If you are looking to replace or upgrade your ERP system, one of the most important things to take into consideration is whether to go for an on-premise system or one in the cloud. As an independent ERP consultant, I can’t make that decision for you, but I can share with you some of the factors you should be taking into consideration. Knowing the pros and cons of each type of ERP system will help you determine which would be the most appropriate for your business.

Deployment

When it comes to the main difference between an on-premise or cloud system, it really boils down to how they are deployed. On-premise ERP software is locally hosted on your business’s own servers, whereas cloud-based software is hosted on the vendor’s servers and you access it over the internet. Nowadays some vendors also offer so-called ‘hybrid’ deployments – systems that are a mix of both on-premise and cloud-based software.

Pricing

On-premise software tends to be paid for in a one-off licence payment, based on the number of users – this is considered a capital expense. You will also have to factor in the cost of hardware, support and updates to the overall cost of the system.  On the other hand, cloud ERP software is paid for purely on a monthly subscription – which is considered operating expenditure. One of the reasons why cloud software has become so popular in recent years is that it is seen as having a low cost of entry; however, in the long run, the total cost of a cloud ERP is likely to outweigh the cost of an on-premise system.

Pros and Cons of On-Premise ERP Systems

We have already mentioned above that the initial cost of an on-premise system is higher than cloud systems due to investment in hardware and other IT costs – which could be seen as a disadvantage. From a data point of view, hosting the system onsite gives you the advantage of giving you more control over the data security. However, this could also be a disadvantage if your business is not up to speed with the best way to safeguard your sensitive information, leaving you open to being targeted by cybercriminals.

On-premise system vendors tend to allow you to customise their software more readily. However, again, this could be a disadvantage as the more you customise the system, the longer it will take to implement and the more likely you are to have issues with the system when the vendor updates the software.

Pros and Cons of Cloud-Based ERP Systems

Data security can be a concern for cloud-based systems as you are placing the security of your business data in the hands of your system vendor. However, if you choose a reputable vendor, then this shouldn’t be a worry. To further put your mind at ease, you can always request a third-party security audit of your vendor.

From a customisation point of view, although cloud systems tend to be less customisable than on-premise ones, this can work to your advantage as it means you should have a more stable system. Again, if you do want to customise your in-cloud system, try talking to your vendor – they may be able to work something out for you.

So, to summarise, there are pros and cons attached to both on-premise and cloud ERP systems, and so your best bet is to talk to an independent ERP consultant. We can get a clearer picture of what your needs are, and help you make a more informed decision. To start the move towards a better system for your business, please call Greenbeam Consulting on 0843 523 5630 or send us an email to [email protected]