Cloud ERP vs. On-Premise ERP
Many manufacturing companies can benefit from an enterprise resource planning (ERP) system, which can either be hosted in the cloud or on-premise. Cloud systems have grown in popularity in recent years with most vendors offering some kind of cloud deployment variation. An on-premise ERP isn’t as common as the cloud-hosted version, but there are still instances where they can be beneficial.
More–> What is an ERP System?
The Difference Between Cloud and On-Premise ERP
The primary difference between the two systems is how they are deployed. A cloud system is hosted on the vendor’s servers and then the company can access it through the browser. When the system is on-premise, the system is physically hosted on the company’s servers and computers. It is also possible to receive a hybrid deployment, which is where cloud software is hosted on the company’s private servers.
Pricing Models for On-Premise and Cloud ERP Systems
The cost of each system will vary substantially from one company to the next. The primary difference in cost is determined by how each ERP system is billed to the client. Companies pay a monthly or yearly subscription to host cloud software, and there may be additional costs for training, support, and updates. For on-premise software, companies have to pay a one-time perpetual licensing fee. There may be extra costs for training, support, and updates.
Cloud systems are generally classified as an operating expenditure, which means it is a regular cost the company will need to pay over time. On-premise systems go under the capital expenditure category, meaning it is a single large investment the company pays for upfront.
What Are the Benefits of a Cloud ERP?
A cloud ERP system has a more predictable cost since companies pay for a cloud ERP over time. The business does not need to spend a lot of money upfront, making it a more affordable investment initially. Additionally, the company does not have to invest in any additional hardware, such as extra servers, to keep the system on premise. A cloud-based ERP system can also be implemented quickly, so companies can start using the new software sooner.
With systems hosted in the cloud, security falls into the hands of the vendor, so companies do not have to invest in additional materials to keep data safe. Most vendors will automatically update and maintain the system, taking one more task off of the users’ plate.
Cloud-based ERP systems are becoming more popular thanks to their predictable costs, easy accessibility, strong security, and automatic maintenance.
What Are the Benefits of an On-Premise ERP?
With an on-premise ERP system, companies may be able to reduce the overall price of the system since they pay for everything upfront. While an on-premise ERP system can be seen as a riskier investment, it is possible the business could save money over time depending on how long they will need the system. Because security also remains in the hands of the company, some business owners may prefer an on-premise ERP if they do not trust another organization to keep their data safe.
Additionally, it is easier to customize on-premise ERPs compared to cloud systems. While customizations may ultimately delay implementation time, the company will end up with a system that is better tuned to its needs. The business retains greater control over the entire implementation process, guaranteeing the business owner is satisfied with how the system turns out.
While both systems have their advantages and disadvantages, companies and vendors alike are generally staying away from on-premise systems and looking more toward the cloud. If you need help choosing the right system for your organization, contact the ERP specialists at ComTec Solutions.