Many customers ask what the hardware requirements are in an ERP implementation project, SAP Business One in our case. Looking at the necessary IT infrastructure, the requirements differ considerably depending on the complexity of the project, the number of users, integrations with other solutions, locations, etc. Since the IT infrastructure represents a significant cost in an ERP implementation project, we recommend that this information be synthesized as early and accurately as possible in order to know exactly what the options and the financial effort are. Finally, what matters is to ensure an optimal level of performance of the implemented ERP system, which is a basic condition for the ERP system to provide high operating speed and user satisfaction.
There are two major options when implementing an ERP system such as SAP Business One: using an in-house IT infrastructure, owned and operated by the customer (on-premises) or hosting the solution on the infrastructure of an external provider (hosting). Each one of these options offers advantages and disadvantages depending on the specifics of each client and project.
On-premises ERP implementation
On-premises is the traditional approach when implementing an ERP system. ERP licenses are installed on the beneficiary’s IT infrastructure, in a suitable location and space (data room) owned by them. The entire process of managing the equipment (server, storage) and associated software (operating systems, virtualization platform) is the responsibility of the customer. The ERP system provider will provide the beneficiary with all the technical information necessary to purchase new equipment (servers, storage) or upgrade existing ones, if necessary. The client is also responsible for ensuring the supply systems (preferably redundant) for the equipment, their cooling (professional servers need dedicated cooling). Also, running the backup operations and securing the entire infrastructure are the responsibility of the beneficiary. The company that provides the implementation services will only cover the installation of licenses, customization of the solution, and its maintenance. That is what is strictly related to the ERP system and not to the IT infrastructure on which it runs.
This scenario is recommended for companies that have an in-house IT team, a dedicated server installation space, and the skills needed to manage this hardware infrastructure. It is a simple process to manage but it requires qualified human resources. It offers a maximum degree of control as well as a high level of performance of the ERP system in response time, thanks to the reduced latency obtained by placing the servers close to the users. If the beneficiary has several operating offices and accesses the ERP system installed at the headquarters from different geographical locations, the latency must be reduced by specific technological solutions, for example, VPN with guaranteed bandwidth.
The on-premise scenario involves some relatively high investments and responsibility for the proper maintenance of the IT infrastructure in order to avoid unplanned interruptions (downtime). Professional back-up is also an important component, especially for companies where real-time access to ERP functionalities is critical. Ensuring the backup does not fall on the ERP system provider.
You can read more on the necessity of a backup solution in this article: Can an ERP system be affected by ransomware? How can you protect yourself? (sysinconsult.ro)
Choosing this model does not change at all the business logic and the functionalities of the ERP implementation project but only the IT infrastructure on which it runs. In this case, the servers on which the ERP licenses are installed will be hosted by an external provider (data center service providers). These can be both physical servers owned by the beneficiary or especially virtual machines rented in the form of cloud services (IaaS). The first situation involves the actual relocation of the servers to the data center of the supplier (collocation) which will ensure the basic components (power and cooling) but the administration will remain the responsibility of the beneficiary. The second case is the most common and involves contracting all the infrastructure services necessary to run the ERP system. They are virtualized servers that are highly scalable in performance and are completely managed by the provider. This model offers the advantage of easily adding additional resources (permanently or temporarily) if the ERP system will need more processing power (in care of an increase in the number of users, processing large data sets, etc.). Basically, this model means complete outsourcing of the IT infrastructure, the beneficiary of the ERP implementation project focusing exclusively on the use of the solution.
Established hosting service providers have data centers with redundant architecture, which generally eliminates the risk of downtime while planned ones (server maintenance, for example) are kept to a minimum. Hosting services are available as a subscription, are generally very flexible, and offer multiple options (virtual machine configurations, storage, networking, back-up, etc.). The hosting scenario is the best choice for companies that do not have a hardware infrastructure or IT teams or have a limited budget for the ERP implementation project. This approach allows directing the entire budget to the business components of the system by increasing the number of modules, functionalities, add-ons, etc. In this scenario, the ERP system will be used via the Internet, but access can be secured with the help of a VPN (Virtual Private Network). In the long run, the implementation of the ERP system under the hosting model generates total costs (TCO) that are higher than the on-premises model. However, the value and time horizon (generally after 3-4 years) differ depending on the specifics of each project and the contracted services.
What is the best solution?
Whether we are talking about a new ERP implementation project or just an upgrade to a new version, the performance of the IT infrastructure running the system is important. This has a direct impact on the operating speed, data processing speed, and user satisfaction. Ensuring an optimal level of performance can be achieved in two ways, both offering the same results.
The on-premises scenario offers more control, reduced latency, and does not depend on the internet connection. Instead, it requires a higher initial budget (purchase or upgrade of hardware) and in-house administration, backup, and security skills. The hosting scenario implies the existence of a service provider, recurring costs, and dependence on the internet connection. Instead, it eliminates the worries and the need to manage equipment, to change it in time, to relocate when changing the headquarters, etc.
The cost of implementation itself (licensing, installation, customization) is the same for both scenarios but our recommendation is to analyze these aspects well, over a wide horizon of four to five years, and make the decision only after you have all the data well outlined.
Consultants from System Innovation Romania can help you better understand the specific aspects of each scenario and make a more accurate projection of the associated costs.