Cloud ERP vs On-Premise ERP – Which Is Better?

ERP BUYING GUIDE SERIES (Article 5 OF 10)

Scroll to the bottom to see additional articles in this series. This interrelated series of blogs will focus on the important essentials to help you streamline the process of evaluating and procuring a new ERP system.

Cloud ERP vs On-Premise ERP – Which Is Better?

SAAS? Cloud? Hosted? On-Premise? Etc. It’s a bit confusing what they are not to mention which one(s) are right for you. Read Article 10, What Is A SAAS ERP Solution (Click Here), for a refresher of the definitions.

Here’s how the (Cloud vs On-Premise Options) are structured:

Cloud or On-Premise?

  1. With Cloud then there’s either SAAS or Hosted.

      a. SAAS (Software-As-A-Service) is a “Lease it” option.

      b. Hosted (Your ERP system is hosted in a hosting center) – You can “Lease It” or “Buy It”.

          i. Buy It – buy the hardware and/or the software. And pay monthly recurring services for it to be hosted and pay monthly recurring services for the IT services to maintain it.

          ii. Lease It – pay monthly recurring (per user) charges for hardware, software, IT services.

  2. The On-Premise option is pretty much a “Buy It” selection.

      a. Buy It – buy software, hardware and IT services (if needed).

      b. Lease It – Not really available for an On-Premise solution. However, getting a loan for the project would offer cash flow that would be similar to that of the SAAS/Hosted options.

To be honest there’s no “magic answer” regarding which solution(s) is best for your needs. Feel free to contact Calsoft to discuss your specific needs so that we can recommend the best solution(s) for you as well as point out the pros and cons of each solution for your situation.

General observations about Cloud ERP vs On-Premise ERP

Cloud ERP – – Things That Come To Mind About This Kind of Solution

  1. Lower upfront cost compared to On-Premise. Consistent monthly payments.
  2. A turn-key solution. Quicker to implement. Quicker to start using.
  3. Hardware is taken care of for you. No need for internal IT resources to manage it.
  4. System is accessed through the web.
  5. Flexibility to add/remove users as needed (only pay for what you want/need).
  6. More bundled service provided by the cloud provider.

On-Premise ERP – – Things That Come To Mind About This Kind of Solution

  1. Higher upfront cost. You buy and own both hardware and software.
  2. Control and flexibility. It’s yours and in your building = more control/flexibility.
  3. Lower long term cost. Flexibility to use hardware until you want to change it out.
  4. More flexibility. Flexibility to upgrade the business application when you want to.
  5. (Potentially) Lower IT costs than with Cloud. Only pay for what you want/need.

Situations Whereby Cloud Is Commonly Considered:

  1. Your company has 1-30 employees and you don’t have an internal IT team.
  2. Your business needs are standard, so you can use cloud ERP without customizations.
  3. You’re happy with the standard reports out of the cloud ERP system, so no customizations.
  4. You typically replace your hardware (i.e. servers) every 3 years.
  5. You upgrade your business applications regularly (i.e. every 2 years).

Situations Whereby On-Premise Is Commonly Considered:

  1. Your company has 50+ employees.
  2. Your company has an internal IT team taking care of systems already.
  3. You want more control and flexibility for accessing the application databases (i.e. to create custom reports or to leverage business intelligence and analysis).
  4. You want more control of if/when you upgrade to new versions of the ERP (i.e. so that you can upgrade during the “slower season” for your company)

If you found this article valuable then I encourage you to read some of the other articles in this series:

And of course Calsoft is available to assist. Call 1-888-838-8422 or Send us an email.

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