How Cloud ERP Compares to On-premise ERP

May 26, 2016 8:39:50 AM

NetSuite Cloud ERP

While considering a new ERP system to invest in for your business, one of the main decisions to take is whether to go for a cloud-based ERP system or an on-premises one.

As the name suggests, an on-premises ERP system is one that is installed locally on your servers and has to be managed by your internal IT staff. In contrast, cloud-based ERP (or Software-as-a-service, aka SaaS) is offered as a service by an external vendor. This software and its related data are managed by the vendor who provides this service and users access it via web-based browsers.The decision to choose an ERP system for your organization should be taken after considering the following factors because it could have a substantial effect on your business.

Cloud Based ERP

  1. System Upgrades: While on-premises ERP systems have the advantage of being customizable, these customizations will have to be reimplemented in case of any version changes of the software. This is so painstaking that most organizations prefer not to upgrade their ERP systems to newer versions and keep running on outdated technology.

    On the contrary, cloud-based ERP systems are automatically upgraded so that the latest technology is always available to you with practically no down time. Previously customized changes are carried forward, negating the need to re-implement the changes all over again.

  2. Total Cost of Ownership: It takes a large upfront investment to buy, implement and manage on-premises ERP systems (software, hardware, servers, etc.) and also to train IT personnel to use it optimally. On-premises systems need constant maintenance and care to ensure smooth operations, requiring additional IT staff and budgets. Subsequent upgrades require redeployment of the software and re-implementation of the customizations across different users’ computers, ultimately adding to the costs.

    Cloud-based ERP is usually less expensive initially as the provider hosts and runs the infrastructure as part of the ‘service’. The provider also ensures smooth running of the system, seamless upgrades and enhancements, and secure data at all times, leaving your IT team to focus on innovation and growing the business.

    Over time, all these add up to provide a considerable reduction in the Total Cost of Ownership on cloud-based ERP systems.

  3. Performance & Accessibility:Cloud-based ERP systems are designed to be flexible and adaptable to differing levels of usage. As the technology is built from the ground up, there is better availability than conventional ERP. Performance-wise also, cloud-based systems score higher than on-site ERP because they provide access to real-time data across devices, connected via the Internet.

    Other pluses of cloud-based ERP solutions are the assurance of security, compliance, disaster recovery, and so on.

  4. Speed: One of the biggest advantages of having cloud ERP is that you don’t have to waste time in buying and installing IT infrastructure; this automatically increases the speed of your ERP deployment across regions and divisions; cloud-based ERP systems have been deployed in weeks as compared to months for on-site ERP.

  5. Scalability:For a growing business, it is vital that its ERP keep up to speed with an expanding customer base and the related changes. Cloud-based systems have a huge advantage over traditional systems in this regards, as they’re flexible and scalable to accommodate additional users, without any extra hardware, as would be needed for an on-premises ERP.

Considering all the above factors, it is clear that cloud-based systems, especially ERP for businesses, are here to stay, owing to its value, flexibility, security and scalability.

Topics: ERP Cloud ERP

Steven Cariglia

Written by Steven Cariglia

Steve leads Sixred's customer success team, and has a successful career providing technology solutions to Fortune 1000 and technology sectors. Our primary goal at Sixred is to drive customer success as that is the foundation of any effective business.