Cloud vs on-prem: making the move

Companies are under severe pressure to transform in order to survive in today’s economy. Applications, such as Oracle E-Business Suite, and other ERP systems, occupy a crucial part of businesses’ operations, but many run on aging and limiting on-premise infrastructure. By Mark Vivian, CEO, Claremont.

In many cases the on-premise IT systems that were developed over 10 years ago are no longer fit to support the organisation’s current strategy. COVID-19 is the perfect example of this. As businesses scrambled to accommodate for their disparate workforces, those that were already hosting their ERP and business applications on cloud infrastructure found it easier to adapt.

In face a recent study conducted by cloud hosting company Aptum, found that 92% of business leaders had confidence in their business continuity plans due to the fact they were using cloud infrastructure. So why are some businesses still hosting business critical applications on-premise?

Who still hosts on-prem?

On-premise hosting is where businesses own or rent the physical servers to host their applications on site. Despite the renewed push towards cloud services there are still some valid and specific use cases for this hosting option. According to Claremont’s latest managed services survey, 69% of Oracle EBS users currently host on physical servers rather than infrastructure cloud.

A company running its own on-premises servers retains complete control over security. They are responsible for setting appropriate user access policies, installing firewalls and antivirus software, ensuring security patches are installed promptly, and guarding against cyberattacks. This makes on-premise hosting an attractive choice for organisations with high compliance requirements.

This degree of control can be something of a double-edged sword: if mismanaged, on-prem servers can leave an organization vulnerable to security threats.

Staying on-prem is the risk adverse option. ERP systems are large investments for businesses to undertake. Last year the average cost per user for implementation alone was $7,200 USD. Adding this to licence fees, maintenance costs, management, support, and training, the total cost of ownership of an ERP system can be significant. Implementing cloud applications is essentially implementing a new product, and companies want to squeeze everything they possibly can out of their current IT investments.

Cloud uptake has generally been quite slow for this reason. Organisations, such as Oracle, are recognising this and their activities are focused on making it easier for on-premise applications to live alongside cloud applications so that businesses can migrate their applications to the cloud gradually. And yet, many businesses remain opposed to move to infrastructure cloud.

Remote working with ease

COVID-19 has activated a widespread move of backend systems to cloud infrastructure and has caused many of the arguments that support on-prem hosting to crumble. The need for easy flexible working intensified over the course of the coronavirus pandemic. For business leaders looking to optimise working arrangements, hosting ERP systems on infrastructure cloud allowed them on-demand visibility into business operations to support staff wherever they were working from.

Although access to on-prem systems can be granted via VPN and other patch fixes, it is unlikely these would be able to cope during indefinite periods of increased traffic. One of the areas known to suffer is internet speed as multiple employees are trying to access the same system on-site through one avenue.

Hosting applications on cloud infrastructure improves this as computing takes place on third party servers, and cloud service providers spend enormous amounts of money and time designing low-latency networks that can be accessed everywhere.

Say goodbye unnecessary costs

Re-platforming onto cloud infrastructure allows businesses to make further improvements and reduce their accrued value deficit. On-premise infrastructure requires more attention in terms of maintenance and costs. To scale infrastructure during lockdown to accommodate a disparate workforce, for instance, somebody would need to be running, maintaining, and sourcing hardware on-premise.

Additionally, businesses hosting on-prem have to start thinking about procurement much earlier. I.T. departments have to predict future business activity for the next 5 years and size up and purchase hardware for that period on that basis which drastically hampers their agility.

Change in scale and scope is a lot easier to manage with infrastructure cloud. A move to cloud infrastructure provides a much more flexible arrangement, where compute and storage resources can be flexed up and down in tune with the organisation’s requirements, either in the long term, or perhaps on a seasonal basis if your business volume requires it. In terms of budget, you only pay for what you use. A shift towards greater agility and away from Capital Expenditure (CapEx) model to Operating Expenditure (OpEx) model will be welcomed by many businesses as they look to cut costs in the aftermath of the COVID crisis.

Obtain peace of mind with the right partner

To preserve their own IT staff’s time, enterprises should choose a partner to assist in any cloud transformation project. They will have the experience and the skillsets to ensure that businesses avoid common (and sometimes expensive) pitfalls. Organisations need a partner that will work with them to ensure their team is involved wherever possible and accurately advise them on the type of infrastructure that fits their requirements.

In the case of Oracle EBS, there are options to replace this with cloud-based applications, or to redeploy it on cloud infrastructure to help meet business drivers. Working with the right managed services provider can help businesses optimise their existing software and help deliver real business benefit.

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