Enterprise resource planning (ERP) systems play a vital role in helping organizations automate, manage and optimize their core business processes.
When it comes to choosing an ERP system for your business, there are plenty of options on the market. One of the most important decisions you must make is whether to opt for an on-premise or cloud-based solution.
Cloud ERP systems are becoming an increasingly popular choice for companies, with 62.7% choosing them over on-premise, due to the flexibility they offer for modern, agile organizations.
The type of ERP deployment model you choose can significantly impact your business, so it’s important to weigh the pros and cons before making a decision.
The difference between on-premise and cloud-deployed ERP systems
The main difference between on-premise and cloud-based ERP systems is how they’re deployed.
An on-premise solution is installed locally on a business’s computers and servers, meaning that it’s tied to a physical location and managed by the company’s IT staff.
Instead, a cloud ERP system is hosted and managed by a vendor and accessed through a web browser.
Both solutions offer advantages and disadvantages that businesses must consider.
Cost of ownership
Implementing an on-premise ERP system typically requires larger upfront and ongoing investments than cloud-based solutions. Businesses will have to front the costs associated with purchasing hardware, software, servers and facilities required to house and run the system. Additionally, they must have IT personnel available to handle any maintenance issues that arise.
The initial costs involved in setting up a cloud ERP system are much lower. This is because all you need to do is install the software on the required devices and access it through the internet. As there’s no hardware involved, it can easily be rolled out across multiple regions and divisions without incurring additional overhead costs.
With everything taken care of, your IT teams can spend their time on tasks that’ll help to grow the business more effectively. Cloud ERP is generally offered on a pay-as-you-go monthly or annual subscription model, which is much more manageable for small and growing businesses.
Customizations and system upgrades
Customizations for on-premise ERP systems are linked with the current deployment of the software. This means it can be challenging for IT teams to re-implement the enhancements on future versions and is the reason why many companies choose to continue running outdated ERP software.
Upgrading an on-premise system will require the IT department to completely redeploy it across the company, which can be costly and result in downtime for your business.
Conversely, with a cloud ERP system, the vendor is responsible for pushing out upgrades as they occur and the platform automatically transfers any customizations and enhancements to the updated software without your IT team having to lift a finger. This means the system remains up and running and your data uncompromised.
Security concerns
ERP Security issues are a major concern for leaders in the market for a new cloud or on-premise solution. It’s no surprise considering the amount of valuable information they store, including company financials, employee details, customer data and more.
Security is a top priority for cloud-based ERP providers as they ensure the provision of robust security, disaster recovery and rigorous backup procedures to keep company information safe.
With an on-premise system, security is the user’s responsibility. Therefore, it’s important for a business to be able to safeguard its ERP’s sensitive data.
Mobility and flexibility
On-premise ERP systems can be accessed remotely, but this often requires mobile connectivity and third-party support to function. Accessing an ERP’s sensitive data on a mobile device can be a security concern, which is why it’s essential to implement stringent cybersecurity measures if you plan on allowing employees access to the system on their personal devices.
With a cloud-hosted ERP, employees can access the system from any internet-connected device. This facilitates a more flexible working environment and drives employee engagement as they can access business resources no matter where they are. However, this does raise security concerns as well - so it’s important to ensure appropriate measures are taken to safeguard company data.
For modern workforces that are embracing hybrid and remote working, cloud ERP delivers the mobility needed to succeed and maximize productivity. Moreover, these systems are much more scalable than on-premise ones and provide the flexibility to add users as your business grows.
Choose the best ERP system for your business
Every business has its own unique needs. It’s important to consider the pros and cons of different types of ERP systems before settling on the right one for your company.
Although on-premise ERP solutions may work for some, cloud ERP provides an affordable, customizable, secure and flexible solution for small and midsize businesses.
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