15 Feb Cloud vs on-premise ERP: Which to choose and why
The choice between cloud-based and on-premise 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, but ultimately, the choice you make will depend on the needs and requirements of your business.
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 blog, we will take a closer look at the three options and some of the main features and benefits they have to offer.
First of all, here is a brief outline of the three models:
What is cloud-based ERP?
Cloud-based ERP is provided as a service and your company’s software and data is owned, hosted and managed by a third-party provider. You get access to this through a web browser, which is usually on a monthly subscription basis.
What is on-premise ERP?
This is normally managed by your IT staff and it’s installed locally on your company’s hardware and servers. You usually pay a one-time license fee and then 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’s also maintained on a server at a secure data center through a third-party host, much like having your own private cloud.
There is still an upfront license fee and you also pay monthly to ‘rent’ space in the cloud.
Main features of cloud-based ERP
- Because you are not paying for a license, 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. However, 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 the 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 is 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.
Main features of on-premise ERP
- On-premise solutions involve a large upfront cost for the license fee and is therefore considered a capital investment
- There may 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
- Despite the initial ongoing investment, the total cost of ownership is usually lower over the years
- You have greater control and flexibility to customize your system in any way that is necessary to ensure it works efficiently for your business.
However, customizations 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. However, this may be preferable to you if you’re dealing with lots of sensitive information
Main features of hybrid ERP
- There is an upfront cost for the license 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 the hardware on your premises
- You have the freedom of any customizations 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
This is just a brief overview of the main benefits which each solution provides. We hope this gave you a better in-sight into what you can do for your business, for it to run simpler and more efficiently.