Agile Dynamics Solutions blog posts archives about ERP


Total cost of Ownership of Cloud and On-Premises ERP systems

Deciding about a new cloud ERP software is overwhelming tasks that can bring a lot of challenges for businesses to decide. As this software can be difficult to understand, especially if you are not really a techie person.

Of course, the vendors trying to simplify the systems for businesses to better understand it but sometimes there needs to be a more complicated explanation.

The same applies for calculating the TCO (Total Cost of Ownership) as it involves people and technology and therefore many business owners are prone to make mistakes when they are calculating the TCO for Cloud ERP software’s.

That is why we have brought you the 6 important mistakes businesses make when calculating TCO so you can avoid them.

Total cost of ownership ERP Cloud Applications . All the hidden cost sof On-Premises ERP & CRM Applications

What is Cloud ERP TCO?

Cloud ERP TCO means Total cost of ownership of a particular Cloud ERP application which is the financial estimate to better understand the direct and indirect costs of the Cloud ERP software. This analysis describes all the cost obvious and hidden that are included with purchasing Cloud ERP software so it can show to buyer for how much they can own the software.

1. Software

This is the cost of your software application including the cost of all supporting products and services, such as ISV solutions, add-on applications, customizations and other integrations to ensure your ERP system is fully inter-operable with existing systems. One big difference from a licensing standpoint is that the cloud is a SaaS that you pay-as-you-go monthly or annually and expense the cost, which is classified as Operating Expense (OpEx). In the case of on-premises applications, you pay a high upfront cost classified as a Capital Expense (CapEx) which is usually depreciated or amortized over several years.

2. Implementation, customizations and training

These costs apply in both the cloud and on-premises scenarios and will vary depending on the level of complexity and use-case. You will likely need help from your ERP vendor to successfully implement your ERP, so you should account for the cost of their professional services. These implementation costs typically include software installation, configuring parameters, developing customizations and integrations, migrating data, and testing.

After completing implementation, you may need your ERP vendor to train your team. Consider adding project-related costs, such as solution selection, change management, process auditing, and reengineering to your TCO estimate.

3. Hardware

In an on-premises scenario, you will incur a high upfront cost to purchase your infrastructure, such as servers, networking hardware, operating systems, databases, and data storage, and then periodic additional operating costs (such as electricity costs) to effectively run, manage, and secure your ERP solution on-premises.

You will also need to buy more hardware and build redundancies in case of failures. On the other hand, the cloud allows you to flexibly manage your hardware costs without having to own, maintain, and pay for servers regardless of utilization percentage.

4. IT personnel

One of the biggest single line cost items is often your IT personnel budget. Maintaining IT personnel is expensive, and in an on-premises scenario, you’ll need to factor in their labor costs plus maintenance of your real estate, servers, databases and other technology.

In a cloud scenario, some of these costs will apply towards service, but that cost is typically a tiny fraction of maintaining your own in-house IT personnel, resulting in redeploying your free resources and immediately improving your bottom line.

5. Maintenance

Now that you know your hardware and IT staff costs, you’ll need to include the maintenance costs of your on-premises ERP, which include the loading of fixes, patches, updates, and upgrades. Additionally, factor in the cost of IT personnel labor to test updates as they are released. In the cloud, updates, fixes, and patches are released on a continuous upgrade cycle, allowing for immediate deployment.

6. Upgrades

In the cloud, upgrades run automatically in the background and require minimum oversight from your IT personnel, so there is no additional software or upgrade costs. However, in an on-premises scenario, you’ll need to account for additional IT personnel labor costs to test and deploy your upgrades.

Curious to know what other costs are currently not visible to you on the surface? Contact us today to help you perform your comparative TCO analysis. Get the knowledge you need to make a fully informed financial decision about the direction of your organization.

6 Important Aspects of Calculating Dynamics 365 Cloud ERP TCO 2

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Related Articles

Small to medium-sized businesses (SMBs) in Malaysia are lagging behind their enterprise counterparts when it comes to cloud adoption. With the new year (and new decade) fast underway, a recent Microsoft study showed that more than 96% of enterprises are using the cloud, compared to only 78% for SMBs. And while the use of cloud-based productivity apps like Office 365 has steadily grown among these smaller companies, their continued reliance on legacy software in key business applications such as ERP or accounting is impeding them from competing effectively with today’s top players.

Given this situation, moving to the cloud should be an obvious priority for SMBs, but many myths and misconceptions still exist regarding the benefits of cloud technology. Below are the ten most crucial and game-changing benefits that SMBs have reported after investing in cloud solutions.

Top 10 Reasons SMB's Should Invest in the Cloud [Infographic] 3

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Top 10 Reasons SMB's Should Invest in the Cloud [Infographic] 4

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Every year 8 out of the 10 businesses are closing down, especially in the years like this when there is a lot of uncertainty ahead of you. Difficult times like this requires businesses to adapt and ensure that every decision is made with a vast amount of information.

And although your business grows or is stagnant you can still fail your business if you do not have a proper technology to ensure that you can manage your business in growth time or your business is still.

According to Business Employment Dynamics, you can see how many business make it through in:

  • About 80% of businesses with employees will survive their first year in business. (The most recent data shows that, of the small businesses that opened in March 2016, 79.8% made it to March 2017.)
  • About 70% of businesses with employees will survive their second year in business. (The recent data shows that of the small businesses that opened in March of 2015, 69.2% made it to March of 2017.)
  • About 50% of businesses with employees will survive their fifth year in business. (Data shows that of the small businesses that opened in March of 2012, 50.2% made it to March of 2017.)
  • About 30% of businesses will survive their 10th year in business. (The most recent data shows that of the small businesses that opened in March of 2007, 33% made it to March of 2017.)

It is important to note that these rates are consistent year by year and although in some industries it may be slightly different the important reasons why company fails are usually these 3, I will describe in this article.

These 3 major reasons cause businesses to lose money, resources, and time and therefore it is important to understand them and know how to solve them.

1. Current systems are disconnected and cannot handle the complexity of a growing business

Dynamics 365 helps growing businesses to handle more complex business processes. Dynamics 365 ERP and CRM systems in Malaysia and Singapore.

Yearly growh is a goal of every company, but with the growing business new obstacles and challenges will come with it.

Whenever the business grows from 10 to 50 employees or from 100 to 500 employees, the challenges are different and a new approach is required.

According to Panorama Consulting, the businesses who do not update the old ERP systems or still rely on the spreadsheets and manual processes leads to redundant data (35%), unaligned business systems (33%), and the inability to track processes in real time (28%).

These problems cost businesses a lot of money and resources and with a growing business, you need to focus on how to streamline processes and help employees work faster and smarter.

Therefore, growing businesses in Malaysia are searching for a comprehensive solution which they can deploy and get a 360 overview to manage more effectively their financials, sales, services, and operations to increase profit and decrease cost.

To connect apps like payroll, banking apps, CRM systems, e-commerce, or customer APIs to become more efficient and reduce the time, repetitive tasks which can be streamlined or automated such as:

  • Create quotes
  • Orders
  • Invoices
  • Reporting
  • Others

And tasks can be carried out from the office or on the go via mobile apps.

2. Incomplete data and tedious reporting create blind spots and lead to poor decisions

Growth might seem like a great opportunity to expand the operations and the best time for organizations to recruite more resources but many of them fail due to the poor cashflow.

According to Entrepreneur, 82% of small to midsize businesses fail because of poor cash flow management.

Tim Berry the author of the article has described some important rules of cashflow to remember such as:

  • Growth sucks up cash. 
  • Cash flow is not intuitive
  • Profits are not cash, they’re accounting

And even though for many business owners and accountants the rules make sense, it is hard to follow them if the company does not have sufficient reporting system.

Manual reporting is tedious and takes up a lot of time of finance department and still there are blind spots which lead to poor decisions and ultimately failing the business.

The solution for such companies would be a comprehensive ERP system which will create a single source of truth by seamlessly sharing data across every line of business.

Modern ERP solutions will centralize your data from sales, accounting, purchasing, inventory, and customer interactions for an end-to-end view of your business.

Users are able to create customized reports and view comprehensive dashboards with intelligent reporting systems such as Power BI in Dynamics 365.

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3. unsecure data causes business risks

Malaysia authorities have been actively looking at fraud in small and medium size companies. As for many developing countries, small and medium size business are important to the economy.

According to KPMG-Malaysia,

  • 48% businesses claim that their organization were victims of fraud
  • 46% of the respondents also state that they have received complaints of bribery and/or corruption in their organizations.
  • Unfortunately, only a small percentage of businesses were able to determine the fraud loss which amounted to RM2.407 million. The survey results indicate that 42% of the reported fraud incidents were withing the range of RM10,000 to RM100,000

Also according to ACFE, businesses with fewer than 100 employees are the most susceptible to fraud, with a median loss of $200,000.

SMBs in Malaysia and Singapore faces big risks chart. Dynamics 365 in Malaysia and Singapore by Leading Microsoft Dynamics 365 partners in Malaysia and Singapore
Source: ACFE

These numbers are growing as more businesses is moving more to the digital platform. Therefore, it is extremely important to find a secure solution for your business data.

So, you can securely handle, store, and transmit data across your systems.

Data security is extremely important to businesses. Many hackers knows the vulnerability of small businesses.

Therefore ERP system should have proper safeguards to ensure that the data is properly secured.


Protecting your business is becoming more important than ever especially with the sensitive data being accessible over the internet.

Today’s organizations should be searching for ERP solutions which provide high level of security, a single source of data and ease of reporting.

In order to run your organization more effectively and securely anywhere, whether you are the home, office, or business trip, the ERP system should be able to provide you with tools to do so.

Check out Dynamics 365 Business Central, our comprehensive all-in-one business solution to supercharge your growing business. Learn more

Additional resources:

For more resources visit our Resource Centre, where you can find plenty of ebooks, whitepapers, guides and infographics to download for free!

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