On-premise vs. Cloud-based ERP: Ready, steady, go!

Enterprise Resource Planning (ERP) software helps organizations to automate and accelerate their business operations, and in turn, enhance overall productivity and efficiency. But what’s ERP’s strongest suit? Your organization will save valuable time, resources, and costs.

The search for an effective ERP system invariably leads most business owners and managers to choose between on-premise ERP and cloud-based ERP. Traditionally, ERP systems were deployed on-premise (on-site) at the customer’s location, on their infrastructure. However, since the advent of innovative cloud-based software solutions, it’s now possible to access ERP systems via online and mobile applications, from anywhere, at any time.

For organizations that are primed and ready to take the proverbial plunge, and are shopping around for an ERP system, we’ve taken everything you need to know about on-premise and cloud-based ERP and put it all in a neat little package, below. When it comes to choosing your ERP system, knowledge reigns supreme. The more you know, the more you understand, so that you and your organization can make the best possible decision that’s the “best fit” for your business.

Key differences between on-premise ERP and cloud-based ERP

Cloud-based (or just, cloud) ERP is provided as a Software-as-a-Service (SaaS) product by ERP vendors, in direct contrast to on-premise ERP, which is deployed on a company’s internal servers, and managed by its own staff. The table below illustrates the major differences between the two solutions.

On-premise ERP

Cloud-based ERP

Deployed physically on a company’s internal network and servers. Requires suitable infrastructure and preparation before ERP can be deployed. Delivered via the Internet, and can be accessed on mobile devices and tablets. The surge in remote working makes it easier for employees to work from home (WFH) or bring their own devices to the office (BYOD).
The primary mode of ERP deployment until the mid-2000s. A large number of security-conscious organizations continue to use on-premise ERP for complete control of operational business data. Popular since the 2010s. Does not require extensive training or expertise to use, and smaller companies simply do not have the capability to manage in-house IT teams. Cloud ERP requires minimal setup to implement.
Provides greater control and autonomy. ERP vendors sell licenses to use and/or modify the software. Attractive user interface and ease of use. As ERP vendors try to outrank the competition, they are motivated to consistently enhance the user experience.
Results in the need for additional manpower and infrastructure expenses, where an in-house IT team is required to maintain, manage, and safeguard the ERP system against security threats, and resolve technical issues independently. Customizations, special features and functionality, may require top-ups or subscriptions at an additional cost. Although cloud ERP is affordable, scaling up or customizing specific features will require additional purchases/subscriptions.
Security and software updates are the customer’s responsibility. The in-house IT team and/or system admin need to effectively update and safeguard on-premise ERP. Affordable, and can be deployed quickly, even without a dedicated in-house IT team. As a result, companies can reduce their IT expenditure, and focus on scaling up, and increasing revenues.

Who should use on-premise ERP?

Although on-premise ERP is steadily losing its market standing to cloud-based ERP, it is still considered a good choice for organizations that handle sensitive data, such as organizations associated with governments, defense, security, healthcare, and those that manufacture sensitive products. On-premise ERP is also a suitable option for companies that can afford an in-house IT team, and the required infrastructure to manage, customize, and deploy an ERP system independently.

Who should use cloud-based ERP?

Unless your organization handles highly sensitive data, which requires comprehensive management, control, and reporting functionality, a cloud-based ERP is a smart and cost-effective option. It is easily scalable, and it doesn’t require massive investment upfront. It is an ideal choice to effectively manage organizations of varying sizes and scopes. In a word, unless your company is an integral part of, or provides products or services to a data-sensitive organization, a cloud-based ERP system should be your solution of choice.

Cloud-based ERP is suitable for most businesses

It’s important to note that although on-premise ERP is often presented as a cure-all to security issues, a carefully selected cloud-based ERP can provide high-level security across the board. As reputable ERP software vendors consistently update and enhance security issues, the chances of data breaches are far and few. As a result, cloud-based ERP can be easily implemented and deployed by companies of all types and sizes, from producers of baby food, to battleships – and virtually anything in between. In addition, to enhance the user experience, customizations, extra features, and even third-party (complementary/add-on) software products and applications can be purchased, and integrated into the system.

If you’re thinking about ERP for your business, we’re here to help. Contact us for a no-obligation call with one of our ERP implementation experts.

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The Author
Todd McElroy
Head of Sales, Priority U.S.

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