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 |
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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.
This blog post was written by Monika Joshi.
She is a specialist at Blue Link Associates, provider of fully integrated ERP software, available both on-premises and hosted.
Monika,
There’s a lot of speculation around cloud ERP and its future. It’s obvious that there’s a strong tendency to cloud for midmarket ERP and that few or no innovation is happening in the on premise arena, but one thing is true: Cloud ERPs have a lot of improvement to be done regarding UI, they are still ugly, boring and unintuitive.
How long will it take, from your point of view, for cloud to conquer 50% of the ERP mid market?
Hi Marco,
Well first I do believe that some of the new cloud ERP’s have a very pleasing look and feel. MUCH better than the current on premise solutions.
Second… when will they have 50% of the market? Well… that is interesting… The question is what is “Market”. If we are talking ALL manufacturing and distribution ERP’s in the world, maybe never. The larger Oracle and SAP implementations at large companies (fortune 500’s), who have the most users, may never move to a cloud hosted by an ERP vendor. They will continue to host it themselves, or private host (technically their systems are already in the cloud). But, if we are looking at total users of ERP systems in the world, this may never happen (i.e., 50%).
However, if we look at the total number of companies, there are many more smaller companies. These are the early adopters of cloud. This is the same thing that happened when we ERP’s moved to either SQL or Oracle, and Client Server. This move to relational databases began in the mid 80’s, and it was not until the early 2000’s that we saw the mass exodus. Therefore, we expect something similar. That within 10 years. Most companies will be on the cloud. Maybe as much as 75%. And it will probably be between years 5 and 8 that we see the number reach 50% of all companies.
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