Multi-Tenant vs. Hosted Cloud ERP: Pros and Cons
There is a general consensus that, by 2023, most of the installed MFG ERP systems will be cloud-based. But will they be multi-tenant or hosted? There are arguments for both. However, only one will win out. Let’s take a look at each.
Multi-Tenant: The Rule of One – In a multi-tenant environment, the is only one copy of the application software, one operating system and one data base supporting multiple organizations on a single bank of servers. As a result, it is easier to deploy and maintain one version of the ERP software versus a hosted solution which must replicate the application software for each individual customer.
Since it is less expensive for the ERP application multi-tenant cloud software providers to support deployment of their software to their customers, this cost savings can be passed onto them. And, in those situations where there is a critical fix or system upgrade that needs to get out to hundreds, even thousands, of customers, the fix or upgrade can be done as soon as it is ready with a multi-tenant cloud ERP.
Virtually all new business application software that is being developed today is being created for the cloud and a multi-tenant environment, not a hosted environment.
Why Would Hosted Be a Consideration? – First of all, there is certainly a benefit to having legacy software deployed on a server off-site compared to legacy software deployed on hardware at the customer’s site. While the customer will still pay hosting costs, the organization will no longer have the expense of needing in-house IT staff to support hardware.
Secondly, many want to hold onto their older legacy software for while longer. Present legacy software is typically more functional than the newer Cloud ERP software. However, that’s today’s status and this is rapidly changing. Most analysts believe that the equivalency of several Cloud ERP software solutions will exist within two to four years as more and more development dollars are poured in Cloud ERP solutions while little or no development dollars are being invested in on-premise legacy software.
This means that if the customer is transferring the hosting of their on-premise legacy software to a hosted environment, they are buying into a model that is only a stop-gap initiated by the on-premise software vendors to lengthen the use of their on-premise software. However, it is questionable if the hosted on-premise cloud solution could ever effectively take advantage of the newer trends of mobile and collaboration benefits as well as its multi-tenant Cloud ERP counterparts will.
The Future Is . . . – Over time, newer technologies and emerging software vendors will end up working in collaboration with each other in multi-tenant environments at a price that is much less expensive price than hosted alternatives.
In fact, it’s happening now. In May of 2012, Rootstock and FinancialForce.com, announced an agreement to deliver a native end-to-end supply chain and accounting solution for Salesforce.com customers including Astrum Solar, a full-service residential solar provider headquartered in Annapolis Junction, Md. By uniting manufacturing and supply chain applications with accounting, Salesforce CRM customers like Astrum Solar can gain deeper operational insights and control while minimizing painful and costly IT infrastructure modifications. The power of a shared platform enabled Rootstock and FinancialForce.com to quickly build a seamless integration between the applications that couldn’t be achieved if they didn’t share the same data model.
Pat Garrehy is the president and CEO of Rootstock.