Hand holding phone with ERP graphic on screen

Cloud ERP vs. on-premise ERP

If you’re trying to choose an enterprise resource planning (ERP) solution for your business, it can be hard to know where to start.

A big decision you need to make is whether to go for a cloud-based ERP or an on-premise ERP. This isn’t a straightforward choice, with advantages and disadvantages to both. Here are six key differences for you to think about:

1. Cloud ERP tends to have a recurring fee

If you go for a cloud ERP, you will probably need to pay an ongoing subscription fee. On-premise ERPs usually involve a one-time expense, but this will be significantly higher than the set-up fee for a cloud-based solution.

How much do you have to invest in the solution up front? If you want to keep your initial costs to a minimum, a cloud-based ERP might be right for you.

On the other hand, if you have money to spend — and want to avoid any ongoing costs — the pricing of an on-premise ERP could be more appealing.

2. The installation of on-premise ERPs tends to take longer

As the infrastructure is ready to go, the implementation of cloud ERP systems can happen relatively quickly.

If you opt for on-premise ERP, you will need to install new infrastructure—which will take considerable time and effort.

That said, regardless of the option you choose, you need to factor in time to integrate the system into your business.

3. Cloud ERPs get updated regularly

It can be challenging to upgrade on-premise ERPs, especially if you have built-in a range of customizations.

Cloud ERPs are updated regularly by the suppliers — and upgrades can be installed seamlessly without impacting any customizations you may have.

Whatever ERP solution you choose, it’s important to stay up to date. Make sure you consider how you will do this before you decide on a system.

4. On-premise ERPs are more secure

According to Norton, the USA is the number one target for targeted cyber attacks in the world. If security is a key concern for your business, this is something you need to think about. Generally speaking, on-premise ERPs are more secure.

But that doesn’t mean you should rule out cloud ERPs, either. The majority of cloud ERP suppliers now offer strong data security as standard. They have to. A security breach would be disastrous for their business — as well as their clients.

But if having full control is essential, an on-premise ERP might be the best choice.

5. Cloud ERPs are often easier to use

Getting buy-in from your staff is essential. Did you know—70% of change management programs fail to achieve their goals? This is, in part, due to poor buy-in and employee resistance.

The easier the software is to use, the less resistance you’re likely to face. As a general rule, cloud ERPs tend to be more modern with better user experience. Not only will your staff be more willing to use it, but it will also be easier to train them.

6. Cloud ERPs do not require additional hardware

As we’ve already mentioned, on-premise ERPs require you to buy and install the infrastructure required to support them. This isn’t the case with a cloud ERP.

As well as the reduced time and cost during the implementation phase, cloud ERPs require less maintenance once the system is in place. In fact, there’s no maintenance at all — as all the hardware is managed off-site.

If resources are stretched within your business, this is often the better option. But it might not be ideal if you’re looking for greater control over your infrastructure. In these cases, an on-premise ERP might be the right solution for you.

When it comes to choosing between a cloud or on-premise ERP, there’s a lot to consider. Each business is unique. Considering your own requirements is essential if you want to maximize the benefits of ERP software for your business.