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Written by Paul Magnussen » Updated on: October 05th, 2024
We are truly living in very interesting times. Today, industry specialists understand that optimising resource utilisation and streamlining operations is vital for success. Here, the role of Enterprise Resource Planning (ERP) is crucial as this system is a detailed software suite that integrates important business functions such as supply chain management, customer relationship management (CRM), human resources, inventory management, accounting, and financials.
By securing data from different departments in a unified platform, ERP systems automate workflows, improve collaboration, and provide valuable insights. This results in better profitability and efficiency.
There are two main models that can be used to deploy ERP systems – cloud-based and on-premise. Getting to know the key differences between them is directly related to selecting the appropriate solution that aligns with a company’s particular requirements.
| Feature | Cloud-Based ERP | On-Premise ERP |
| Deployment Model | Hosted on remote servers via cloud provider | Installed on local servers in a company’s IT infrastructure |
| Cost and Investment | Usually lower upfront costs, subscription-based pricing model | High upfront costs for software licences, hardware, and implementation |
The cloud-based ERP solutions may come with lower upfront costs. Companies pay subscription fees depending on the number of features they need and users. This subscription model removes the requirement for prominent upfront investments in implementation services, software licences, and hardware.
These systems need a prominent upfront investment in implementation costs, software licences, and hardware. Furthermore, an organisation’s IT team is responsible for the ongoing maintenance expenses.
Cloud-based ERP solutions are hosted on secure remote servers that are managed by a cloud provider. Companies access the ERP system via a mobile app or a web browser, removing the requirement for local software or hardware installation. This model presents immense scalability and flexibility, thereby letting it become a famed choice for companies of all sizes.
This involves the installation of ERP software and associated databases on a company’s own servers. This model offers a good degree of control over customisation and data security options. However, it demands a prominent investment in ongoing maintenance and IT infrastructure.
Cloud service providers make heavy investments in the latest security infrastructure. This is why cloud-based ERP solutions commonly present reliable disaster recovery protocols, access controls, data encryption, and ongoing security updates. Such measures ensure your business-associated data is safe from hardware failures, cyberattacks, and unauthorised access.
Here, the data security responsibility is on a company’s IT team. This demands continuous investment in disaster recovery planning, personnel expertise, and security software. Companies should have a reliable IT security infrastructure that guarantees data safety.
A prominent advantage of cloud-based ERP solutions is their inherent scalability. Cloud providers present ready resources, letting companies easily scale their ERP system as the needs change. This scalability removes the need for companies to invest in additional software or hardware whenever they attain growth.
Scaling an on-premise ERP system could be a costly and complex process. The inclusion of additional functionalities or users often requires buying new software licences, hardware, and possibly engaging ERP software development services to integrate fresh components in the already present system.
A leading benefit of cloud-based ERP solutions is the removal of IT maintenance burdens. The cloud solutions provider takes care of all system-related security patches, updates, and maintenance. This will give more time to a company’s IT team so that they can better emphasise the strategic initiatives.
These systems demand ongoing maintenance by an organisation’s IT team, such as ensuring system uptime, troubleshooting technical issues and even installing software updates.
Today’s cloud-based ERP solutions present unmatched accessibility. Users may access the system from the location(s) of their choice via an internet connection using a mobile app or web browser. This flexibility lets the workforce collaborate with co-workers in real-time, access critical data on the go, and most of all, work remotely.
Such systems are usually limited to access inside a company’s internal network or via a VPN connection. This can affect remote work capabilities and restrict collaboration among teams located at a distance from each other.
The cloud-based ERP solutions present a compelling value proposition for various organisations. Let’s look at some vital advantages of it:
Sure, cloud-based ERP presents a host of benefits, but there are various scenarios where on-premise ERP is most likely the right call. These include:
Opting for the right ERP solution is an important decision for any company. Here are some factors that the decision-makers must keep a note of:
Take note of the following advice with utmost attention:
Making a call between on-premise ERP and cloud-based ERP greatly depends on a company’s technological capabilities, budget, and needs. This is why it is important for the company to carefully evaluate the factors discussed in this blog, as this will allow it to get the ERP deployment model that accurately aligns with its strategic objectives and guarantees success.
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