Updated: Jan 4, 2020
Using an Enterprise Resource Planning (ERP) system is the easiest way of connecting all the nodes of an organization. It helps in improving operational efficiency, controlling costs and thereby increases profits.
The fundamental difference between on-premises and cloud-based ERP solutions lies in how software is deployed and accessed. On-premises ERP software is installed on computers and servers that are owned or leased. Cloud-based ERP is deployed via the cloud (servers owned or leased by the vendor) and accessed through a web browser. The SaaS (Software as a Service) model which allows companies to pay as they use is such an example.
What would be the key differences?
Cost and time:
On-premises ERP solutions typically demand greater financial outlay upfront to purchase and manage the necessary pieces of software. If your organization does not have an onsite IT team , you will have to hire the right people to manage affairs. Consequently the investment involved may be sufficiently significant to count towards capital expenditure. It should also be noted that setting up and implementing the necessary infrastructure for an on-premises ERP system is extremely time-consuming.
With Cloud-based ERP systems, the vendor would have already deployed the software on their servers and can grant you instant access. You would therefore just pay a subscription fee which includes both hardware and software costs. These costs are generally lower in the long run, not to mention the system itself also takes lesser time to deploy.
Data security and ownership:
An on-premise ERP system allows a business to maintain complete control over data and all associated security under the hood, however this may result in a greater likelihood of encountering malicious attacks .
In a cloud ERP system, data is hosted on the vendor’s cloud and accessed through a web browser. To safeguard the data companies will opt for encryption methods to enhance the security. The cloud service provider will update your system automatically to ensure that you are always working in a secured environment.
Integration and Scalability:
As a business grows progressively the need for integrating various entities might arise. A cloud-based ERP system will bring scalability to businesses by employing APIs to help ameliorate the integration process. Due to lack of accessibility, further integration and expansion of an existing on-premises ERP system will possibly run into strong headwinds .
Training and support:
An on-premises ERP system requires extensive training and technical support extended to employees for a prolonged period. As far as cloud-based ERP systems are concerned, the service provider can support the technical team in managing IT functions and troubleshooting various technical aspects with relative ease.
In recent times, cloud-enabled ERP systems have thus emerged as a prominent solution for organizations pursuing hassle-free operations.