Cloud-based vs on-premise ERP: Which to choose and why? - B1 Systems
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Cloud vs on-premise ERP: Which to choose and why

Cloud vs on-premise ERP: Which to choose and why

The choice between cloud-based and on-premise enterprise resource planning systems (ERPs) remains a hot topic of conversation. There is no denying that cloud-based services will continue their rapid growth in popularity, but that doesn’t mean there’s no longer a place for traditional on-premise solutions.

Each have their own advantages and disadvantages and, ultimately, the choice you make will depend on the needs and requirements of your business. There is no one-size fits all solution.

With SAP Business One, as well as cloud and on-premise solutions, you also have the benefit of an additional third option of ‘hybrid’ deployment, which can offer the best of both worlds.

In this article, we will take a closer look at the three options and some of the main features/benefits of each. There won’t be too much focus on ‘negatives’ because something that is a disadvantage to one business might be of benefit to another, again depending on your needs, requirements and, to some extent, your personal preferences.

First, here’s a brief outline of the three models.

What is cloud-based ERP?

Cloud-based ERP is provided as a service – Software as a Service (SaaS) – and your company’s software and data is owned, hosted and managed by a third-party provider, which you access through a web browser, usually on a monthly subscription basis.

What is on-premise ERP?

An on-premise solution is installed locally, on your company’s hardware and servers, and managed by your IT staff or someone you appoint. You usually pay a one-time licence fee and you own the software.

What is hybrid or ‘hosted’ ERP?

A hybrid solution is based in the cloud, but the software is still bought and owned by you and can be installed on your computers. It is also maintained on a server at a secure data centre through a third-party host, much like having your own private cloud. There is still an upfront licence fee and you also pay monthly to ‘rent’ space in the cloud.

Here are some of the main features of each solution.

Main features of cloud-based ERP


  • Because you are not paying for a licence, a cloud-based system offers a great entry level solution without the upfront cost
  • It is an operational overhead; you never own it and you pay a predictable monthly fee throughout the time you’re using it
  • You don’t have to pay for maintenance and upgrades as these are managed for you as part of the fee, but there may be additional training and support costs
  • The price could go up and there may be extra costs you hadn’t anticipated. You could also end up paying more over a longer term than you would with other options


  • In general cloud-based solutions are less flexible than on-premise solutions. They work best if you have a straightforward requirement that can be served by templated processes and systems. You don’t have to worry about maintenance or upgrades, but there’s a chance they could be carried out at a time that is inconvenient for your business


  • Data security is in the hands of your hosting partner. This could be an advantage if your systems are not as robust as they could be, or it could be an issue for you if you prefer to keep sensitive data in-house.


  • You can access your ERP from any computer, anywhere. However, you are completely reliant on the internet and having a good internet connection.

Main features of on-premise ERP


  • On-premise solutions involve a large upfront cost for the licence fee and is therefore considered a capital investment
  • There may also be associated hardware and IT support set-up costs, depending on your existing infrastructure
  • You are responsible for all maintenance, upgrades and backups etc. If you don’t have the appropriate in-house expertise you may have to buy it i.
  • Despite the initial ongoing investment, the total cost of ownership is usually lower over a number of years


  • You have greater control and flexibility to customise your system in any way that is necessary to ensure it works efficiently for your business, However, customisations can be problematic if the software provider updates the software, both in terms of cost and practical implementation


  • You have full control over your data security, which does mean you need to have excellent data protocol procedures in place, but may be preferable to you if you’re dealing with lots of sensitive information


  • You are not reliant on internet connection, but you are reliant on your on-premise systems and need to make sure they are well-maintained

Main features of hybrid ERP


  • There is an upfront cost for the licence and you also pay a monthly fee for it to be stored in the cloud on your own private server
  • You own the software and get the five-year cost-benefit of ownership
  • You still need to factor in the ongoing costs involved in maintaining and upgrading the servers and hardware on your premises


  • You have the freedom of any customisations and add-ons and benefit from superior integrations with all systems. This means situations such as software upgrades from the provider can be managed much more easily due to the dual web browser access


  • You retain full control of data and data security, but with the added practical benefit of information being stored in the cloud where it cannot be damaged or destroyed


  • If you’re working on your ERP in the cloud, you always have the hardware backup if there’s a problem with the internet connection
  • If you change your internet strategy at any time, you can easily take your ERP with you because it is also web-based

This is just a brief overview of the main features and benefits of each solution, and what works for one, will not work with another. If you have multiple small offices in various locations, for example, you might be best served by a cloud solution, but a larger operation with hundreds of users may be better served by an on-premise or hybrid model.

And it doesn’t always come down to cost. We often read that cloud is exclusively a much cheaper option and much quicker to implement, but this is not necessarily the case.

To find out more information about how SAP Business One can benefit your business please contact us directly by calling 01202 232268 or send an email to

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