hire-purchase and thus spreading the costs over three or five years. A note on this: as a rule, the licence purchase is combined with an additional software maintenance contract, which includes the provision of new software versions as well as support services. If you do not have your own administrator, you should also take into account ongoing costs for new hardware or specifically for updating the system software ( operating system, anti-virus software, etc. ).

Many entrepreneurs still consider the in-house option to be safe and correct because they always have control over their data. Physically, this is also the case. Fortunately, many companies never put to the test how secure their in-house data actually is. But we all know how dependent we are on good anti-virus and spam solutions these days in order to be able to read our emails or surf the internet without hesitation.

The Cloud option:

At the beginning of the "cloud movement", mainly project and service providers were interested in this variant. Especially in this sector, there are often many employees in the field who want quick and easy access to the system. This model is also interesting for large companies with several locations. In the meantime, the cloud variant appeals to companies from all sectors and is especially 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 price per user. This rent includes the SAP licence, the database licence (HANA or MS SQL), the software maintenance fee for the manufacturer's 3rd level support and also the provision of the software in the cloud. Depending on the offer of the SAP partner, the contract can then be extended to include additional support packages (principle Enterprise and Premium Support). The cloud provider takes care of keeping your SAP system running. Apart from a small, fixed time window for maintenance work, the system is permanently available. For your security that the cloud provider is bound to specifications and guidelines, there are quality standards (Tier 1 to Tier 4) as well as ISO27001 certification.

Overall, the investment for the provision of the software at the start of an SAP implementation project is significantly lower than in the purchase variant. 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 would force you to do so. Compared to the purchase variant, where you only have the annual software maintenance fees after the actual investment, in the cloud variant you have to pay the monthly rental fees month by month and year by year. So you have a higher monthly burden overall. In return, however, you do not have to worry about the purchase of the IT infrastructure mentioned above, which is usually also due every three to five years.

One more important issue should be mentioned in the cloud variant. You need a functioning internet connection - this does not necessarily have to be blazingly fast, but stable. For a five-user system, for example, 1.5 MBit/s is already sufficient. But you need this connection permanently (when you are working). Unfortunately, I still often see companies (especially in industrial areas of small towns or in rural areas) being slowed down by poor Internet connections and being limited in their strategy as a result. This point must therefore still be taken into account in your decision.

Cloud even though you bought a licence?

You bought your SAP licences years ago. Now the hardware is due for renewal and actually you would prefer not to deal with this topic at all. In this case, there is also the option of "moving" your current SAP Business One system to the cloud. Your existing software maintenance contract thus remains in place. An additional rental contract for the cloud environment ( at SIGMA, for example, this is the Cloudiax Cloud ) is concluded. Due to the already existing purchase licences, the monthly rent for the Cloud is of course significantly lower. You can see how to log on to your SAP system in the cloud in this short YouTube Video.

"The cleaning lady parable"

Overall, we can summarise, there is no good or bad. Cloud is not automatically cheaper and hardware is not necessarily more complicated. It depends on the setting. I always use the example of the cleaning lady. You can hire your own person to clean your company on a regular basis. In this case, you also have to take care of everything else: you need a mop, a bucket, cleaning products and you need a substitute if the cleaning lady is sick or on holiday. However, you can also hire a service provider who takes over a firmly defined service at a firmly defined price. In this case, the service provider must 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?

In the end, with all these advantages and disadvantages, there is one thing that should be remembered. The world is becoming more and more digital. Let's take retail, for example. Today, you have to be able to use a wide variety of channels to sell your goods. Whether it's Amazon, Ebay, your own online shop or even the shipping companies you use to send your goods. Cloud solutions everywhere! For sure, you will be able to operate the systems in your own house with your own hardware for many years to come. However, the requirements and also the challenges that you have to master in doing so are becoming increasingly complex and are changing much faster than was the case in the past.

We therefore stick to our recommendation: take time for your strategy. How can you stand out from your competition and thus drive your own business forward? This usually leads to the requirements that we can use together as a 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 I’m happy to to talk about the next steps.