Cloud vs. On-Premise – Which deployment model is right for you?

Do you also want more transparency and efficiency in your production? Are you seeking suitable manufacturing software, such as a Manufacturing Execution System (MES)? Are you wondering whether you should implement a cloud MES or an “on-premise” MES better?

In this article, we explain the differences between the cloud and on-premise approaches and provide an overview of the most important aspects you should consider when choosing the right solution.

To be clear from the outset: for most companies, the journey towards the factory of the future will make sense with the cloud. But, there are industries and areas where on-premise operating models offer advantages.

Two ways to connect production and planning

To organize the data flow between production and planning, i.e., between MES and ERP (Enterprise Resource Planning), production managers have two rough options: They can connect their SAP or ERP system to a cloud-based MES solution or an on-premise MES solution.

In doing so, they can remain in the SAP world – with SAP Digital Manufacturing (SAP DM) or the on-premise solution SAP Manufacturing Suite. As an SAP Silver partner, FORCAM ENISCO offers certified consulting and implementation of the cloud MES solution SAP DM.

You can also choose powerful solutions from experienced partners—for example, the flexible platform solution MES FLEX, which also offers its own framework for data integration into the SAP/ERP planning world (FDI4SAP).

How cloud and on-premise differ

There are a wide range of deployment models – from private or public cloud to on-premise and hybrid solutions. They all have their own advantages and disadvantages.

A key feature of the cloud is its scalability. The software processes the necessary data in the data center of an external provider, the cloud. The respective cloud provider provides the resources needed for this. In the case of on-premise solutions, the software works locally on hardware installed on-site, close to the factory. So, if you opt for cloud software, you don’t have to invest in new hardware, which is the case for the on-premise model.

The key feature of on-premise MES solutions is that operators retain complete control over their IT infrastructure, data security, and compliance. However, providing an on-premise infrastructure requires investments in internal resources such as trained IT personnel and hardware. The teams have to take care of the IT solution’s maintenance, operation, and updates, and the hardware has to be kept up to date.

Info: The main difference between cloud and on-premise solutions is where the software is hosted and run. With a cloud solution, an external cloud provider takes care of all resources. With on-premise solutions, the responsibility lies with the company itself – the hardware is owned and maintained by the company.

From IaaS, PaaS and SaaS to complete IT control

The three cloud infrastructure offers are Infrastrucutre as a Service (IaaS), Platform as a Service (Paas) and Software as as Service (Saas). Depending on the service model, the cloud provider takes on more responsibility as you can see in the graphic above.

• Infrastructure as a Service (IaaS) is a cloud computing model in which companies are provided with essential IT resources such as virtual servers, storage space, networks, and computing power over the internet. Users can flexibly scale this infrastructure and use it as needed without operating their physical hardware.
• Platform as a Service (PaaS) provides a cloud platform that offers developers the tools, frameworks, and services to develop, test, deploy, and manage applications efficiently. This eliminates the need to worry about the underlying infrastructure, such as servers, storage, and networks.
• Software as a Service (SaaS) is a cloud computing model in which software applications are hosted on the internet and managed by the provider. Users typically access the software through a web browser without installing or maintaining it.

The advantages of an on-premise solution at a glance

Those who opt for an on-premise solution have the following key advantages:

• More control over your data: An on-site MES ensures complete control over your manufacturing data, as all information is stored and managed locally.
• Data security and performance – fewer dependencies: On-premise systems work independently of the internet connection and ensure continuous operation even during network failures. This is particularly important for manufacturers in locations with unstable or unreliable internet access. The system also often performs better because the data processing occurs close to the production line.
• Compliance and regulatory requirements: Industries such as aerospace, defense, and pharmaceuticals often have strict legal requirements that mandate local data storage and processing. On-premise MES makes it easier to comply with these regulations because the data is stored in a controlled environment.

The advantages of the cloud at a glance

Cloud deployment with an established and renowned provider offers you

• cost savings,
• scalability,
• remote access and collaboration,
• reliability and maintenance,
• the latest technologies.

Manufacturing lowers your total cost of ownership

By using the cloud, you can reduce your total cost of ownership (TCO). In the cloud, you can scale your resources according to your needs and only pay for what you use (pay-as-you-go model).

Typically, the costs for on-premise software are as follows:

• Software licenses,
• customization and implementation,
• training,
• hardware,
• IT personnel,
• and maintenance.

Cloud software reduces these costs to:

• subscription fees,
• customization and implementation,
• training.

It should be noted that on-premise systems may have higher initial costs, but can be more cost-effective over time. In the cloud, upgrades are carried out at defined intervals, so you are always up-to-date.

Cloud computing shifts from CapEx to OpEx

Another aspect of a cloud MES is the shift from capital expenditures (CapEx) to operational expenditures (OpEx). In plain English, the shift from capital expenditures to operational expenditures. With a cloud solution, you avoid the high capital costs of purchasing and maintaining hardware and software. Instead, you can opt for a subscription or pay-as-you-go model that offers more flexibility and cost predictability.

Reduced maintenance

On-premise infrastructures require the maintenance of servers, cooling systems and other hardware. By using a cloud MES, you can reduce maintenance efforts. The cloud provider takes care of these tasks. This allows your company to focus on its core business. You do not have to expect unexpected capital expenditures.

Scale without additional capital expenditure

The same applies to scalability. If you scale an on-premise solution, you have to invest in new hardware when you reach the existing capacities. With a cloud MES, you pay only for what you need. This increases the monthly operating costs according to your needs.

Better financial planning

Operating expenses (OPEX) are regular and predictable payments. This helps with budgeting and financial planning. This is ideal if you want more flexibility and less financial risk. You benefit from predictable and lower costs.

This strategic advantage makes cloud MES an attractive option for modern manufacturers. It doesn’t restrict your budget. You can start immediately to use the valuable insights from your manufacturing processes. This gives you the necessary leeway for investments and improvements to your production processes.

Increase free cash flow, reduce operating costs

Cash is king. That’s why managing cash flow is a top priority for companies. By implementing a cloud MES, you can free up financial resources and significantly reduce operating costs. Unlike traditional on-premise solutions, which require up-front investment, a cloud MES offers a cost-effective and scalable alternative.

How a cloud MES boosts cash flow and reduces costs

• No maintenance: As already mentioned, there is no need for maintenance of the on-site infrastructure such as servers, cooling systems and other hardware. With cloud MES, these costs are eliminated, so you can focus your resources on other critical areas of your business.
• Optimized resource utilization: You only pay for what you need – no more overprovisioning of storage or compute capacity. Cloud MES offers flexible pricing models and helps you manage your costs effectively.
• Streamlined operations: With automatic updates and centralized management, Cloud MES reduces the need for IT support and labor-intensive tasks. This means less administrative work and more focus on core manufacturing processes.
• Energy savings: Cloud providers operate highly energy-efficient data centers that can significantly reduce energy consumption compared to operating your own infrastructure.
• Increased productivity and real-time monitoring: Cloud-based manufacturing software (as well as on-premise software) equips your manufacturing operations with critical tools to improve visibility into production processes. This visibility enables you to increase product quality, optimize maintenance schedules, and improve overall productivity.

Data sovereignty and security across regional borders

With cloud MES solutions, concerns about data sovereignty and security can be effectively dispelled while enjoying the benefits of a global infrastructure:

• Compliance with local regulations
  Cloud providers operate localized data centers that comply with regional laws on data sovereignty, such as the General Data Protection Regulation (GDPR) in Europe or the California Consumer Privacy Act (CCPA) in the US.
• Cross-regional availability
  Global data synchronization enables companies to seamlessly operate production sites in multiple regions while ensuring compliance with local regulations.
• Advanced security
  Leading cloud providers implement state-of-the-art security measures such as encryption, access controls, and robust disaster recovery mechanisms. These investments often exceed the capabilities of individual companies that rely on on-premise systems.
• Centralized security management
  Cloud MES centralizes and standardizes security across multiple locations or regions. This approach reduces vulnerabilities, increases resilience and ensures uniform security procedures.

Note: Disaster recovery (DR) is an important aspect of business continuity planning to protect businesses from unforeseen events such as hardware failures, cyberattacks or natural disasters.

Summary

Implementing an MES is a strategic step to improving financial performance and driving operational excellence. Cloud MES solutions offer scalability, flexibility and lower TCO. On-premise MES systems, on the other hand, offer maximum control and security. The choice depends on your company’s individual requirements, budget and compliance needs.