3 Myths About Cloud ERP Software Debunked!

Fact: While making an apples-to-apples comparison of TCO for on-premises and cloud ERP is difficult, research shows that on-demand applications perform much better for SMBs than legacy systems.


Calculating the TCO of cloud-based software requires considering the costs of the subscription, application support, implementation fees, customization and integration costs, servers, Internet access, end user support and training. To calculate the TCO of an on-premises program, you’ll need to take into account paying for maintenance, support, training, utilities and upgrades.

Although complicated, the Yankee Group managed a comparison. The research team released a survey that shows that the TCO of cloud ERP software is “significantly better” than on-premises solutions for SMBs and midmarket enterprises when evaluated over three to five years. On-premises solutions, the survey notes, require significantly higher investments in IT infrastructure, deployment and support. Cloud solutions, on the other hand, eliminate such expensive support costs. Cloud solutions also have a faster ramp-up time, lower ongoing costs, less IT support staff and enterprise-class infrastructure, which also boosts the TCO.


Myth No. 2: The cloud is not a safe place to put financial data.

Fact: Criminal attacks, faulty technology or natural disasters could happen to anyone at any time. Regardless, the chances of your data being available when you need it are higher at a data center compared to an on-premises system. 


It’s really a shame that business owners still think their data is less secure in the cloud. They’re wary of putting their sensitive financial and customer data in the cloud because it feels safer to have the data in the office server. However, this fear is more psychological than factual. Fortunately, this myth is slowly starting to diminish. SMBs realize that data centers have very high levels of compliance and security compared to their local environments.

Remember, these data centers are world class and designed specifically to protect your information. Their firewalls and encryptions are much stronger than those at your office. A data center is also more liable for security breaches than your company. That means the center works extra hard to keep people out, while your office doesn’t have this kind of liability or pressure. And the internal monitoring of employees in data centers is greater than an average office building.

Myth No. 3: Subscription models are more expensive.


Fact: Subscription models are less expensive.

Here’s how the myth works: Business owners are prone to justify their aversion to subscription models by comparing the decision to buying a car. They’d rather buy the car and be “done with the payments” than deal with ongoing costs of a subscription. Never actually owning the car feels more expensive because for most people because, in truth, it probably is. 


But here’s the problem with drawing this parallel to software subscription models: Renting your ERP software is not the same as leasing a vehicle. For one thing, your automobile isn’t going to become out-of-date in a matter of a few months. Software, on the other hand, needs constant attention, upgrades and maintenance to make sure that users are compliant. This is a big deal, especially at year-end when it comes time to do your taxes, and these formulas and procedures must be absolutely correct or the company is liable for major mistakes.

Another reason SMBs “feel” that subscriptions are more expensive is because they only factor in the price of the subscription, rather than the added benefits. Sure, after 5 or 10 years, the subscription is indeed pricier than buying. But again, this is not a car. The subscription costs also includes maintenance, upgrades, security and other factors discussed more in depth earlier in this article.