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When considering a new enterprise resource planning (ERP) system, you need to decide on how it will be deployed within your business.
It used to be that ERP software was only available on-premise, but with the advent of cloud computing and Software as a Service (SaaS) has come a wide range of ERP solutions hosted on the cloud.
Each deployment options brings its own benefits and challenges, and some solutions may only be suitable for certain sizes or types of business.
To help make things clearer, the software procurement experts at YourShortlist have prepared this guide to On-premise vs Cloud ERP systems so you have an accurate picture of each option.
What are ERP solutions?
ERP software is a class of software solutions that empowers companies large and small to consolidate internal and external data and to manage essential business processes.
ERP solutions provide a real-time, integrated view of core business processes using common databases maintained by a database management system. They can track business resources and commitments across the supply chain, with applications sharing data across various departments and facilitating information flow between all business functions.
This can include functionality for supply chain management, financial management, and customer relationship management (CRM). With cloud ERP, project management modules are often included or available as part of a wider software suite.
On-premise vs Cloud ERP
While the basic functions of ERP software remain the same across different deployment options, cloud-based ERP and on-premise ERP are hosted, accessed, and operated in different ways.
You should carefully consider the key differences and which option will be most suited to your business and IT infrastructure.
Traditionally, ERP solutions have been deployed on office hardware, with data stored within on-site servers. This means the business is in complete control over data hosting and software implementation, through it means access to the ERP system is tied to specific hardware.
Many businesses using legacy software will likely have on-premise systems in place.
Many ERP solutions have become cloud-based or have cloud deployment options. Cloud ERP systems are adaptable for remote or hybrid working and can be a more affordable option for smaller, dynamic companies. Cloud based ERP for small business allows data to be available remotely from any device and at any hour.
Nowadays, cloud enterprise resource planning software can also be accessed via mobile devices (smartphones, tablets). This expands the reach of access to the software for global teams. With remote and hybrid working now commonplace, mobile deployment provides added flexibility to cloud ERP software.
Benefits of Cloud ERP
If you have researched cloud ERP options already, you’ve probably noticed that cloud-based ERPs are often considerably cheaper than on-premise solutions. This isn’t just down to cheaper pricing models, but also due to a cost-saving on hardware and server implementation on-site.
This is one of the main reasons behind their rising popularity and why so many ERP software providers have been sunsetting older, on-premise versions of their software in favour of cloud-based versions.
Cloud-based ERPs often offer easy mobile accessibility, with many even providing native applications for Android and iOS. This enables you to have permission-based access to company data anywhere, at any time.
They are also easier to manage for IT staff, as most bug fixes and updates are delivered automatically, alongside automatic data backups.
The modular nature of many cloud-based ERP for small business also allows for systems to be easily scalable and adaptable for rapid-growth companies.
Challenges of Cloud ERP
Security concerns linked to cloud-based ERP solutions have thankfully diminished as more reputable service providers have emerged on the market and cloud security becomes more advanced by the day.
A more pressing concern, however, is the limited access to servers or system infrastructure. The SaaS model essentially means users never have full access to the inner workings of their ERP systems, which are hosted remotely on cloud servers.
More accessibility for remote or hybrid working also means less customization. Cloud ERP systems have tightly controlled design and feature updates delivered automatically, often unable to be expanded on by third-party developers. This lack of flexibility compared to on-premise solutions can potentially be a drawback for companies with specific requirements.
Benefits of On-premise ERP
ERP solutions that are deployed on-premise come with many similar features to cloud-based systems. However, on-premise solutions are often easier and more convenient to manage for IT staff when it comes to initiating specific modifications.
In fact, the ability to customize the system according to your company’s requirements is among the main benefits of an on-premise solution over cloud ERP.
With on-prem ERP software and data hosted on internal servers or a private cloud network, this provides a higher level of security, or at least, control over security.
A lower demand on bandwidth, connectivity, and the associated costs can also be of benefit to a business.
Challenges of On-premise ERP
A prevalent issue with on-prem solutions, however, is the lack of remote and mobile accessibility.
A heavy and specifically tailored solution means that it’s often necessary to bring in third-party support or integrations to enable seamless communication between mobile devices and the ERP solution, thereby increasing the overall cost of the system.
Given that mobile accessibility has become a significant form of system access with the rise in hybrid working, this can be a drawback for many ERP buyers that choose on-prem over cloud ERP.
While they are sturdy and reliable, on-premise solutions are not the right option for everyone – especially not as they often require a rather hefty upfront cost compared to its cloud-based counterpart.
This upfront cost can be risky for SMEs, especially when you add the additional software, storage room, IT costs and labour it takes to run the solution daily.
On the bright side, you’ll receive a solution which is more open to customization than a cloud ERP alternative, albeit with possibly limited scalability due to the more manual nature of support and software updates.
Large enterprises within tightly controlled sectors, such as the pharmaceutical industry, are usually the most suited to an on-prem ERP solution.
Examples of Cloud ERP Solutions
With cloud-based solutions beginning to dominate the market, we thought it would be useful to share some details on 5 widely used systems, to give you an idea of what to expect when beginning your search for new cloud ERP software.
1. Microsoft Dynamics 365 Business Central
- Payroll, inventory, order, project, supply chain, and risk management
- Dynamics 365 and Microsoft 365 integrations
- Power BI integration for analytics
- Secure Azure cloud architecture
- Microsoft partner support
- Wide pool of third-party software integrations
Microsoft Dynamics 365 Business Central is an all-in-one ERP solution to help small to medium businesses streamline processes, enhance customer interactions, and enable business development. It is designed to connect teams in finance, sales, service, and operations through a unified, integrated application and is flexible, customisable, and easy to use.
2. Infor CloudSuite Industrial
- Advanced Planning and Scheduling
- Product Configuration
- High level of personalization and customization
- Field Service Management
- Quality Control System
- Workflow features
Infor CloudSuite Industrial an ERP solution of choice for more than 5,000 manufacturers worldwide. From repetitive to bespoke manufacturing, CloudSuite Industrial enables the processes needed to accelerate production and meet customer demand more quickly. Available on-premises with a perpetual license, or through SaaS hosted and subscription models, including optional application managed services.
3. IFS Applications
- Sales, manufacturing, distribution, and finance management
- Powerful and varied interfaces
- Third-party CRM integrations
- Built-in reporting and analytics tools
- Adaptable permissions and access
IFS Applications is presented by the vendor as an agile application suite that offers ERP, enterprise asset management (EAM), and enterprise project management. The platform supports several manufacturing modes and can act as a support function for ERP and EAM or as a logistics solution in demanding environments like aviation and defence.
NetSuite is a suite of ERP and accounting modules owned by Oracle, used by more than 28,000 customers in 200+ countries and commonly used by mid-sized enterprises within the Computer Software sector. The NetSuite ERP software presents itself as the first and last business management solution a business could ever need and comes in different editions suitable for varied sizes of business (larger enterprises may wish to opt for Oracle Cloud ERP instead).
5. Sage Intacct
- Payroll, inventory, and order management
- Enterprise accounting
- Collaboration features
- Multi-dimensional reporting
- Subscription billing option
Sage Intacct is a cloud ERP system for small business, medium business, and high-growth companies that aims to provide visibility and agility to enable timely, data-driven decisions. It can also integrate with third party CRM software like Salesforce. Additional reporting features include revenue recognition, multiple account charts and reporting books, Graphs/Charts/Performance cards, and report visualizations.
Download Your Free ERP Comparison Guide 2022
Choosing On-premise or Cloud ERP
On-premise solutions are robust, secure, and customizable, the perfect fit for any large organization with specific needs. However, they’re often expensive and require a high level of manual maintenance and updates.
Cloud-based ERP systems, on the other hand, are considerably cheaper, easier to maintain, and provide more accessibility. But they’re less customizable than their counterparts.
Functionality and features depend on the specific software. However, almost all ERP systems serve the core functions of inventory, ordering, and finance, with CRM features built in.
Put simply, there’s a lot to consider.
To ensure your new on-premise or cloud ERP system can help you achieve your company’s goals, you should first assess your key business objectives and projected growth.
- Individuals from different departments should identify key requirements for their areas of expertise. Establish a project team to highlight requirements across the entire business.
- Allocate responsibility to key personnel for internal software support and maintenance post-implementation.
- Guaranteeing external software partner support in the early stages will negate the need for training further down the line.
- Review and map out your business processes to gain a picture of how the software will support and impact your company.
- Ensure buy-in from the team and that the ERP system will be utilised by all relevant members of staff (as well as ensuring they are trained in its use).
- Look for well-supported software that provides longevity and scalability to adapt to changes and growth within your business.
For anyone beginning to research, select, and buy new software ERP systems, keeping the following considerations in mind can make the process much easier:
Clearly defining your goals for the ERP solution at the outset will narrow down your search criteria. This keeps your focus on systems that are relevant and achievable to implement for your business and offer the desired functionality.
Escalation of Scope
As the scope of ERP procurement escalates, so too can the associated costs. Buyers should keep in mind the scale of their organisation and database. The more data you must migrate to a new ERP system, the longer and more costly the process becomes. Carrying out a data audit prior to procurement can be an invaluable exercise.
Return On Investment
ERP is often costly to setup, so you should be confident that the solution can achieve your desired results and provide the necessary functionality to make it a worthwhile investment.
Ultimately, your decision must be based on the specific requirements of your company.
Which features matter to you? Which ones can you live without? Will an on-premise solution serve your needs, or should you opt for a cloud-based ERP system?
If you find yourself unsure of where to get started with ERP software procurement for your business, let the experts at YourShortlist help.
Get in touch to find out more about the benefits of becoming a YourShortlist Member.
Your ERP Needs. YourShortlist.
As a key decision maker, you’ll have to do your research before choosing an on-premise or cloud ERP solution for your business.
At YourShortlist, our goal is to make technology procurement simple, transparent, and cost-effective by matching businesses with the right software providers.
We’re all about helping our members understand, choose, and implement the solutions that will facilitate successful growth. We manage a diverse database of 700+ software partners providing solutions in ERP, CRM, cyber security, cloud migration, HR, and more.
With the help of YourShortlist, IT buyers across the globe have made better-informed decisions on new software, infrastructure, and managed services to improve their business.
Last year, we helped over 730 businesses match with their ideal ERP software provider. And our database of partners is always growing.
Our non-chargeable service includes:
- Independent buying advice on the best ERP solutions and providers on the market
- A bespoke shortlist of specially selected partners experienced in implementing ERP solutions for your industry
- Partner background information
- Free call-backs from partners with no obligation to purchase
If you’re on the hunt for a new ERP system, discuss your requirements with a member of our team and begin the journey today towards a free, no-obligation shortlist tailored to your business.
Book a meeting with our team or call us on +44 (0) 20 4532 5532 and we can match you with the software partner you need.