Is It the End of On-Premise ERP Software?

April 11, 2024
News and Events
8 min read

If your current on-premise system has reached the end of life or is no longer supported by the publisher (like Microsoft Dynamics NAV), it’s time to move to the cloud.  

If you’re experiencing increased IT expenses, performance issues, or downtime, it’s time to move to the cloud. 

If your technology infrastructure is outdated and needs overhauling, it’s time to move to the cloud.  

If you’re having compatibility and integration issues with your other core business systems, it’s time to move to the cloud.  

You may hesitate and delay the inevitable, but the benefits of moving to the cloud significantly outweigh any reasons to stay with an on-premise ERP. In this blog post, we will discuss the phasing out of perpetual licensing and the risks your business will face by keeping your servers, storage, databases, and business applications 100% on-premise.  

From there, we’ll provide our top reasons to consider embracing and moving to a cloud this year.

Perpetual Licensing is Dead

It’s the end of an era. Most software and technology publishers, such as Microsoft, are in the process or have already phased out perpetual licenses. Across the technology markets, they are widely being replaced by subscription and consumption models.  

Perpetual licensing is considered the “traditional method of purchasing software.” You pay once to license the software indefinitely and then often pay a small percentage of the initial licensing cost yearly to have access to software updates.  

ERP software has traditionally been delivered in an on-premise structure. An organization buys the software, pays for the one-time perpetual licensing fee and tailored implementation services, and then must invest in servers and an IT team to manage, maintain, and update their systems and data until the end. The responsibility was put on the shoulders of companies to find the expert resources, expertise, and budget to manage their data, storage, security, and software updates, often employing specialized implementation partners for significant upgrades and customizations.  

As a result, investing in on-premise ERP software required extensive up-front costs and an enormous amount of resources to keep your systems running properly —which is why, not long ago, sophisticated ERP software was often reserved for the budgets of large corporations.      

The advent of cloud and subscription pricing models has opened up new opportunities for small to midsized growing businesses that could previously not afford the high upfront fees and costly maintenance. Gone are the days of having to make an enormous commitment to a solution and invest your hard-earned cash and resources into maintaining it.  

Instead, subscription models offer the opportunity to rent robust, cloud-based ERP software licenses on a monthly, quarterly, or yearly basis and get access to a fully up-to-date business application with the latest functionality and security features.  

And everyone wins. Software publishers can expand their market reach and serve practical, scalable ERP solutions to a more diverse range of business sizes and industries. Growing SMBs can alleviate the cost, infrastructure, and resource burdens with the ability to license and pay for only the ERP functionality they need at the time.  

So, what about on-premise ERP software—is that completely dead?   

If you ask anyone in the tech field today, they will probably say ‘mostly yes.’ All the early adopters have been running in the cloud for years, and now the laggards are finally getting off their feet and moving to the cloud, too. According to research by Gartner analysts, 85% of companies are expected to embrace a cloud-first strategy by 2025. 

Spending on cloud infrastructure has long exceeded on-premise software. Even large government agencies have moved their most sensitive systems to the cloud.   

However, according to a recent Forbes article, on-premise software is not dead but is being “redefined.” Software still runs on servers—the difference now is that companies don’t need to physically house and maintain the hardware themselves. Instead, they pay for hosting services and platforms, like Microsoft Azure, to do the heavy lifting and lease the storage and software they need.  

So, yes—business owners no longer have to worry about managing and maintaining on-premise servers, but they’re not entirely off the hook. Cloud service providers are only providing the service and storage, and there is still an ongoing effort required to right-size and manage your cloud environments. Luckily, there really is an option for everyone. Software as a service (SaaS) and multi-cloud options have created endless opportunities for every business size, budget, and security tolerance, which we will discuss in the next section.

It’s Time to Move to Cloud ERP – Here’s Why

Let’s face it: the time to move the cloud was yesterday. Over the past decade, cloud computing has taken over how we work and do business. Better performance, accessibility, scalability, and savings have all driven the adoption of cloud technology, and companies today either run in the cloud or are in the process of moving to the cloud.  

Cloud ERP is the most modern version of ERP deployment, and it offers significant advantages in the cost savings and scalability department. Depending on your needs, you can decide how much control you have over your cloud services and solutions with several public, private, and hybrid cloud deployment options.  

Unlike on-premise ERP software, cloud ERP requires significantly less up-front investment and more flexibility based on your budgets and needs. So, if you are still running most of your business on physical servers, here are some compelling reasons why we think you should consider embracing a move to the cloud this year:

  • Lack of Support for On-Prem
    This is the first reason you must consider transitioning from on-premise to the cloud. When your ERP software has reached its end of life or mainstream maintenance, every issue or problem with your system is now up to you (and your wallet). Software publishers like Microsoft and SAP will no longer support their on-premise ERP legacy solutions, which means no more new features or functionality, no more patches or security updates, and no more mainstream publisher support.
  • Missed Opportunities
    When you are on the latest version of a cloud ERP solution, you have access to more data and analytics at your fingertips. Your salespeople can connect with customers from anywhere, your operations folk will have more functionality than ever, and your executives can finally view the whole picture they need to make faster, strategic decisions that impact the business.
  • Unnecessary Costs
    There is a cost to being reactive and not proactive. Dragging your feet to move to the cloud will eventually have costly repercussions. If you’re running an older (and no longer supported) version of Dynamics NAV, for example, you may be unable to follow the upgrade path to Business Central. Instead, moving your operations and systems to the cloud will cost you a full reimplementation.
  • Modern Advancements
    There are many advantages to moving to the cloud that you can read about here. However, two of the most considerable enhancements you don’t get with on-premise software are the advanced multi-layered security provided by the world’s largest cloud companies and the seamless integration capabilities that allow you to extend your industry or process-driven functionality easily.

How to Select the Right Cloud ERP for Your Business

We’ve established that the cloud is the path forward for a business looking to evolve. But there are many options out there, and we want to ensure you are equipped with the information you need to make the right decision for your business.  

As passionate nerds about the cloud and all things IT for growing small to medium-sized organizations, we don’t want you to select an ERP solution that is too big for your business or your budget. No company needs to pay for a slew of unnecessary features or licenses they won’t use, which will only complicate adoption and ERP projects, driving up the costs. We have seen that go sideways and have helped many customers right-size their technology to fit their needs.

This is why we most often recommend a look at Dynamics 365 Business Central, Microsoft’s trusted and preferred cloud ERP solution for growing companies who need and require more than a bookkeeping solution like QuickBooks but don’t require a mid-six-figure or multi-million dollar Tier 1 ERP.  

Not only is Business Central an intuitive, practical, modern cloud ERP that is affordable, infinitely scalable, and easily adaptable to nearly any industry, but it’s also a proven and widely trusted platform. In 2022, Dynamics 365 Business Central already dominated the global ERP software market with over 1.8 million users. 

So you can learn all the details about Business Central’s cloud ERP inclusions, licensing, and benefits to evaluate its fit for your organization, the seasoned experts at Tigunia have created this free comprehensive guide.

Decoding Dynamics: A Buyer’s Guide to Microsoft Dynamics 365 Business Central Cloud ERP