Making the choice between Cloud ERP and On-premise ERP


Tue, 4 Aug 2020

3 to 5 mins read

Should your ERP system reside in the cloud?

For many executives, the decision isn't whether to develop an Enterprise Resource Planning (ERP) system. The decision is whether to deploy the system on-premise or in the cloud. 

Many executives that already have an on-premise system are deciding whether to keep it on-premise or take it to the cloud. 

According to a report published by McAfee, the movement to the cloud is gaining momentum: 

Respondents indicated that in a little over a year, 80 percent of IT budgets will be used for cloud solutions. 

Within two years, 73 percent of respondents plan to achieve a completely software-defined data center. 

However, there are a number of questions to ask yourself to make the best choice between Cloud ERP and on-premise ERP. 

Which is the Least Costly Option? 

Initial costs for developing an ERP system are less in the cloud: 

  • No additional capital expenditure for hardware is required 
  • No additional IT staff is required 

This is especially useful for growing companies that are just starting an ERP project. The upfront costs involve things such as internal training, but there is no significant upfront investment. 

Which is the Least Time Consuming Option? 

If you're starting an on-premise ERP project, you need to consider that the project can't interrupt your everyday operation. On premise deployment, therefore, is typically slower. 

With a cloud solution, you can get the system configured without putting normal business operations on hold. In addition, your cloud managed services provider already has the hardware and infrastructure in place, which results in a faster implementation. 

Which Option Will Provide the Best Performance? 

Both on-premise and cloud options can experience a drop in performance. For on-premise systems, you may get quick response from your IT staff, but if the staff is already on overload, addressing performance issues may have to wait. 

Cloud providers can't afford to have performance problems. They have the luxury of providing more redundancy and backups. They also provide performance guarantees. 

Which Option Will Provide the Broadest Accessibility? 

If you have employees who will need to access the ERP system from mobile devices, that may be the deciding factor that sends you to the cloud. Your staff can access a cloud ERP system at any location where they can access the internet. Typically, on-premise ERP systems can come close to full mobility, but it does require time and maintenance to establish the required configurations and protocols. 

Which Option Will be Easier to Manage? 

Your staff will need to maintain the ERP hardware and software. Software upgrades happen on a regular basis. Especially if you have multiple locations, maintenance tasks can be significant. In addition, you may experience service interruption or inaccessibility while your staff completes the updates. 

Your cloud managed services provider will handle the updates for a cloud ERP. Your staff won't need to worry about the timing of the updates because they will take place automatically. 

Cloud solutions also have much more flexibility in terms of changing requirements. Scaling an on-premise system would involve acquiring more hardware and IT staff to run it. Your cloud services provider will be able to adjust to your changing requirements very easily. 

Which Option is More Secure? 

Your IT staff will be responsible for managing the security for your ERP system when it is on-premise. Today, cloud ERP systems provide a very high level of security. In the cloud: 

Cybersecurity is at the top of the list of capabilities your cloud provider needs to get right
Document management systems prevent anyone from downloading sensitive information
The cloud offers secure gateways for mobile access
Regulatory compliance is supported by the cloud's automatic document retention
High-level security measures require proper user authorization to gain access system wide

Which Option is More Customizable? 

On premise ERP systems may be more customizable because you have full control over the system. Customization may require additional hardware and staffing, but you can get exactly what you want. 

You can customize a cloud ERP more quickly and less expensively, but traditionally, not all types of customization were possible. Given the explosion in the cloud ERP market, cloud ERP providers are responding by increasing the frequency of upgrades, and collaborating with cloud and third-party providers to create new APIs and integrations for a higher level of flexibility. 

Which Option is Easier to Support? 

Your IT staff will be responsible for an on-premise ERP system. In the cloud, an expert staff of technicians will support the system, and handle most of the support requirements remotely. 

Which Option Offers More Advanced Capabilities? 

Users can easily use Business Intelligence (BI) programs to access cloud ERP systems. The organized data storage in the cloud ERP makes extracting information with a user-friendly BI interface simple. Analytics features in the cloud allow for real-time graphics and reports without waiting for a system update. 

A Summary

On-Premise ERP

- Higher initial cost

- Require hardware setup

- Maintain for redundancy and backups.

+ Control on the hardware/backup support

+ Does not depend on internet for local use

- Additional setup for accessibility outside network

- Need to maintain security on hardware and user access

+ More customization option

- Need Hardware support staff

- BI Programs may need more additional hardware setup

Cloud ERP

+ Lesser initial cost

+ Hardware and infrastructure already in place

+ Redundancy and backups with performance guarantees

- Hardware/backup support required support request

- Require internet to use

+ Access from anywhere is default setting

+ Maintain user access with provided cyber security option

- Customization depend on what provided

+ Hardware support staff included in Service.

+ BI Programs easier to integrate

Final Thoughts:
There are many things to consider when choosing how to deploy your ERP system. One thing to keep in mind is that if you're planning to migrate your existing system to the cloud, the migration process is very similar to a new installation.
You'll need to develop a cloud migration strategy that will lead you through the cloud migration steps to make your new ERP system a success. A well-planned implementation will ensure that you take advantage of the new capabilities the cloud offers. There's no reason to replicate your current system when you can make your organization more productive in the cloud.

Credexo is a respected cloud managed service provider that can help you through the transition. The result will be an ERP system that leverages cloud capabilities to make your company a formidable competitor.

Next steps

Ask us about our accelerators -  with guided tours we can get you started quickly