Cloud is now the usual way to buy business software, and running your own servers is something you choose for a specific reason. This is a framework for deciding whether you have one, without relying on anyone's sales slide.
What the two models mean
On-premise means you license the software and run it on servers you own or rent, in your building or a data centre. Your team, or an IT contractor, installs updates, keeps the server patched, runs the backups and gets it back up when it goes down.
Cloud means the vendor runs the software and the servers, and you use it over the internet, in a browser or an app, for a subscription. The vendor handles updates, patching, backups and capacity.
Between the two sit hosted arrangements, where a provider runs a copy of traditionally on-premise software for you. These can work, but check who is responsible for upgrades. Often it is still you, and you pay a hosting fee on top.
Compare the full cost, not the licence
The licence or subscription is the number on the quote. It is rarely the whole cost. Put every line below side by side over the same multi-year period before you decide.
| Cost line | On-premise | Cloud |
|---|---|---|
| Software | Licence up front, plus annual maintenance | Subscription, usually per user or per tier |
| Hardware | Servers, storage and backup devices, replaced every few years | Nothing beyond the computers, phones and handhelds people already use |
| People | IT time for patching, backups, upgrades and outages | Mostly setup and administration |
| Upgrades | Often a project, with consultant time | Delivered by the vendor as part of the subscription |
| Remote access | VPN or remote desktop for reps, drivers and the warehouse | Over the internet, by design |
| Disaster recovery | Off-site backups and a tested restore, at your cost | The vendor's job; ask how it is done |
The line most often missed on the on-premise side is people. Someone has to own the server on a Friday afternoon. If that person is your controller doubling as IT, count the cost of their time, and of the day it goes wrong while they are on holiday.
Security: who does the work
Security is not a property of where the server sits. It is a list of jobs someone has to do every week: apply patches, review who has access, keep backups off-site, test a restore, and watch for odd sign-ins.
With on-premise, every one of those jobs is yours. With cloud, the vendor does the infrastructure jobs and you still own the people jobs: who gets an account, what each role can see, and removing access the day someone leaves. A cloud vendor that does its share well is often better staffed for that work than a distributor's IT team. One that does it badly is a risk you cannot see, which is why the questions further down matter.
Uptime and your internet connection
A cloud system is only as available as your connection to it. For many distributors the weak point is not the vendor's data centre but the single internet line into the warehouse.
- Put in a second connection from a different provider, or a cellular backup, and test the switch-over before you need it.
- Write down what the warehouse and the order desk do for an hour without the system: printed pick lists for the morning's routes, a phone list of key customers.
- Ask the vendor what happens when a handheld or a driver's phone loses signal halfway through a task.
On-premise does not remove the risk. It moves it to your building's power, your server's hardware and whoever can fix them. And reps on the road, drivers at stops and customers ordering through your B2B e-commerce site still reach the system over the internet.
Your data and how you leave
With on-premise, the database sits on your server, so you can always reach it, even if making sense of it without the vendor's software is another matter. With cloud, the data sits with the vendor, so get the exit terms in writing before you sign:
- Can you export customers, items, prices, orders, invoices and lot history in a standard format, without an extra charge?
- Is there an API for pulling data on a schedule?
- What happens to your data when the contract ends, and for how long can you still get it?
Where on-premise still fits
- No reliable internet. A site that cannot get a dependable connection, even with a backup line, cannot depend on a cloud system.
- A contract that requires it. Some government or customer contracts set rules on where data is stored and who can reach it. Read the actual clause before assuming it rules out cloud.
- A strong IT team already in place. If you already run servers well and have the people, the extra cost of one more system is lower.
- Heavy custom code. If the business depends on changes to the software itself, on-premise gives you more control, at the price of owning every upgrade.
Questions to ask a cloud vendor
- Where is our data hosted, and how is it backed up?
- How is our data kept separate from other customers' data? (Our guide to multi-tenant vs single-tenant explains the options.)
- When does planned maintenance happen, and how are we told?
- Who on your side can see our data, and is that access logged?
- What sign-in protections do our users get, such as one-time codes and lockout after failed attempts?
- How do we get all of our data out, and what does it cost?
The decision
Default to cloud. Choose on-premise only when you have a hard requirement that cloud cannot meet, and check that the requirement is real rather than "we have always done it this way." If you are moving from an older system either way, plan the move with our guide to switching ERP systems.
Where APFoodz fits
With APFoodz, the office, the warehouse and the trucks work from the same records, through the warehouse app and the driver app.