One of the most critical considerations to make when selecting a new enterprise resource planning (ERP) system for your organization is whether to go with an on-premises ERP system or a cloud-based ERP solution.
Cloud ERP is growing more popular than ever before. Almost every ERP provider now has a cloud deployment option, and some have completely abandoned on-premise ERP services. “Hybrid Cloud Market Worth USD 173.33 Billion by 2025 and Growing at a 22.5 percent CAGR,” according to research published by Global Newswire in 2021
However, there are reasons why a small or mid-level organization prefers a classic on-premise ERP system over the cloud, which was standard practice in the ERP sector until recently.
In this blog, let us consider all such aspects to help you to decide which type of ERP solution would be best for your company.
Differentiating Factors for Cloud-based ERP and On-Premise Solutions
On-Premise ERP is a solution in which the company hosts their own private data on their hardware and servers, on their own facilities. In which they need to pay software licenses based on the number of users who will use the system, and the program is installed on the servers of your firm. Software licenses are typically purchased once and for all, but if you require extra modules, you may face further charges.
But for the Cloud-based ERP, you don’t need any setup areas or hardware. It is more of a subscription service for your ERP needs. In which businesses pay monthly subscriptions to make use of the vendor’s platform to store their confidential data. Data is saved in the cloud and stored on the servers of a third party, not your company’s servers.
Accessibility and Mobility
Mobility and flexibility are two of the most appealing aspects of cloud-based ERP software. Data stored in these systems can be accessed at any time and from any location using any device with an internet connection. This gives the company more visibility and control over its operations.
This flexibility is lacking in an on-premise ERP system. These systems offer limited remote access, and you are frequently unable to oversee business operations when you are not in your office.
Total Cost of Ownership and Deployment
Every ERP deployment
, regardless of the type, takes time and careful planning. Although, depending on your choice, the cost and time involved may differ.
When it comes to on-premise software, there is normally a large initial charge followed by recurring expenses as you continue to improve your software. In terms of product expertise, you’ll either require employees who are familiar with the product or you’ll need to obtain training, whether through your in-house team or an outside trainer. Consider the expense of managing the server room and even the hardware.
When compared to cloud solutions, your company will pay a lower upfront fee but will incur continuing costs. According to an Oracle analysis
, cloud applications consume 91 percent less energy than their on-premise counterparts, which is good news for those concerned about their carbon footprint.
The high cost of on-premise ERP tends to inhibit small and medium-sized firms; historically, SMBs prefer cloud-based ERP so that the cost is more uniformly distributed across the product’s lifecycle. The cheap entry cost necessary to implement a cloud-based ERP software is one of the reasons why 93 percent of businesses have made this choice.
However, the system costs tend to converge over time.
Security of Data
Data security is undoubtedly a major concern for businesses, it can play an important part in choosing which software to implement in your company.
In cloud ERP solutions, your business data is in the hands of the professional service provider. Despite the fact that they provide stringent security procedures, this can present problems for some firms because they never have a perfect piece of mind. According to a BT survey, 49 percent of IT decision-makers are ‘very or extremely concerned about the security of cloud services.
On-premise ERP, on the other hand, puts your data security in your in-house IT team, which can oftentimes be counterproductive. Your security measures may not be as strong as you desire, making you more susceptible if you go alone rather than using a well-known service.
This is because, although an on-premise ERP solution consolidates your information into a centralized and secured server network, picking a professional partner who employs a cloud-based system ensures their security is adequate to the duty of securing your sensitive data.
To prevent security breaches to their minimum, cloud ERP systems hosted their client’s data in many different locations on the web.
Integration and Scalability
The scalability matter is somehow related to the ability of an ERP system to accept an increased volume of data and the number of users as your company grows.
A cloud ERP system gives this flexibility and enables significant integration, allowing it to operate well even as workload increases. Maybe an on-site ERP solution can help your firm grow, but you will have to pay for additional hardware deployment costs to achieve that growth.
Customization and Upgrades
On-premise ERP software allows users to customize your software, but these modifications are embedded into your present program, which means that if your provider releases an upgrade, you’ll have to re-implement those changes, which may be challenging.
When you choose an on-premise ERP solution, your IT personnel will be expected to administer and maintain your software on a continual basis, as well as have a solid plan in place to modify your data-related hardware, contracts, and licensing.
Cloud-based ERP may assist your company to avoid all of these inconvenient, stressful, and time-consuming procedures.
Choosing the correct ERP system for your company may be difficult since there is no one-size-fits-all ERP solution. Both on-premises and cloud ERP software have their own advantages and disadvantages. Rather than forcing contemporary technology, the decision to choose the best ERP software for your company should be based on what helps the business the most.