Making the Case for Cloud Storage vs. On-Premise Servers in Manufacturing

June 10, 2024

Written by: Paul Van Metre and David Vuyk

Here’s a question we get occasionally in regard to ProShop ERP:

“Can I host it on my own server?”

To be fair, we can appreciate where this is coming from. Most often, the question is asked by business owners who operate in highly regulated industries such as Defence, Aerospace, and Medical. The assumption being made is that hosting their data on their server will automatically equate to a stronger security posture rather than hosting that same data on the cloud. Is it really? Not likely. 

Traditionally, many companies have managed their data on-premise. After all, this intuitively seems like the best way to maintain control over your sensitive data. That being said, there is a good argument to be made that hosting data on your own server doesn’t automatically equate to enhanced data security. In-fact, the opposite can be true in many cases. 

Knowing is half the battle, so let’s explore how manufacturing businesses can benefit from cloud storage as a robust and compliant solution, while also highlighting some of the pitfalls of traditional on-premise servers:

The Pitfalls of On-Premise Server Management
On-premise server management involves several critical tasks: hardware maintenance, software updates, security patching, and constant monitoring for threats. Poor management practices in any of these areas can significantly weaken your data security posture as a business. When that is the case, using a compliant cloud solution like AWS GovCloud can be a better and more secure alternative. If you’re considering an on-premise server, or are currently maintaining one, here are some common issues to guard yourself against:

  1. High Initial and Ongoing Costs
    • Setting up on-premise servers requires a significant initial investment in hardware, software, physical infrastructure, and dedicated staff or IT Management services. Continuous expenses include maintenance, and personnel costs for managing and maintaining the servers. Upgrading hardware and software over time also adds to the ongoing costs. The costs before the ERP is even added can easily balloon to 6 figures per year, far more than the entire cloud ERP system alone costs. 
  2. Scalability Challenges
    • On-premise solutions have limited scalability. Expanding capacity requires purchasing and installing additional hardware, which can be time-consuming and expensive.
    • Unlike cloud solutions, on-premise servers cannot easily scale up or down based on demand. This can lead to over-provisioning (wasting resources) or under-provisioning (leading to performance issues).
  3. Security Risks
    • Failing to regularly update and patch servers leaves them vulnerable to known exploits. This can easily happen when you don’t have dedicated personnel maintaining your servers. In today’s landscape,  those security updates need to be done on a daily basis and require significant expertise to do it right.
    • Ensuring the physical security of the data center, including protection against theft, natural disasters, and unauthorized access, adds an additional layer of complexity and cost.
  4. Compliance and Certification
    • Achieving and maintaining compliance with industry standards and regulations (such as NIST 800-171 and CMMC) with on-premise servers can be challenging. This requires ongoing audits, documentation, and implementation of stringent security controls.
    • Cloud providers like AWS GovCloud are audit-ready and already compliant with many regulatory standards and offer tools to help customers achieve compliance, reducing the burden on businesses.
  5. Downtime and Reliability
    • On-premise servers can be a single point of failure. Any hardware failure, power outage, or other issues can lead to significant downtime and data loss.
    • Implementing a robust disaster recovery plan with on-premise servers requires additional resources and infrastructure. Cloud solutions typically offer built-in disaster recovery and backup solutions.

SO, which of these two options is right for your manufacturing business?

Well, to answer that question, we need a better understanding of what Manufacturers are up against right now when it comes to data security requirements:

Understanding the Requirements of NIST 800-171
As manufacturing businesses become increasingly reliant on digital systems for their operations, data security has become a top priority. This isn’t only because business owners are becoming increasingly security conscious, but also because it has become a requirement of working in certain industries. The reality for many shops working in regulated industries has become “get cybersecurity compliant, or get new customers.” Yikes.

The National Institute of Standards and Technology (NIST) Special Publication 800-171 has set forth guidelines to protect Controlled Unclassified Information (CUI) in manufacturing businesses. Compliance with these guidelines is mandatory for any company handling CUI on behalf of the U.S. government (ie. manufacturing businesses who complete work for the federal government- at any tier of the supply chain). Since small businesses are often the most vulnerable to cyberattacks, making CUI data more secure has become absolutely essential. If this isn’t currently on your radar, it needs to be.

Questions Manufacturing Businesses Need to be Asking Their Cloud-Based Software Vendors:

If your manufacturing business currently uses a cloud-based data-storage solution, here are some essential questions you should be asking your software vendors with regard to data residency, shared responsibility, and compliance with NIST 800-171:

  1. Data Residency: 

Where is the data physically stored?                                    

Understanding the physical location of data storage is crucial for compliance and data sovereignty requirements. Your software vendors should provide clear information on data center locations and any data transfer policies.

Can you ensure that our data will remain within specific geographic boundaries? 

Many businesses need to ensure that data remains within certain geographic boundaries to comply with local regulations and contracts. Vendors should be able to guarantee data residency.

  1. Shared Responsibility

What aspects of security are covered by the vendor (cloud-based software service), and what is the responsibility of the customer (your manufacturing business)?

Understanding the shared responsibility model is critical. Vendors should clearly delineate what security measures they manage and what the customer is responsible for. This often comes in the form of a shared responsibility matrix (SRM) document that is provided to you.

How do you assist customers in meeting their responsibilities under the shared responsibility model?      

Vendors should provide tools, training, and support to help customers fulfill their security obligations, ensuring comprehensive protection and compliance.

  1. NIST 800-171 Compliance

How does your solution support compliance with NIST 800-171?

Vendors should detail how their software helps meet the 17 families of security requirements outlined in NIST 800-171. This includes specific features and configurations that align with the guidelines.

Do you provide documentation or audit support for NIST 800-171 compliance?  

Adequate documentation and support for audits are essential. Vendors should offer comprehensive documentation and assistance to demonstrate compliance during assessments.

What security controls are in place to protect CUI within your ERP system?                

Vendors should describe the technical and administrative controls they have implemented to safeguard CUI, including encryption, CUI labeling, least privilege, access controls, and monitoring.

Evaluating Vendor Responses
When evaluating responses to these questions from cloud-based software vendors, manufacturing businesses should consider the following:

  • Transparency: Vendors should provide clear, detailed answers without ambiguity. Transparent communication about data residency, shared responsibility, and compliance measures indicates a strong security posture.
  • Support and Training: Effective support and training programs are crucial for enabling businesses to meet their responsibilities and ensure ongoing compliance.
  • Proven Track Record: Vendors should have a demonstrated history of helping clients achieve and maintain regulatory compliance with NIST 800-171 and other relevant standards.

Ensuring data security is of the utmost importance for all manufacturers. This is especially true for manufacturing businesses operating in highly regulated industries where more stringent controls are being mandated. Poor on-premise server management can expose a business to significant risks, including data breaches, regulatory penalties, and lost business. In contrast, cloud-based solutions like ProShop ERP tethered with AWS GovCloud offer advanced security measures, continuous updates, and robust compliance, making them a secure choice for safeguarding sensitive manufacturing data and CUI. By leveraging the cloud, manufacturing businesses can focus on their core business operations while trusting that their data security is in good hands. 

By asking the right questions about data residency, shared responsibility, and compliance measures, businesses can ensure they choose a cloud-based software vendor that not only meets their operational needs but also protects their sensitive information and adheres to regulatory requirements. This proactive approach will help manufacturing businesses maintain a robust security posture, ensuring the integrity and confidentiality of their data. The reality is that for many companies needing to meet NIST 800-171 compliance requirements, their current ERP systems will not be able to support the standard with their cloud service, leaving the decision to bring the ERP on-premise, exposing the shop to all the aforementioned risks and costs, or choosing to change ERP vendors.  When the time comes for your business to meet the NIST standard, or risk losing all of your government-related business, what will you do? We don’t recommend waiting until you can’t pass an audit to find out.

Advanced cybersecurity controls are inherent to the ProShop platform. If you’re looking to bolster your data security and achieve compliance to standards such as NIST 800-171, consider booking a call to explore how ProShop can support your Cybersecurity efforts!

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