Cloud vs. On-premises. An SAP Business One dilemma.

Early on in their digital transformation journey, most potential SAP Business One users are faced with the decision of whether to run SAP Business One in the Cloud or On-premises. And although there really isn’t an answer as to which model is “the best”, for most businesses, it shouldn’t be all that difficult to ascertain which is the best for you.


For those new to the topic, the “On-premises” environment is the traditional route. You buy software licenses or license subscriptions from your SAP Business One Partner and your own server infrastructure and everything is managed and maintained in-house. This means data security and updates have to be handled either by your own internal IT team or contracted SAP Business One specialists. We’ll discuss the pros and cons in more detail later, but as a general rule, the On-premises model offers you more control but also more responsibility.

The cloud

The cloud-based model can be approached in several ways.

A. SaaS (Software as a Service)

This is the standard public cloud-based approach and is also the highest service level on offer. SAP Business One and any extensions are installed and supported on cloud-based infrastructure by your cloud service provider. The cloud service provider takes care of everything including licenses, updates, backups and data security. Your only responsibility is data entry. You are billed periodically based on the number of users and other than that, everything else is taken care of for you.

B. PaaS (Platform as a Service)

The PaaS model is very similar to SaaS with one notable exception; the customer buys their own licenses upfront. This gives you a bit more control over the software without the headache of servers etc. It’s also the go-to model for businesses who already have licenses bought and paid for, but who want to migrate to the cloud.

C. IaaS (Infrastructure as a Service)

This model means that you buy cloud resources e.g. servers, networks, virtual machines, etc. from the cloud service provider and access those through an internet connection but the licenses and software including administration and upgrades are entirely your own or your contracted service provider’s responsibility.


One of the great advantages SAP Business One offers is the freedom to mix and match cloud-based services to suit your business, for instance, if you already have your own infrastructure in place, you might wish to run SAP Business One On-premises but you could also opt for subscription-based licensing for the software to reduce your upfront investment. Then, if perhaps circumstances change at a later date, you might decide to buy your own licenses after all, essentially transitioning fully to the traditional on-premises model. The main limitation is that all of your users have to be on the same model. You can’t have half of your users on subscriptions and the other half licensed.

The dilemma

We’ve given you a brief summary of the available options, but which is best? To help you to ask yourself the right questions when making this important decision, we’ve made a list of 7 factors you should take into consideration.

1. Your current set up

Much depends on what infrastructure you already have at your disposal. If you already have a fully functioning server that has a reasonable amount of life left in it, you might as well get as much ROI out of it as you can. This tips the balance more in favor of the On-premises model. After all, why would you want to pay a data center every month to do something that you can do yourself?

2. Standard set up vs. customization

If you have a relatively simple business scenario to an extent that you can use SAP Business One (and any extensions), more or less, as they come out of the box, the cloud is definitely a good option.  You’ll also benefit from a shorter and usually less-expensive implementation process.

If you have a slightly more complex or unique business scenario, the cloud could well still be right for you, but you do need to do your homework beforehand. Not all cloud environments are suitable if you require a substantial amount of customization. That being said, there are some partner-hosted clouds that offer good environments for high levels of customization or third-party integrations. Just be careful that you know exactly what your requirements are, that you have done an analysis of potential customization needs for the future and that what you are signing up for can accommodate that.

It is worth noting that customization and integration projects are often easier to execute with an On-premises deployment and the associated difference in cost shouldn’t be overlooked either.

3. Data Security and backups

This one is a bit swings and roundabouts but still worth considering in terms of your business preferences and policies. An advantage of On-premises is that you have more personal control over your data security. You don’t need to share data with any third party. Everything is kept strictly in-house.

For cloud-based deployment, your data will be stored in a data center. While this means transferring your data to another system that you have limited control over, this also comes with significant advantages. Most data centers, such as those run by SAP, Microsoft or Amazon, really have first-class, physical and ultra-hi-tech network security measures in place, far beyond the means of most SMEs. Most data centers are also designed to withstand natural and manmade disasters such as fire, flood and even earthquakes.

In the same vein, data backed up in the cloud also enjoys the safety afforded by sophisticated data centers. On-premises, you need to think about a separate physical location to store the backup. Otherwise, if there were a fire or a thief got into your server room, the backup would be in as much danger as your primary data. Ensuring that the backup location is secure against cyber and physical threats brings an extra cost to the table.

All in all, this comes down to personal preference, company policy and also the extent to which you can secure your own servers.

4. Upgrades

This is one area where cloud models really shine, some more than others. When performing an upgrade On-premises, you need a separate infrastructure on which to test the upgrade and the migration so you’ve just doubled the cost of buying, housing and maintaining your servers. And it gets worse. Inevitably during the upgrade, your system won’t be available for a period of time. The amount of time varies hugely from case to case, but in our experience, something in the range of 8-24 hours is about average.

If you are on a typical SaaS model, you cut that right down to about an hour. The entire upgrade will be handled by your cloud service provider removing the need for additional servers from the equation. Let’s not forget that as well as saving on time, you get the benefit of the service providers’ expertise and experience in performing upgrades on a regular basis so for all practical purposes issues are less likely to arise. This does not hold true for all cloud models. With IaaS, you are responsible for administration and upgrades and performing them will cause similar levels of inconvenience to On-premises upgrades.

5. Scalability

If your business is growing fast, the Cloud might be the more appealing model for you. If you are running SAP Business One On-premises and need to increase capacity, that means investing in more servers, bigger or more server rooms, more employees to maintain the servers, etc. If you are running in the Cloud, you just buy more user subscriptions the following month and the Cloud provider takes care of the rest.

The same applies if you need to scale down for some reason. Instead of being left with a load of surplus infrastructure that you no longer need On-premises, you can just change your subscription level. Be aware though, that your contract with the Data Center will often include some kind of notice period. You won’t normally be able to reduce the number of users within the contract period and to do so you will have to wait for renewal.

6. Convenience

There is no doubt that Cloud deployment will be less hassle for the majority of businesses. Server maintenance and management simply isn’t something you have to concern yourself with if you are running SAP Business One in the cloud on the SaaS model. On-premises deployment means you will need your own staff to manage and maintain servers so you will have the trouble of recruiting suitably qualified staff, paying their salaries and expenses and generally having another aspect of your business to manage.

The Cloud deployment model also often proves itself more convenient if you have some users working remotely or you have a mobile workforce. While system access is entirely possible On-premises, there is an added dimension of complexity and possibly increased network costs too.

7. Money, money, money

While the above factors do play a significant role, as with many things in business, it often does come down to money in the end. Running SAP Business One in the cloud massively reduces the upfront investment of introducing a new ERP system to your company. You don’t need to buy servers, house them or employ the staff to maintain them, you don’t need to renew the servers every 7-8 years, you don’t need to pay the substantial license fees upfront and the list goes on. Even your electricity bills will be significantly higher if you are running your own servers On-premises.

If freeing up capital to invest in your ERP system is an issue, or if you’d prefer to invest your available capital in the expansion of your business, then Cloud deployment is a very attractive option. The upfront investment would mainly consist of implementation costs and for everything else, there would simply be the monthly subscription payment. This means you can expect a much faster ROI.

In the interests of complete transparency though, On-premises deployment does often work out cheaper overall in the long term if you are running the system without all the Cloud’s characteristics, so businesses that do have capital available to invest, should seriously consider the On-premises model as well.

The decision

In sum, the answer isn’t cut and dried. It all depends on your business’s situation and only you can decide what your priorities are. Whichever model you decide to choose though, you should take comfort in the fact that there are thousands of SMEs all over the world running SAP Business One happily and successfully in the cloud and thousands more running happily and successfully On-premises too.

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