On-premise vs. cloud ERPs, why cloud triumphs

Posted by Sample HubSpot User on Jun 12, 2019 4:08:54 PM
Sample HubSpot User

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Ever wondered what the hype around cloud ERP systems is about, but never quite understood it? We break down exactly why cloud ERP software is preferred by small and medium enterprises (SMEs), and how they’ve benefitted from them. 

In case you missed it, here’s what an ERP software does
If you are looking to optimize your organization’s workflow, then you can’t be a stranger to enterprise resource planning (ERP) software. This is a powerful tool that helps companies manage their end-to-end business needs, by connecting all functions in an organization i.e., procurement, accounting, finance, project management, customer relationship management etc., thereby improving the organization's operational efficiency.

The two main types of ERP systems: On-premise ERP vs. cloud ERP
While ERP systems have generally been accepted as efficient tools for companies to improve operations, not all companies have learnt to truly maximize their ERP's potential. For example, some companies using on-premise ERP systems are unaware of how they compare to cloud ERPs, their more advanced counterparts. The key difference between these two systems is simply outlined by their names: On-premise ERPs have to be physically and locally installed onto a company's server and hardware. By extension, that means they can only be accessed within company premises. They also need to be managed and maintained by in-house IT staff. In contrast, cloud ERPs—also called SaaS, or Software-as-a-Service—are provided as a service. With cloud deployment, companies' data is managed and exchanged centrally on the internet by their ERP vendors and can be accessed on-the-go by all users so long as they are connected to the internet. 

Why cloud ERP is better for your business
It is no secret that time has birthed technological advancements that have completely revolutionized the way businesses operate. Cloud solutions are key factors to this transformation, bringing about undeniable benefits such as cost-savings, real-time enhancements, increased security, flexibility, and customisation.

Cost savings and easy implementation
On-premise ERP systems usually require large upfront payments. While there are some exceptions, they are generally priced under a one-time perpetual licensing fee with recurring fees for subsequent support. An experienced in-house IT team, or trained relevant personnel, is usually required to carry out continuous hardware maintenance which tend to be time consuming. 

However, going on the cloud is usually more cost efficient as cloud software companies offer customizable subscription models i.e., monthly or annual subscriptions. These subscription models are easier on cash flow management and tend to increase adoption. Cloud deployment also means businesses can easily customise and implement their ERP software online according to their specific requirements, within hours. Altogether, these lower barriers to entry contribute to the popularity of cloud ERP systems. 

Real-time enhancements
When ERP providers release product updates, on-premise ERP systems require additional manual installations. Such manual updating means previous customizations configured by the IT team need to be deleted in favour of the new enhancements which have to be customized all over. That is why many  companies rather settle for running outdated on-premise ERP systems. than have to endure this updating process that costs time and money. 

Unlike on-premise ERP systems, cloud ERPs are continuously running on the cloud’s IT infrastructure. Data enhancements are rolled out securely and seamlessly in real-time, minimizing disruption and delays to businesses. These automated updates enable companies to enjoy the most advanced version of their ERPs, while reducing both administrative and operational costs. IT resources are also freed up to focus on more innovative and impactful tasks.

Security
Data security remains a key concern of business owners, considering the nature of the business information stored within ERP systems. On-premise ERPs place the control of data security solely with the company which can be risky as not all in-house IT teams are well-versed with data security protocol. This leaves companies vulnerable to cyber attacks. While there was some initial skepticism surrounding cloud security, reputable cloud vendors have implemented strict data security standards that can easily be verified by a third-party security audit. These stringent quality checks have put the fears surrounding cloud ERPs' data security to rest, and truly underscores the need for a reliable and trustworthy vendor. 

Learn about Deskera's reliable ERP software

Integration and flexibility
Integration and migration from legacy systems are also important processes that need to happen seamlessly. On-premise ERP systems demand high levels of care and attention so no data is lost during migration, while this process for cloud ERP systems is entirely facilitated by the service provider. This delivers an ease-filled experience for business owners. In addition, cloud ERP systems also offer flexible bandwidth for businesses to scale. This is especially with regard to catering for more users and expansion of operations. Unfortunately in such cases, on-premise ERP require additional hardware and costs. 


At a glance

Points of comparison

Cloud ERP software

On-Premise ERP software

Deployment

Hosted on the vendor’s servers and accessed through a web browser.

Locally installed on a company's own server.

Cost

Customizable subscription models. No additional hardware and maintenance costs.

Large upfront payments and high maintenance costs.

Implementation

Completed within hours or days.

Complicated and sometimes require months to complete.

Maintenance

Does not require a specialised IT team.

Requires an experienced in-house IT team.

Enhancements

Automated and real-time.

Operationally tedious and disruptive.  

Security

Dependent on quality standards of vendor. 

Dependent on in-house IT team who might not be well-trained in data security protocols.

Integration

Software can be changed and upgraded quickly.

Rigid and difficult to upgrade system.

Scalability

Highly scalable.

Limited scalability.

Our verdict

Cloud ERPs are especially suitable for small and medium businesses that seek low upfront investment, quick deployment and on-the-go access. Go from an on-premise ERP to a cloud solution to help optimize your business in today’s rapidly digitalising landscape. Keen to find out more? Speak with our professionals. 

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Topics: ERP, Digital Transformation

Written by Sample HubSpot User

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