When picking a new enterprise resource planning (ERP) system, one of the most important things to think about is whether the system will be on-premise or in the cloud. ERP systems that run in the cloud are becoming more popular than ever. Almost all ERP vendors now offer some kind of cloud deployment choice, and some have stopped offering on-premise ERP services altogether. But there are still a few reasons why a small or medium-sized business might choose to use a traditional on-premise ERP system, which was the standard in the ERP market until lately. Which is best? Well, you have to decide, but this overview of the on premises erp vs cloud based erp.
How on premises erp vs cloud based erp are set up and how much they cost.
How these two systems are put into place is very different.
- Software-as-a-Service (SaaS), which is another name for cloud-based applications, is hosted on the vendor’s servers and viewed through a web browser.
- On-premise software is software that a company puts on its own computers and servers.
Cost is another important difference between on premises erp vs cloud based erp solutions:
- Even though there are exceptions, most cloud software costs a monthly or annual subscription fee plus ongoing costs for help, training, and updates.
- In general, the cost of on-premise software is based on a one-time registration fee that lasts forever. This fee is usually based on the size of the business or the number of users at the same time. Costs keep coming up for things like updates, training, and help.
On-premise options are usually thought of as an investment, since they have a large cost up front. On the other hand, a cloud ERP system is often thought of as an operating expense, or an extra cost that the company will keep paying. Cloud software is used by a lot of people because it doesn’t cost much to start using it, especially compared to expensive upfront permanent license fees. A recent study found that 57 percent of businesses now use hybrid cloud systems, which are up from 19 percent, and that 93 percent of businesses use cloud-based software or system design.
But system prices tend to get closer to each other over time. The next graph shows the total costs of ownership (TCO) for on-premises and cloud-based software over a ten-year time.
What are the pros and cons of cloud ERPs?
Many people who might buy ERP are most worried about safety. It shouldn’t be a surprise, since an ERP system saves important information like client lists, employee information, trade secrets, financial data, and more.
The numbers above show that customers used to be worried about the security of cloud-based software, but now many of them are less worried.
Cloud businesses with a good reputation take data security very seriously. Prospective customers who are worried about a vendor’s security can ask a third party to check the vendor’s security. This can be very helpful when the seller isn’t as well-known.
Most cloud computing platforms offer simple mobile access and native mobile apps. This ease of access presents security problems, especially if employees use their own mobile devices to view company material.
Cloud ERPs limit customization, similar to how accessibility reduces customization. General consulting firms can use a cloud system’s built-in functionalities.
On-premise ERP pros and cons
On-premise ERP systems have similar features. Both deployment methods have some important differences.
On-premises systems change easier. Many organizations, especially those in specialized industries like manufacturers with unique processes, need to be able to meet their own needs.
On-premise ERPs give businesses better control over data security. Therefore, a corporation must protect its ERP’s most sensitive data, which fraudsters often target.
Mobile mobility can be hard to use for deployments that take place on-site. Even though it’s not an unsolvable problem, it may still be annoying.
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