Cloud vs On Premise ERP: Which One Should I Choose?

With the rise of cloud-based software, companies shopping for ERP are now faced with an additional consideration – deployment method. Choosing between installing cloud vs. on premise ERP can be a difficult decision for companies, and there are advantages and disadvantages to each option. Here’s a brief comparison of cloud vs on premise ERP deployment, including the difference between each, pros and cons, as well as some indicators as to which option is better for your company.

The Basic Differences Between Cloud vs On Premise ERP

A more traditional, on-premises ERP system is one where the software is installed on a server owned by the client, not the vendor. The client deals with installing the hardware, running the system, and most IT issues. On the flip side, a cloud-based ERP solution means that the system is located off-premises, and is accessed using the Internet. The software vendor is therefore responsible for maintaining the hardware and dealing with IT issues. This deployment method is an example of Software as a Service (SaaS) where the client pays the vendor annual or monthly fees to access the software.

Pros and Cons

There are advantages and disadvantages to both cloud vs on premise ERP methods, and there is no right answer when choosing which advantages are more important than others.

On-Premises		SaaS
Pros	Cons	Pros	Cons
Data is stored in the organization No monthly subscription fees Hardware can be shared with other internal systems	Hardware upgrades and maintenance required Less secure than most data centres	Reduced upfront investment Reduced need for hardware – vendor provides servers Fewer IT staff needed	Reduced control of systems Internet connection required You will lease, not own, the software

One piece of advice: consider looking at a provider who offers both implementation types, so your company has more flexibility to make a decision, receives unbiased recommendations, and has the option of moving from one to the other should the business change.

Some Criteria When Considering Cloud vs On Premise ERP

For those heading into an ERP comparison, here is a general guideline for choosing between cloud and on-premises ERP deployment. Make sure you consider the factors listed!

	SaaS	On-Premises
Company Size	Small-medium	Medium-large (international)
IT Skills	Basic or none	Advanced
IT Infrastructure	Basic of none	Well-established
IT Expenditure	Predictable monthly cash flow	Up-front long-term investment
Control	Less hardware control	Direct hardware control

Although cloud vs on premise ERP deployment is great for smaller companies that are looking to outsource IT, it doesn’t mean that they can’t benefit from an on-premises solution either. Both options have advantages, so be sure to analyze which would be the best fit for your business processes and company infrastructure. Put aside any preconceived opinions and biases you may have, and take the time to learn about the differences between both.