Cloud ERP software vs. Traditional on-premises ERP

Difference between SaaS / Cloud ERP software vs. Traditional on-premises ERP

On-premises ERP & Cloud / SaaS ERP systems tend to have their own benefits and drawbacks. Here are some facts listed below:

System & data control: In a SaaS scenario, a third-party typically manages software and data as opposed to an on-site ERP system. This additional support of traditional ERP tends to require more IT staff, which can result in more associated costs. On the other hand, there can be a higher degree of control over the systems and data for on-premises systems.

Integration: At some level, most traditional and cloud ERP software systems offer integration due to the increasing needs of transferring data between applications. Cloud ERP systems tend to use APIs that are tools to help ease integration.

Updates: Cloud ERP software generally receives more frequent updates than traditional systems. In some instances, updates occur as often as monthly or even weekly. This can carry the benefit of remaining compliant to changing regulations. When deployed, cloud ERP systems can bring scalability to businesses with high growth and rapid expansion. While it is beneficial for any ERP to keep pace, repeated updates are not without their drawbacks, especially for systems with higher degrees of customization.

Mobile access: It has become more common to see traditional ERP products offering users mobile access that can assist with remote approvals, notifications and operational visibility. There can sometimes be added complications for on-premises ERP software if a third-party client is required to act as the link between mobile devices and the ERP system. Many cloud ERP systems, because of their Web-based nature, are natively mobile and come with standard mobile applications.

Security & reliability: When factoring critical data such as corporate financials, employee details, customer account information and trade secrets, it is no wonder why security remains an essential requirement when considering ERP software. This is why more clients prefer on-premises ERP. In the past, cloud ERP often carried the perception of being widely susceptible to breaches, hacks and exploitation, especially when compared to its traditional on-premises counterparts. To give peace of mind, many cloud ERP vendors are touting encryption and use of additional safeguards built on platforms like Amazon Web Services, which have enhanced security protocols.

Cost & Payment: On-premises ERP software is generally priced with a one-time perpetual license and ongoing support fees, some of which may be negotiable. Cloud ERP systems take on subscription-based pricing models that are usually monthly or yearly. SaaS vendors can price their applications based on a choice of multiple usage factors such as the number of users, transactions, amount of data or other units of measure which may be more costly when compared to on-premises ERP.

Implementation:  Arguably, cloud ERP systems can have relatively shorter implementation times, but again this can vary depending on multiple factors such as customization, number of end users and IT architecture, to name a few. Shorter implementation times can equate to a reduction in spending on project expenses including, but not limited to, professional services and backfilling staff.

There is usually a higher, upfront investment with traditional on-premises ERP software. Cloud ERP leverages economies of scale and reduced need for customer infrastructure to quickly deploy their product and services. Depending on considerations such as pricing structure and service subscription duration, overall investment of cloud products may eventually incur similar or even higher long-term costs.

While cloud/SaaS and on-premises systems may both offer their own business advantages, organizations should look at the resources and insights that can help them make an optimal selection when investing in an ERP system.