While selecting new ERP software hosting the ERP on premise vs. ERP on cloud is a critical decision. While considering an ERP for small business, the buyers are bombarded with a plethora of choice. Among these are the considerations of hosting it on premise or cloud. The primary difference is where the on premise ERP systems are installed locally on company’s hardware and servers which are further managed by the in-house IT team. Whereas a cloud based ERP system, also called as SaaS, is provided as a service where the associated data is managed centrally by the vendor and is accessible by the customer using a web browser.
As per 2016 report on ERP systems by Panorama Consulting Solutions,
56% companies make a saving of at least 20% when deploying cloud based ERP system
Cloud based Erp Services have been popular in recent years especially among small and medium enterprises. However, there are many reasons why an organization may choose a conventional system to host the same on premise. The ERP model deployment that a small business selects has a tremendous impact on the operations of the firm and thus following key factors must be considered before selecting ERP on premise vs. ERP on cloud.
1. Ownership Cost of ERP on Premise Vs ERP on Cloud
On-premise ERP systems usually require a large upfront cost which includes purchasing and managing the software, related hardware, servers, people to maintain the same and other facilities which are necessary to operate the same.
Moreover, the existing IT team of a company is required to invest a significant amount of time to launch and run the system within the organization. Whereas for cloud based ERP services, such costs are meager comparatively.
It is the ERP provider who has to ensure maintaining the system, keeping the data secured and rolling-out the product enhancements. This allows the company to focus their time more effectively on their core business area.
2. Deployment Cost
There is a huge difference between implementation cost for ERP on premise vs. ERP on cloud. The cloud based ERP services are hosted on vendor’s servers while the on-premise software is installed on company’s server locally.
More than the hardware cost of deployment in the on-premise system, the investment of training the IT team and addressing maintenance issues become a huge investment for a small business. This distracts the IT resources within an organization that spends excessive time on maintaining and managing the on-premise system. Whereas cloud based ERP services are predictable based on pay-as-you-use subscription model that make cash flow management and planning simpler.
3. System Upgrades And Enhancements
The on-premise ERP software can be customized as per organizations requirements; however, they are not easy to reimplement in the future versions. The new releases of updates and enhancements can potentially wipe out the previous customizations which the IT team will have to start building from scratch again. This is one of the primary reasons why organizations don’t prefer on-premise based ERP systems. On the contrary, cloud based ERP services are upgraded by the provider automatically resulting the business using the latest versions of the ERP software.
4. Control Over The Data
One of the biggest advantages of deploying ERP on premise vs. ERP on cloud is the security of the data. The data is most secured when the software is deployed on-premise. However, some small businesses may not be as adept at practicing proper data security protocols. Protecting critical data like financial statements, employee information, and customer account information etc. is an essential requirement while considering an ERP system. Though it is a widely believed myth that cloud based ERP services are susceptible to breaches and hacks however with new services there are enhanced security protocols.
6.5% of annual revenue is spent on ERP project deployment
5. Deployment Speed
ERP software usually takes time for implementation which requires careful planning. Cloud based ERP services provide clear benefit since they don’t need any additional hardware or infrastructure. Such software can be easily rolled-out across multiple locations and avoid cost related to deployment. As the business grows, the cloud based system is flexible and easier to scale. At the same time, cloud based ERP software doesn’t offer same freedom. Business needs to invest in additional hardware to give more employee access to an on-site system.
6. Improved System Access And Performance
On-site based ERP systems are not accessible everywhere unless mobile based application versions are opted by the businesses. Whereas cloud based ERP services provide real time information that can be accessed anytime and anywhere via the internet. Since cloud based ERP software are also built ground up, they also offer optimized performance that can adapt to the client’s requirements quickly. Such systems automatically adjust and dynamically provide for additional resources to handle surge in the system if any. Such software is also coupled with rigorous security, disaster recovery and backup procedures that are cost effective.
7. Mobile Access For Real Time Information
With the surge in usage of smart phones, small businesses and their representatives can easily access the company data real time. However, if the software deployed is on-premise then it requires additional cost and effort to access the data. With cloud based ERP services, businesses are assisted with remote approvals, notifications, and operational visibility. Due to their web-based nature, most of the cloud based software is natively mobile and come along with standard mobile applications.
There are various options while selecting ERP software for businesses of all sizes. While ERP on cloud vs. ERP on-premise may both offer their advantages, there truly is no one size fits all solution. Small businesses must consider looking for the resources and insights that can help them to make an optimal selection while investing in an ERP system. There are few vendors who also supply a hybrid based model in which cloud solution is hosted on an organization’s private server.
44% businesses choose cloud or SaaS hosted ERP software as compared to on-premise software
All such solutions have made it easier for business to access information on the go and make faster, sustainable and profitable business decisions. Performance of any of these systems is of essence. Usually, cloud based ERP software, dynamically and quickly adjust to an industry’s requirements which aren’t true for an on-premise system.
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