So many small- and medium-sized business (SMB) leaders aren’t thinking about what their on-premises ERP solutions cost the company.
They have other “more important” financial issues to worry about such as the price of fuel, health care costs and tax increases.
Except, if you really think about it, knowing the cost of your on-premises system is critical, especially if there tools out there like cloud ERP systems that could save the business significant time and money.
At the very least, it’s important for SMBs to know the hidden “gotchas” about on-premises solutions. For example, who supports the system after the consultant has set it up? And how much does it cost for that support?
Here are five hidden costs that every SMB executive should consider before buying or significantly upgrading an on-premises ERP system. This is important because you just might discover that cloud ERP solutions are significantly less demanding on your time and wallet.
- Maintenance and support: There is huge difference between what you get with a cloud subscription model compared to a traditional on-premises program. Ongoing annual maintenance, patches and updates to the accounting application are included in cloud ERP. With an on-premises system, you’re usually billed for ongoing support after the initial setup.
- Hardware and software upgrades: With on-premises models, when you upgrade it feels a bit like going through the implementation all over again. The cost, time and potential scope crawl are there for a second time.
- Hardware and extended hardware support: Will your on-premises solution work with your current printer or device? If not, you’ll need a patch here or an upgrade there, and on-premises vendors typically charge for such changes. This is not often considered a hidden cost, per se, but it’s dismissed by vendors as a real problem for these kinds of solutions.
- IT resources: While you may already have your IT staff to manage other parts of the business, some SMBs are tempted to consider it a sunk cost. But if you think about how much time they’re spending to support and maintain your equipment, then that changes everything. You have to allocate a percentage of what you’re currently investing or hire additional people to help your IT staff maintain everything else you’re doing on your on-premises solution.
- Data backup: It costs money to store information, restore it or back it up. You don’t want to lose even a day’s worth of data. Buying a terabyte backup drive and plugging it into your basement server is just not going to cut it as a safe backup method.
So how do you circumvent these five issues and avoid hidden costs? The answer is by using a subscription cloud model.
All of the costs and functions associated with providing a comprehensive solution are bundled into one single monthly, quarterly or annual payment. All of those items assumed by the customer are included in the cost of a single bundled subscription offering in the cloud-driven market. Subscription models remove the need for upfront capital, offering a controllable operating expense.