6 Hidden Costs of On-premise ERP Systems

6 Hidden Costs of On-premise ERP Systems

January 27, 2021

As a manufacturing or distribution organization, an enterprise resource planning (ERP) system is your lifeblood. Your supply chain (and therefore your livelihood) depends on it. But are you getting the most for your money with an on-premise ERP system? Consider the price of hardware, software, and IT personnel. Extra costs are likely lurking in the shadows.

Keep reading to learn more about six hidden costs associated with on-premise ERP systems. 

1. Servers

On-premise ERP systems can cost you a pretty penny upfront. Think about all the infrastructure that goes into keeping the system running. First of all, you need a server to house the ERP and its data. The average price for a single server ranges around $3,000 to $5,000, and some of the more expensive ones could cost you upwards of $12,000. Then there are things like software licenses, databases, and security measurements. These costs can be sneaky if you don’t pinpoint them ahead of time.

On the other hand, if your ERP system is hosted in a third-party cloud, all of those costs are absorbed into the subscription model, allowing you to flexibly manage your hardware costs without owning, maintaining, and paying for servers. 

2. Back Ups 

After you get done paying through the nose for the initial hardware, don’t forget about building redundancies in case of failures. That’s right, time to buy more data storage. It’s almost like taking out an insurance policy on your data. If you’re looking to cut IT costs, this is not the area to do it. With anything on-premise, a backup solution is absolutely necessary. 

3. Implementation 

The above costs are just to acquire the hardware and software you need, but now you need to pay your IT staff to install and maintain your systems. For many businesses, salaries rank high on the list of IT costs. On-premise deployment is often a painstaking, overly-complex process. The time spent on implementing the solution could be better spent on other tasks. But, if you choose a cloud option, then all those upfront installation labor costs are gone like a puff of smoke.

4. Downtime

Regardless of the number of letters, downtime is considered a 4-letter word in most industries. Any time employees can’t access the systems they need to do their job, it’s lost revenue. If your ERP system goes down, it’s on your IT team to get it back up and running. There will undoubtedly be downtime associated with the tech failure, and they have to drop what they’re doing to fix it. However, with a cloud environment, the chances of downtime shrink considerably. 

5. Upgrades and Updates

With an on-premise ERP, your internal IT team has to spend time on a variety of tasks, such as: 

  • Apply fixes and patches
  • Upgrade dependent applications
  • Rewrite integrations
  • Customize software 
  • Conduct performance tuning

While these tasks are incredibly important to keep your ERP running smoothly, they also take a lot of time and energy away from all the other items they could be working on. Free up IT staff to focus on strategic planning and other high-priority work items when you choose a cloud ERP solution. In the cloud, updates, fixes, and patches are released on a continuous upgrade cycle, allowing for immediate deployment. 

6. Energy Bill

Great, you have all the hardware, software, and IT professionals you need to maintain your on-premise ERP. Now it’s time to pay the electric bill. Your hardware needs to run constantly (you hope) 24 hours a day, 365 days a year. If you’re not happy with your personal electric bill, then you’re really not going to like the cost of keeping your ERP powered. 

When you move to the cloud, you no longer have to pay to power on-premise servers or maintain their environment. This significantly reduces the amount you pay on your energy bills.

Upgrade to the Cloud Today

Instead of spending your IT budget and focus on the six hidden costs above, reinvest those funds and IT skills in a different direction. By moving to the cloud, those resources can be invested in areas such as: 

  • Security 
  • Modernization
  • Mobility
  • Sales tools
  • Ecommerce
  • Marketing
  • Internal collaboration
  • Overall productivity

What do you think, have we convinced you? Are you ready to upgrade to the cloud

Rangeline Solutions, a Nexer Group Company is a boutique ERP solutions provider that modernizes manufacturing and distribution organizations by leveraging our specialized supply chain and Microsoft technology expertise. Let us help you reduce costs by upgrading your ERP to the cloud. 

We would love to chat more with you about bringing your software up-to-date to meet your company’s needs. Request a consultation today!