The Difference Between True Cloud and Fake Cloud (and why it matters)

 If you are in the process of evaluating a new ERP system today, you’re likely debating between a cloud and an on-premise solution. In partnership with Mint Jutras research, NetSuite have looked at the different software deployment options that have been considered over the last 6 years. Today, SaaS, or Software-as-a-Service, is the most likely deployment option to be considered, while willingness to consider traditional on-premise solutions dropped off dramatically between 2011 and 2013 and has not recovered since.

You might be wondering how SaaS compares to cloud, and why the distinction matters. Cloud refers to access to computing, software and storage of data over a network (generally the internet.) You may have purchased a license for the software and installed it on your own computers, but your access is through the internet and therefore through the “cloud”.

SaaS is exactly what is implied by the acronym. Software is delivered only as a service. It is not delivered on a CD or other media to be loaded on your own (or another’s) computer. It is generally paid for on a subscription basis and does not reside on your computers at all.

Therefore, all SaaS is cloud computing, but not all cloud computing is SaaS. Confusing, right? 

Cloud computing that is not SaaS is what we call, “fake cloud.” Recognising a lucrative chance to create an additional revenue stream, many traditional on-premise vendors like SAP are trying to “cloud-wash” their existing on-premise offerings to give them the look and feel of SaaS solutions. The resulting hosted or hybrid solutions may be disguised as cloud on the surface, but simply do not achieved the benefits of a true SaaS environment.

So how can you tell a true cloud solution from a fake one? And, more importantly, why should you care?

A true cloud solution was built in the cloud and only in the cloud. Certain characteristics make true cloud solutions unique, as compared to fake cloud. 


It’s software multi-tenancy that separates fake cloud solutions from true cloud solutions and makes the above benefits possible. In a multi-tenant software environment, multiple companies are running the same instance of the software and share all the common services. While your business has personalised processes and data security, shared hardware among others running the platform offers economies of scale and incredible cost savings that single-tenant systems cannot.

Companies who unknowingly select a fake cloud architecture, or rely on traditional on-premise solutions inevitably struggle with the following issues:

Delayed and painful product upgrades

When running hosted/hybrid solutions, you must suffer through the same potentially arduous (and expensive) upgrades every time the software vendor releases a new version. You are also at that hosting vendor’s mercy regarding when they choose to roll out the newest solution. Because the vendor will need to upgrade each customer one by one, including transporting past customisations over to the new software, it could take months or even years to get updated and by then, the next version of the product may be around the corner. This is chief pitfall of on-premise solutions as well.  

Costly, unstable integrations and customisations

Customising an on-premise ERP means reimplementing and testing those custom schema changes, integrations, workflows and reports every time a new version of the software is released. Similarly, if running a hosted solution, integrating it with your other applications or customising it causes considerable hassle and expense and can be unstable because the on-premise product was not initially built for hosting. 

Too much downtime and inadequate security and support

Given their limited headcount and resources, most VARs and traditional service providers simply cannot achieve the same levels of security, privacy and uptime as true cloud providers can. A simple way to determine this is to ask them about their uptime performance, contractual uptime guarantees, and security and privacy certifications such as PCI-DSS security compliance, SOC 1, and EU-US Privacy Shield framework, NIST 800-30 and ISO 27000 standards.

Need to overbuy/over-provision capacity

If you’re uncertain of how much capacity you’ll need, you’ll probably have to over-buy the number of software licenses to ensure you’re not caught short; or, worse yet, you under-provision and can’t live up to your SLAs with your customers because you “failed” to plan ahead.

Expensive, open-ended implementations

On-premise systems are notorious for having laborious, expensive and time-consuming implementations. Fake cloud solutions are just the same. They may boast about speed and agility, but after you sign on the dotted line, they come back with a very traditional looking implementation plan; a block of estimated consulting hours and a rough “blueprint” to get you live.

Don't Be Fooled

Fake cloud providers are trying to blur the lines between true cloud systems and hosted offerings. Yet the advantages they cite for their own systems are those touted by on-premise vendors. When it comes to speed of upgrades and deployment, performance, value, customisation, and service, it is simply not much of a comparison.

As always, if you have any questions, opinions, or experiences you would like to share with us, please feel free to say in our comments section below.

If you want to learn about the benefits of a true cloud-based ERP solution, click here to book a free consultation with one of our team.