Enterprise Resource Planning (ERP) Systems have changed greatly 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. There is one clear difference between these two options, and it is that a cloud-based software is provided as a service and maintained by the vendor, while the on-premise solution has a local installation and managed by the company’s IT staff.
One of the most critical factors in the decision of implementing on-premise ERP vs. cloud ERP, but the best place to start is by analysing the business requirements specific to an organisation. In this article, we look at some considerations that business owners, CEOs, CFOs and CTOs should take into consideration.
Cost and Implementation
The difference between on-premise and cloud ERP solutions is how they are implemented. This variance will impact greatly the cost of the solution.
Cloud-based systems are also better 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 a capital expenditure 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 systems companies are the owner of the data 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 and if they are not properly equipped or have the right data security and recovery protocols in place, this can result in your data being at risk; and 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 in for an on-premise ERP, although you can better customise your solution, you will be tighten to your current implementation. This will mean that by any product enhancement or upgrade that the vendor does to the solution (which is natural and will happen over time), your customisations will be erased, and your IT department will need to look into recreating them. The risk of not updating them, will mean that you will run your business with an obsolete software.
Cloud ERP systems are less customizable than on-premise ones, but are much convenient and less time-consuming. They live on the upgrade trajectory and vendors will 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 that the company might need. Nevertheless, this could also be done with an on-site implementation, but this will incur in additional costs link to hardware deployment.
Advantages and disadvantages for 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 ERP are best suited for bigger enterprises that have higher budget and are looking at customisations of the systems operations. 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 to be an issue as usually they will 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 top of concern for ERP buyers. We now live in a very advance technology world and the concerns about the security of cloud-based software are no longer in place. Reputable cloud vendor have strict standards in place to keep data safe.
As we have seen, there is not a one-size-fits all ERP option. If you are looking at investing in an ERP Solution, whether is on-premise, hybrid or cloud, you can contact our expert team now that will help you choose the best option for your organisation.