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Key differences between Cloud and On-premise ERP

Key differences between Cloud and On-premise ERP

Which one to choose - Cloud or on premise

Choosing between on-premise and cloud ERP offerings can be daunting for most businesses. Because an ERP is an enterprise-wide application, deciding the hosting method is one of the first steps you’ll need to make. We’ve put together a list of things you need to consider before making this essential decision.

Availability

ERPs are designed and built to handle several business functions using a single application. Such applications would need to be highly-available and fault-tolerant. You can probably imagine how downtime of just an hour could result in your business operations coming to a complete standstill. Even worse is the fact that you have no means of supporting your customers or answering their queries without having access to the ERP.

Cloud

Cloud ERP solutions typically use high-availability infrastructures such as Google Cloud or Amazon AWS. The absence of a single point of failure is what makes Cloud ERP solutions highly available.

On-premise

While you can achieve high-availability with on-premise ERP, the costs involved in implementing and running such a complex IT infrastructure makes it unaffordable for most SMEs.

Infrastructure costs

There is a reason why more and more SMEs are embracing the cloud. It allows them to reduce their IT infrastructure budget without compromising on performance or security. Most SMEs do not have an in-house IT department. Moreover, finding resources who have expertise in managing the specific ERP solution you are going to implement is going to be difficult, if not impossible.

Cloud

Cloud ERP will help you lower your IT infrastructure costs by eliminating the need for purchasing, maintaining and upgrading servers and network equipments.

On-premise

The cost of maintaining and upgrading servers and network equipment can be quite expensive for SMEs.

Software updates

It is vital to keep your ERP software updated with the latest version. In addition to potentially unlocking new features, updating to the latest version will ensure that all necessary security patches and bug fixes are in place.

Cloud

Cloud ERP providers typically perform regular updates to their application in the background with little or no downtime. Such continuous upgrades to the application also have an advantage of introducing new features or UX changes to users gradually.

On-premise

Applying updates to an on-premise ERP installation is usually left to the discretion of the business. The business can decide whether to update their application based on how vital a new feature or bug fix is for its operation.

Security

Businesses considering a cloud ERP are often concerned about the security of their data, understandably. An ERP software holds extremely sensitive data of a business and therefore must be secured against unauthorized access and usage.

Cloud

The majority of Cloud ERP providers have teams that specialize in application security. These teams regularly test the application against potential vulnerabilities and continuously monitoring the application and infrastructure.

On-premise

It is tempting to believe that on-premise ERP is more secure than its cloud counterpart. However, this could not be farther from the truth. Most businesses do not have the technical expertise or budget required to monitor and manage IT security.

Customization

Businesses often have requirements that are quite specific to their industry. Some ERP software offer configuration options to handle these unique business process and reporting needs. The ones that don’t will need to be customized by the vendor and usually involves steep costs. As far as specific business needs are concerned, the best course of action is to choose an ERP solution that is specific to your industry or at least a one that is highly configurable.

Cloud

A cloud ERP would only make sense to your business if you are confident that the software can handle all of your business needs using configuration. With the exception of a few solutions, most SaaS companies provide a very low degree of customization to their standard offering.

On-premise

The costs involved in customizing an ERP solution is often the deterring factor SMEs. However. If your budget allows you to invest in customizing the ERP solution, then an on-premise or self-hosted ERP is the right choice. Make sure that you also need to consider how these customizations will impact future upgrades to the software.

Accessibility

Businesses are always looking for innovative ways to serve their customers. In today’s competitive marketplace, innovation has almost become a mandate for brands looking to establish their identity. Enterprise mobility has gained a lot of attention in recent times. The ability to serve customers anywhere, anytime is a success factor for most businesses. Being able to access and record information and perform transactions on the move is an excellent way for companies to serve customers better.

Cloud

Accessibility is one of the significant advantages of using a cloud ERP. Your teams will benefit from the ability to access information on the move. They would also be able to provide services to your customers from virtually anywhere. Furthermore, it could result in your business saving tons of time in manual paperwork or data re-entry.

On-premise

Unless you can beef-up your IT and network infrastructure, an on-premise ERP cannot compete with the accessibility that a cloud ERP can offer. In the absence of high-availability performant networks and servers, you would most likely encounter connectivity or performance issues.

Scalability

Ideally, an ERP software must be able to scale with your business. It should also be able to support branches or locations that your business might possibly open in the future. This fundamental objective is often overlooked by most companies when it comes to choosing business management software, resulting in yet another painful ERP implementation. 

Cloud

A good Cloud ERP software should have no problem scaling with your growing business. It can also support users from multiple locations without the need for any additional investment in IT infrastructure.

On-premise

The ability of on-premise solutions to scale primarily depends on the underlying infrastructure. A significant amount of time and money needs to be invested in capacity planning and upgrading the server as and when required.

Support

Given the complexity of most ERP software, responsive technical and functional support is critical to the success of implementation and adoption. Quick support and issue resolution results in satisfied users and reinforces confidence in the solution they are using.

Cloud

A good Cloud ERP software should have no problem scaling with your growing business. It can also support users from multiple locations without the need for any additional investment in IT infrastructure.

On-premise

The ability of on-premise solutions to scale primarily depends on the underlying infrastructure. A significant amount of time and money needs to be invested in capacity planning and upgrading the server as and when required.

Cost of ownership

The biggest obstacle for SMEs in implementing ERP software is the costs involved. There are significant risks involved in investing upfront on software. Free trials and demo sessions with software vendors go a long way in choosing the right fit for your business. 

Cloud

Most SaaS-based ERP providers offer free trials for businesses to evaluate the solution. Moreover, they reduce the risks through monthly and annual subscriptions with little or no upfront investment. This is what makes SaaS a excellent value proposition for SMEs.

On-premise

On-premise ERP often requires a considerable upfront investment for licensing and implementation. Therefore, the risk is much higher than a cloud implementation.

Conclusion

Each business is unique and therefore have requirements that are specific to their business process or industry. It is almost impossible to generalize whether companies should go for cloud or on-premise. However, a cloud ERP offers significant advantages over on-premise. The demand for cloud ERP is growing steadily as more and more businesses are realizing the unique benefits it offers.

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