When is it the right time for your business to switch from your legacy ERP to a modern, cloud-based system? This article will explore the clear business case for migrating your Enterprise Resource Planning software to the cloud, along with diving into why on-premise technology will add mounting costs, security risks and other drawbacks increasingly over time:
What is a Legacy ERP?
In simple terms, technology enters a “legacy” stage when it is in any way outdated but still in use somewhere by someone. This takes many different forms out in the real world, but applications are perhaps one of the most common examples given how relatively quickly software is evolving over time. Legacy ERP systems are typically from a previous generation from the more contemporary solutions on the market; what makes them unique as a category is that they are often still functional for all intents and purposes, but become less viable as time goes on due to a variety of different reasons.
How On-premise ERP Becomes Legacy Software
Cloud computing has been around for quite some time conceptually, but has increasingly grown in practical usage to the point where digital applications have become the default in many industries. For ERP, this paradigm shift means that on-premise systems are inherently in their legacy stage – they not only cannot keep up with cloud-based versions, but will continue to add more disadvantages as they get older, including:
- Lack of integration with SaaS versions of critical third-party apps (CRM, WMS, etc.)
- Growing maintenance costs as infrastructure ages
- Diminishing support as vendors sunset customer service
- Inability to apply updates for new cybersecurity threats
- Increasing customization needed to fill in functionality gaps
IT Security Risks in Outdated Technology
On-premise ERP present a serious potential security risk on their own that can transform into critical vulnerabilities under certain circumstances. Unfortunately, these factors are not necessarily rare and are in fact becoming a growing threat to many businesses that still rely on outdated enterprise software without understanding how it impacts the overall cybersecurity of their technology stack. Legacy ERP systems can – and often will – end up inadvertently integrated with more modern apps via web-based or remote access connectors, which exposes them to cyber threats they were never prepared for, suffering from gaps such as:
- Outdated security protocols and encryption methods
- Limited patch availability for modern vulnerabilities
- Incompatibility with modern security tools
- Difficulty meeting updated compliance requirements
Data Management Challenges
On-premise ERP solutions are effectively built around an analog approach – they are essentially standalone applications that live in their own design bubble. The problem with this methodology is that their role in your tech stack will inevitably never be siloed, even if their data management inherently is, putting the burden on your team to pass information from one system to another manually.
Legacy ERP Data Challenges:
| Challenge | Impact |
|---|---|
| Manual Data Entry | Increased error risk and more labor required |
| Limited Integration | Data silos and repetitive processes |
| Poor Visibility | Lack of insight and delayed decision-making |
| Inflexible Reporting | Reduced business intelligence and collaboration |
| File Storage Constraints | Limits to scalability and increased data loss risk |
Why are Modern ERP Hosted in the Cloud?
Cloud migration both as a concept and as a practice reflects a gradual shift in the enterprise software channel, where applications – and all of the other IT resources needed to run them – are transitioned away from siloed local installations to being remotely deployed from a data center somewhere else. There are several benefits added for ERP implementation in particular, from being able to consolidate your infrastructure to shaving time off the deployment process, among many others that make it easier on both ends to manage your system. Challenges remain, but many of the traditional pain points are eliminated, along with capturing better opportunities to navigate the other persistent hurdles.
Control vs Burden of Ownership
Choosing between on-premise or cloud-based ERP requires understanding the fundamental nature of each model, and what the trade-offs ultimately are. One essentially leaves all the work – and expenses – to you while giving you complete local control over all the pieces, while the other is a distributed model where either all or some of these pieces are hosted remotely. There are pros and cons to either approach, and while the cloud is usually the overall winner your choice should depend on what your needs and cost-benefits will be for implementation.
ERP Ownership Comparison:
| On-Premise | Cloud-Based |
| Local hardware control | Distributed IT infrastructure |
| Manual security setup | Automated server-side security |
| Onsite maintenance | Provider-managed updates |
| Localized data access | Remote-based access |
| Manual scaling | On-demand scaling |
IT Costs Shift
Part of the paradigm shift in migrating from legacy systems to cloud ERP is the change in where the costs kick in. On-premise IT resources usually bring costly capital expenses (CapEx) from hardware maintenance and manual labor, including from replacing servers and systems due to age or damage. In contrast, cloud-based infrastructure is usually maintained as a service and becomes a controllable operating expense (OpEx).
On-premise:
- Higher upfront CapEx for deployment, upkeep and upgrades
- Significant IT resources required for ongoing maintenance and troubleshooting
- Risk of downtime during updates or cyber incidents
- Security vulnerabilities may form from gaps in in-house visibility
Cloud:
- Eliminates the need for extensive initial investments in hardware
- Predictable monthly OpEx on subscription or service pricing
- Avoids hardware depreciation as well as overhaul and replacement costs
- Lowers the cost of upgrades and limits system downtime during updates
Cloud ERP by Industry
Many legacy systems have maintained their value by delivering industry-specific functionality, but migrating to the cloud grants improvements to many of these feature categories. From real-time resource and process tracking to seamless communication between back office and field teams, cloud-based ERP helps you better address your unique pain points with improved technology and more flexibility.
Industry Benefits Matrix:
| Industry | Cloud ERP Advantages |
| Manufacturing | Real-time production and supply chain visibility |
| Distribution | Inventory and warehouse management automation |
| Construction | Project visibility and field resource optimization |
| Healthcare | HIPAA data security compliance tracking |
| Financial Services | Regulatory reporting and transaction processing |
What is Involved with Migrating to Cloud ERP?
Migrating to the cloud requires careful planning and understanding what exactly you need from your ERP implementation. Whether you are prioritizing integration with existing systems, unlocking new levels of scalability or just saving on your IT costs, take your time to review the options and determine the best fit based on your objectives.
Different Cloud Models
There are multiple ways to migrate your applications, data and more to the cloud, and different models that they all could live in. Understanding the difference between these will help you see which works best for your needs.
- Public Cloud: Multi-tenant environment that shares resources and cuts down the cost of ownership
- Private Cloud: Dedicated single-tenant environment hosted onsite or by a service provider
- Hybrid Cloud: Combines resources from both hosted and on-premise environments
Training and Education
Successful ERP implementation depends heavily on user adoption, but migrating to cloud ERP requires new approaches to usage over traditional on-premise software on all levels. While modern interfaces are typically more intuitive than those of legacy systems, your team will need to adjust to new workflows and capabilities to get the most out of your investment. Additionally, being connected to the Internet by default means that there must be more focus on maintaining cyber hygiene across your teams, and your IT department will need to have visibility to help limit user error challenges.
Migrate from Your Legacy ERP to a Modern System
Moving from legacy systems to modern cloud ERP represents a critical step in digitally transforming your business operations. The expert consultants will help you evaluate your current system limitations, identify the right solution for your needs and develop a comprehensive migration strategy that minimizes disruption while maximizing your ROI.
Contact SWK here to schedule a consultation and discover how cloud ERP can transform your business operations.