When you are thinking about ERP Implementation, one of the most important things to consider is whether you will choose a cloud (internet-based) ERP or an on-premise ERP. Cloud ERP systems have become much more popular in recent years, especially with small to medium sized businesses, but that is not to say that on-premise systems don’t still have a valid place. There are advantages and disadvantages to each type of system and each organisation should weigh up the pros and cons as they relate to their business before they go ahead with ERP implementation.

One of the first questions you might have is what is the cloud? Well, cloud-based software is software that is hosted by the vendor on the internet and accessed through a web browser. This is opposed to on-premise software which is installed locally on the business’ own computers and servers.

Cost

One of the main points to consider when looking at a cloud ERP system as opposed to an on-premise ERP system is the cost. As with everything, there are exceptions to the rule, but generally, cloud software tends to be priced on a subscription basis which is paid either monthly or annually – although there may be recurring fees for updates, support and training. On the other hand, on-premise software tends to be sold with a one-time licence fee that is normally based on the number of users or the size of the organisation. Similar to the cloud software, there will probably be recurring fees for updates, support and training. This differentiation in payment is important, as it separates them into a capital expenditure (for the on-premise solution) and an operating expenditure (for the cloud-based solution). The generally lower initial cost of the cloud-based solution has contributed greatly to its wide-spread popularity, but studies are starting to show that after a period, the costs for both on-premise and cloud solutions start to converge.

Security

The top concern for most ERP system buyers tends to be security. This is understandable considering how important the data that is stored on the system is – usually including company financials, employee information, client lists and so on. With cloud-based solutions, security is in the hand of the vendor.  This can be a benefit but it can also be a disadvantage as some vendors may not have the strict security standards that you require. With on-premise ERP solutions, the data security is in the hands of you, the business owner, which means you have greater control over it. However, it can also mean that you must be adept at practising proper security protocols.  Then again, as the adoption of cloud-based ERP systems has grown, so has the understanding by reputable cloud vendors that they need to have a strict security policy in place, which has eased a lot of business owners’ minds. You can also seek a third-party security audit of the vendor you are considering to help with your ERP implementation if you wish to make doubly sure that your data is secure.

Functionality

In general, you tend to be able to find the same features on both on-premise and cloud based ERP systems, but there are a few notable differences. For example, mobile accessibility can present an issue for on-premise deployments, as they often require a third-party client to communicate between the mobile device and the on-premise software which can be a bit of a headache. On the flip side, although cloud solutions come with easier mobile accessibility, this often means there are greater security considerations needed, especially if employees can access company files on their personal mobiles.

This is just a brief overview of some of the considerations needed when you are thinking about whether your ERP system should be on-premise or in the cloud. As you can see, there are a lot of factors to consider. If you are not sure which deployment model is the one for you, or want to discuss anything to do with ERP systems, then please give us a call on 0843 523 5630 or send us an email to [email protected]