On-premise VS Cloud ERP: what is the best fit for your business?
Enterprise Resource Planning (ERP) Systems have changed dramatically over the past years, becoming more versatile and multi-faceted. All-size organisations use these systems to run their companies, giving them a competitive edge for businesses.
Yet, when choosing to deploy an ERP solution, many companies struggle to decide whether to go for cloud or on-premise. One clear difference between these two options is that cloud-based software is provided as a service and maintained by the vendor. At the same time, the on-premise solution has a local installation and is managed by the company’s IT staff.
One of the most critical factors in the decision to implement on-premise ERP vs cloud ERP, but the best place to start is by analysing the business requirements specific to an organisation. This article looks at some considerations that business owners, CEOs, CFOs and CTOs should consider.
Cost and Implementation
The difference between on-premise and cloud ERP solutions is how they are implemented. This variance will significantly impact the cost of the solution.
Cloud-based systems are known as Software as a Service (SaaS). They are usually hosted on the vendor’s or an implementation partner’s server and accessible via a web browser. Usually, they are priced on a monthly or yearly subscription and can have additional costs for support, training or updates. They are considered an operating expenditure for the buyer.
With on-premise software, there is usually an upfront fee, followed by ongoing investments based on upgrades. They can have additional costs for support and training too. They are considered capital expenditures for the buyer.
Security of data
Security is a big concern for businesses when choosing what solution to use.
The difference between both options is clear; on an on-premise system, companies are the data owner, while on cloud systems, the data is in the hands of the vendor. But which one is safer?
When choosing an on-premise option, data security relies on your IT team. If they are not adequately equipped or have the correct data security and recovery protocols in place, this can result in your data being at risk; even if you have the tools, they might not be as sturdy as you need them to be. Cloud ERP vendors are more likely to have multiple data disaster and recovery protocols for better security. This will make them more secure in the long run as they can help minimise security breaches by hosting data across different locations.
Systems upgrades and customisation
If you opt for an on-premise ERP, you will be tightened to your current implementation, although you can better customise your solution. This will mean that your customisations will be erased by any product enhancement or upgrade that the vendor does to the solution (which is natural and will happen over time). Your IT department will need to look into recreating them. The risk of not updating them will mean you will run your business with obsolete software.
Cloud ERP systems are less customizable than on-premise ones but are much more convenient and less time-consuming. They live on the upgrade trajectory, and vendors constantly push newer features to the current software.
Scalability and Integration
When we discuss scalability, we refer to the system’s flexibility to accommodate the increased volume of data when your business grows.
The best fit for scalability will be a cloud ERP Solution. Cloud systems give the flexibility needed to scale the business and integrate it with other solutions or software the company might need. Nevertheless, this could also be done with an on-site implementation, which will incur additional costs linked to hardware deployment
Advantages and disadvantages of Cloud ERP and On-premise ERP
Cloud systems are usually much cheaper to deploy, are more collaborative, secure upgrades and system maintenance and allow for more accessibility and usually offer native mobile apps. They are less easy to customise. Cloud ERP solutions are best suited for companies seeking lower upfront costs and ease of access.
On-site ERPs are best suited for larger enterprises with a higher budget and considering system operations’ customisations. In general, on-premise systems are easier to modify, giving a company a better chance to customise the solution to their needs. They also offer more control and security of the data. Mobile accessibility is considered an issue as they will usually require a third-party client to communicate between a mobile device and an on-premise system.
Something to consider, apart from the advantages and disadvantages of both systems, is that security is a top concern for ERP buyers. We now live in a very advanced technology world, and the concerns about the security of cloud-based software are no longer in place. Reputable cloud vendors have strict standards in place to keep data safe.
As we have seen, there is no one-size-fits-all ERP option. If you are investing in an ERP Solution, whether on-premise, hybrid or cloud, you can contact our expert team now, which will help you choose the best option for your organisation.