Choose Cloud or On Premise solution

Similar to the debate surrounding Artificial Intelligence, the choice between cloud computing (Cloud) and on-premise solutions is a common topic of discussion. This document aims to provide a comprehensive overview of the key considerations when making this decision.

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Definitions

• Cloud: Cloud computing encompasses a range of services, including Software as a Service (SaaS), Database as a Service (DaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS). This analysis primarily focuses on the widely adopted SaaS solutions for businesses, such as ERP, HR, and CRM.
• On-premise: On-premise solutions involve purchasing a perpetual license and installing the software on the company's infrastructure. This can also include self-developed and internally hosted software.

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Excluded Considerations

• Open-source self-hosted solutions, private clouds, hybrid cloud-on-premise combinations, and core business solutions (e.g., core banking, core securities, core EMR) are excluded due to their complexity and potential for conceptual disagreements.

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Choosing the Right Solution

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The decision between Cloud and on-premise should be carefully evaluated based on various factors:

Business Needs: Short-term and Long-term

• Cloud: Cloud solutions excel in adaptability to changing requirements, driven by technological advancements, competitor actions, personnel changes, and evolving business demands. Cloud providers offer best practices or at least good practices, allowing users to customize and adapt seamlessly. On-premise solutions, on the other hand, rely on user-defined requirements, leading to potential discrepancies between expectations and implementation.

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Technical Needs: Customization, Integration, Security, Stability

• Compliance, Security, and Integration: Cloud solutions generally meet the technical requirements of businesses with up to 2,000 employees. For larger projects, on-premise solutions may be preferred due to existing infrastructure and integration capabilities.
• Customization: Cloud solutions may have limitations in customization compared to on-premise. However, cloud providers offer best practices derived from extensive experience, encouraging businesses to adapt to these practices rather than adhering to outdated methods.
• Stability and Access Speed: Initial concerns regarding cloud stability have diminished as internet infrastructure has improved, particularly with the widespread adoption of 4G and 5G. Cloud providers like AWS, GCP, and Azure guarantee high uptime (over 99.5%), while on-premise software often lacks such assurances.

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Cost

• Cloud vs. On-premise: Cloud solutions are often perceived as more expensive than on-premise. However, the total cost of ownership (TCO) over five years can be similar for both options. Cloud offers cost savings through:
  • Reduced Time: Cloud projects can be implemented in 3-4 months compared to 9-12 months for on-premise, leading to earlier utilization and value realization.
  • Risk Mitigation: In case of project failure, cloud costs are limited to the period of use (typically one year), while on-premise costs cover the entire five-year license.
  • CAPEX to OPEX Conversion: Cloud converts capital expenditures (CAPEX) to operating expenditures (OPEX), which can be more favorable for financial planning.

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Continuous Updates

• Cloud: Reputable cloud providers offer frequent updates (3-4 times per year), providing new features without additional costs. On-premise software may become outdated after 2-3 years, requiring additional investments for upgrades.

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Project Success

• Cloud: Cloud projects generally have a higher success rate compared to on-premise, especially for greenfield projects. Cloud demos showcase 70-80% of the actual solution, while on-premise demos often rely on mockups or incomplete representations.

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Conclusion

Project failure can occur due to various factors, such as complex requirements, poor solution choice, incompetent project personnel, personnel changes, excessive scope creep, extended timelines, or underutilization.

Cloud and on-premise are merely two paths to the same destination, and both carry the potential for failure. When making this decision, consider the type of company you aspire to be and the solutions they employ.

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