Cloud ERP and On-Premise ERP system

Published By
Categorized as ERP

Difference between Cloud ERP and On-Premise ERP system

Increasing competition in the market causes organizations to reach for help in overcoming management complexity. An ERP system proves beneficial in this situation.
In the selection process of the new ERP system, one of the most important decisions is whether to opt for a Cloud ERP system or On-Premise ERP system.

Let’s explore both the types of ERP systems.

What is Cloud based ERP and On-Premise ERP system?

The major difference between the cloud based ERP and On-Premise ERP is the way that it is implemented.
As the name suggests, you must have assumed that the access to software in Cloud based ERP is through the internet that means it doesn’t require any external resources for it.
Cloud ERP is further divided into two sections : Private cloud and Public cloud.

Private Cloud

Opting for private cloud makes the company responsible for maintenance, management and updating of data host centers. This is due to the presence of data on the company’s intranet.
Also over a period of time, the servers are in need of an upgrade or replacement and the process of doing so, can be quite expensive.
The private cloud provides high security as the data is accessed only via company’s secure and private network links.

Public cloud

The prime benefit of the public cloud is the freedom from tasks such as maintaining, managing and updating the data host centers. The provider is accountable for this process.
The time invested for testing is much reduced in this cloud environment. The provider will be responsible for the data security, data back-up and also recovery of data from any disaster saving you from the hassle.
On the other hand, On-Premises ERP software are installed on the customer’s side and requires external resources like computers and servers.

What will be more beneficial for your organization?

By learning more of both the types you will get a clear view of the system, that will help you in making the right choice.
Let’s take a look at the benefits of both the types of ERP system.

Benefits of Cloud ERP system

    • No need to worry about the maintenance of computing infrastructures like hardwares and data servers.
    • Less time to implement.
    • Dynamic cloud ERP application as it doesn’t require the installation part of softwares on computers and servers.
    • Complete security with the option for data back-up along with disaster recovery plan.
    • Access to data from anywhere and anytime on multiple platforms.
    • Real-time data updates.

Cloud ERP makes its reach possible even in remote areas, with no requirement for hardware and software implementations.
This makes the cloud ERP system cost effective and more stable as the vendor provides continuous updates for the system. We will discuss further on why Cloud ERP is cost effective.
Let’s put some light on the benefits of On-Premise ERP system.

Benefits associated to On-Premise ERP system

    • On-going costs can be limited.
    • Dependency on vendors is reduced as the system is operated from your space.
    • This serves as a base for future cloud expansion.
    • Complete data control.
  • Customisations options are vast.

There are also drawbacks associated with the On-Premise ERP system.

Drawbacks of On-Premise ERP system

    • Updating software goes through much complexity. It is a vital part for the business or organization to get all the important updates to stay free from any risk of security.Also it will cost you additional for the updates if the system is On-Premise.
    • On-Premise ERP lacks flexibility in its process. The feature to access the data on the go is not present with the On-Premise ERP thereby lacking opportunities to complete the work.
    • Implementing an On-Premise ERP takes longer than the Cloud ERP ones. This causes delay in the further processes affecting the organization’s goals.
  • Data backup is a major concern with the On-Premise system incase of any disaster.

There are various expenses that arise in the process of both Cloud as well as On-Premise ERP and you should be aware of the facts before arriving on any decision.

Expenses in “Cloud ERP”

    • Fees for subscription by the provider.
    • Training for the team members.
    • Configuration expenses.
    • Cost for system administration.

Expenses in “On-Premise ERP”

    • Implying upgrade patches.
    • Performance modification.
    • Modifications in integration.
    • Service customization.
    • Hardware.
    • Maintenance and enhancement of the network.
    • Maintenance and enhancement of the security.
  • Maintenance and enhancement of database.

As seen from the above listed expenses, On-Premise ERP clearly has some major costs that will be arriving promptly in the process.
These costs are definitely not feasible for SMEs and investing much time and money in this process will make the system less productive and unparallel to the set goals.
Though large enterprises can choose On-Premise ERP systems as they have the resources and a dedicated team capable of covering all the requirements internally.
The selection of the system totally depends on the type of industry and its structure.
Before taking the final decision of selecting the ERP, it’s necessary to do a thorough research of your company and create a detailed report on it.
This will help you in taking the right call for your organization and serve you well in the long run.