Cloud-based ERP systems are more common than ever before. As of 2021, almost all major ERP vendors in the world have switched from on-premise to cloud ERP due to the evolution of technology and influence of business needs and environment in the last few years. With shift to telecommuting due to the influence of the new world under the pandemic, it is expected that this flow of cloud ERP conversion will accelerate even further in the future.
In this article, we will explore what cloud ERP is, and what the difference is from on-premise ERPs. We hope this article will help you understand the differences, the benefits of each, and be a reference for selecting the most suitable ERP for your company.
For a detailed explanation of cloud ERP, please refer to the ERP implementation guide “What is cloud ERP?”.
The difference between cloud ERP vs. on-premise ERP
The biggest difference between these two systems is how they are deployed.
- Cloud based ERP software, also called SaaS, or Software-as-a-Service, is hosted on the vendor’s servers and accessed through a web browser.
- On-premise software is installed locally, on a company’s own computers and servers and managed by the IT staff.
Some vendors also offer “hybrid” deployments, in which cloud software is hosted on an organization’s private servers.
Cloud ERP is, in a nutshell, an ERP that can be used in a cloud environment. In the past, ERP software was purchased from a vendor, implemented to a server built within your company, then used. However, cloud ERP uses cloud services provided by ERP vendors instead of managing the server in-house. Users can now use the software from anywhere at any time as long as they have access to the internet.
Characteristics of cloud and on-premise ERP
On-premises ERP requires a software to be purchased and used on your own server. While the system can be customized flexibly since it is built and operated in-house, there is an initial cost and time required for building the server. When problems like network failure occurs, you need to deal with the trouble yourself.
The main reason a company would choose on-premise over cloud ERP would be if they have a desire to customize system operations and the existing infrastructure as well as host, maintain and protect ERP data. On-premise ERPs are therefore best suited for larger enterprises with higher budgets.
So, which is better, cloud ERP or on-premise ERP?
When deciding whether to choose a cloud or on-premise ERP solution, you need to make a selection that meets your budget and business requirements. We will explore the characteristics and benefits of cloud and on-premise ERP here.
Examples of major cloud and on-premise ERPs
Here is a list of top ERP software for both cloud and on-premise solutions. These companies were chosen due to their market presence, the number of available solutions they have, and their appeal to a multitude of users and industries.
- Dynamics 365
- SAP S4 Hana & ByDesign
- Oracle Netsuite
- Dynamics GP
- SAP Business One
- Oracle E-Business Suite (EBS)
Breakdown of Cloud ERP vs. On-premise
|Cost||・Since there is no need to build an environment to operate the system, there are no operational management costs for assets or equipment.|
・Since no hardware such as server is required, the initial cost can be reduced.
・The number of users and capacity can flexibly be increased or decreased based on the needs at the time. (normal expense treatment)
|Implementation Speed||Since there is no need to build an environment, the ERP can be implemented in a short time.|
|Security||Data centers from major vendors have more security than what can be guaranteed by an average company.|
|Version Updates||Useful new features to the ERP will be available by regular automatic updates.|
|Cost||・Initial cost is required to purchase both the server and ERP software / license.|
・Since most of the cost is one-time fee used at the time of building the server, the total running cost may be lower over a long period of time.
・After the purchase, software and hardware cannot be reduced or significantly changed. (It is invested asset.)
|Strength of On-Premise||Since software and servers are managed in-house, they can be used with a higher degree of freedom, such as customization and system upgrades by demand.|
|Security||Security and safety depend heavily on the operation and maintenance of the company’s environment.|
The question of which ERP environment is better for you depends on the purpose and goal of the system implementation, but considering that the conversion from on-premise to cloud ERP is accelerating as we speak, it may be better to consider cloud ERP first.
Still not sure what solution to use for your organization? Connect with one of our ERP consultants to help you find the right ERP system for your needs and industry.
For over 20 years, Calsoft has dedicated its business to answering customer needs through world-class services in solution implementation and development. As a certified Gold Partner of Microsoft, we have completed numerous Microsoft Dynamics projects. Our goal is to help you maximize business results by improving the efficiency of your company’s operation.
- How to Select an ERP
- How Much Does An ERP System Cost?
- How Long Will An ERP Project Take To Implement?
- Cloud ERP vs On-Premise ERP – Which Is Better?
- How to Select an ERP Vendor
- How To Get The Best Price On An ERP System
- ERP Project – Fixed Bid or Time and Materials?
- ERP Comparison: Dynamics 365 Finance and Operation, Dynamics 365 BC, Dynamics GP
- What is a Cloud ERP Solution?