ERP Software License Versus Cloud ERP SaaS Subscription ─ Pros and Cons

Authored by: By Sebastian Grady, President, Rimini Street

A company’s software licenses are assets. In most cases, the software has been customised to fit the business. After evolving and maturing over decades, it now fits like a glove. For many, the investment is likely in the millions of dollars after adding add up the licenses, implementation costs, and customisations.
 
Often, enterprise software licensees have perpetual rights and can continue using such software indefinitely.  Continuing the auto analogy, drive it as long as possible. Systems such as SAP’s Business Suite 7 or Oracle’s EBS are generally stable and require minimal change. If well taken care of, they could run great for another 15 or more years.  
 
Considerations as you map your software strategies
 
Evaluate whether the cloud is really a better solution for your enterprise software “right now” given the opportunity cost of what you could do with the funds instead (e.g. investing in systems of engagement or moving your infrastructure to the public Cloud with vendors such as AWS, Azure, or GCP). A few scenarios exist where it may make sense to switch to a new platform. One example is moving your data centre to the public Cloud.
 
Assess whether the risk of change is worth the potential reward. Sinking precious IT dollars into a subscription-based solution that, in the case of SaaS ERP software, is relatively immature poses significant risks that can weigh more heavily than the value of having ERP delivered as a service because this is not simply “an upgrade,” it is more than likely a very costly “rip and replace” implementation. The IT strategy should be laser-focused on investments that enable the business strategy, provide competitive advantage, or enable growth. Consider optimising your existing software assets with strategies such as “lift and shift” of applications to IaaS in the public Cloud.
 
Look at whether a coexistence strategy can move you along your cloud roadmap without jeopardising the benefits of your perpetual licenses. With a coexistence strategy, the licensee can keep a portion of the perpetually licensed product and replace the rest with a comparable cloud product. It enables strategic investments in new technology, limits the risks of replacing core ERP, and allows for licensees to keep benefiting from their perpetual licenses.
 
Don’t use the subscription model to fix a problem you don’t have. In other words, don’t do an ERP SaaS refresh just because the vendor says its new platform delivers a digital core. Existing perpetual licenses are a tremendous asset that you can leverage. They provide stability, flexibility, and a strong foundation, giving you the ability to focus on innovation without the cost of switching platforms.

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