Any business, irrespective of the industry sector and size, needs efficient operations to stay competitive. Enterprise Resource Planning (ERP) solutions can fulfill this requirement by offering the necessary flexibility and scalability. As technology evolves, we have advanced ERP software available. This post will show the difference between its two types- On-premise vs. cloud ERP.

ERP solutions can streamline workflows and bring automation to repetitive processes. That’s not all. Entrepreneurs can get more visibility through advanced data analytics and improve their decision-making process. Talking about the types- both cloud ERP solutions and on-premise software have their pros and cons. We will go through them one by one for better understanding.

Let’s start with an on-premise ERP solution.

What is an On-Premise ERP Solution?

It is a traditional ERP system that companies have been using for decades. You can install this ERP solution on a local server and your IT staff manages it. An on-premise ERP solution can give a high degree of control and many customization options. Sectors like aerospace and defense prefer on-premise ERP solutions for excellent security controls and robustness.

Businesses in core industry sectors like manufacturing and healthcare also favor on-premise ERP for their capability to control various processes. However, the high costs and rigidity of these ERP systems compel enterprises to opt for another option- cloud-based ERP solutions.

Key Characteristics of On-Premise ERP

SAP S/4HANA (Non-cloud) and Oracle E-Business Suite are some of the famous examples of on-premise ERP solutions. These solutions have the following common characteristics-

• Full customization and source code control
• High data security in an offline mode
• Perpetual model for software licensing
• Presence of a server on the company’s location

Here, it is fair to mention that on-premise ERP systems need more attention from your in-house IT staff. Moreover, it requires high capex initially, and you must spend more amount on its upgradation and maintenance.

Introduction of Cloud-based ERP Solutions

Cloud ERP solutions, on the other hand, bring a paradigm shift from on-premise to the cloud. These cloud-based solutions offer more flexibility and scalability to modern businesses as compared to on-premise systems. Users can access cloud ERP solutions with the help of an Internet. However, these cloud-powered solutions have some issues with data security.

Enterprises that want to simplify their technical aspects and grow their businesses rapidly, always prefer cloud ERP software. As this software can assist companies to get rid of upfront investment in hardware and software, many entrepreneurs have started considering this option. Let’s go through the top aspects of cloud ERP solutions.

Top Aspects of Cloud ERP Solutions

SAP S/4HANA Cloud and Deltek Cloud are some of the example of cloud-powered ERP systems. Here are the common characteristics of cloud ERP software-

• Quick development and low investment
• Standardized processes and maintenance
• Automatic and regular updates
• High scalability and flexibility

It is interesting to jot down the differences between on-premise vs. cloud ERP systems.

Five Factors that Differentiate On-Premise ERP vs. Cloud ERP

The decision of selecting the right ERP solution for your company depends on several factors including cost and maintenance. The following difference between cloud-based and on-premise ERP will help you make the right decision-

Scalability and Customization

When it comes to scalability, cloud ERP has an upper hand over on-premise systems. Cloud-based ERP software can enable businesses to adjust available resources quickly to meet changing demands. Though on-premise ERP is robust, it lacks scalability and requires additional effort to scale up. However, this ERP has more customization options than its cloud-driven counterpart. It enables businesses to customized the ERP as per their specific activities.

Security of Data

Data security remains at its best in on-premise ERP. As this type of ERP is close-ended, it offers complete control over data. However, companies need to take other measures to ensure top-notch security. Cloud-based ERPs rely on the Internet and it is a provider’s responsibility to take the security measures. This is, at times, a cause of concern specifically for companies that deal with sensitive data. But then, reputed cloud ERP solution providers take all the necessary measures to ensure data security.

Initial Implementation Cost

Cloud-driven ERP remains more cost-efficient than on-premise ERP thanks to the SaaS model. On-premise ERP demands a large amount as initial investment consisting of hardware and software implementation. Moreover, companies should spend more amount for maintenance and upgrading. Here, a subscription model of the cloud ERPs cause lower upfront costs and fixed monthly fee that includes usage and maintenance.

Flexibility and Integration

If we think of flexibility and integration, cloud ERP solutions beat traditional on-premise ERP. Cloud technology in the ERP software is capable of offering more integration options and users need not to modify hardware or software. On-premise solutions, on the other hand, cannot offer this much flexibility and integration capabilities. Companies must pay additional amount to upgrade or integrate the on-premise ERP with complex business systems.

Upgrade and Maintenance

Cloud solution providers take care of upgrade and maintenance of your ERP solution regularly. This is not a case in on-premise ERP solutions and your IT staff has to take care of their up gradation and maintenance. In other words, cloud ERP does not require additional effort or cost from the user’s side for maintenance, but the on-premise system completely depends on the company that uses it.

Visionary entrepreneurs consider all the necessary factors while choosing the right ERP solution. It is, therefore, necessary to consult a reputed cloud ERP solution provider to know more about the characteristics and benefits.

What Should You Choose- Cloud ERP or On-Premise ERP?

Cloud ERP solutions offer high scalability and accessibility at reduced upfront costs. These solutions are ideal for enterprises that need more flexibility and scalability with quick deployment. On-premise ERP offers more control over corporate data as compared to cloud-based solutions. Businesses that have high security requirements and rigid regulations should go for on-premise ERP.

Your choice between cloud and on-premise ERP depends on your company’s specific needs, budget, and risk tolerance.

Concluding Lines

The difference between on-premise vs. cloud ERP is useful in selecting the right solution for your business. Forward-looking enterprises should opt for cloud ERP solutions and companies that handle confidential data should consider on-premise solutions. Hope this comprehensive guide will clear your doubts and you can choose the right option.

B1 Partner Cloud is a reputable and official SAP Partner. We offer highly secure, accessible, and feature-rich cloud ERP solutions to meet diverse and complex needs. Contact us to know more about our offerings in the cloud-powered ERP domain.