Comparing Cloud ERP with On-site ERP: Which is Better for Your Business?

One of the most integral steps in choosing an ERP system for any business is deciding between traditional on-premise and cloud-based deployment.

As its name implies, an on-premise or on-site ERP system is installed locally on an organization’s computers and servers and subsequently managed by company IT professionals. Cloud ERP systems, meanwhile, store all software and related data on the internet. In this case, it’s the ERP vendor who manages the system, and customers can access it through web browsers or dedicated apps in turn.

Understanding the advantages and disadvantages of each ERP deployment model is a good place for business owners to start discerning the optimal choice for their company. Read on for a detailed rundown of the pros and cons of cloud-based and on-site ERP.

Pros and Cons of Cloud ERP Systems

Cloud ERP systems are currently enjoying an unprecedented rate of adoption among businesses. The following benefits, in particular, mostly account for the mounting popularity of cloud solutions:

• Less expensive upfront – Cloud ERP systems are cheaper to set up because they don’t require a company to have its own servers or on-premise technological infrastructure. Subscription fees for these systems also typically include support, upgrades, and maintenance. This means that the company won’t have to recruit and train a dedicated IT team to manage the system.
• Fast deployment and maintenance – Because cloud-based systems are hosted and deployed by the vendor, they can go live in a fairly short amount of time. Updating and implementation are generally quick and efficient, with little risk of functionality problems or system outages.
• Accessible from any location – Cloud-based ERP systems are ideal for companies that support remote work, whether in full or in part. Because these systems are accessible through mobile apps or web browsers, teams can work on their tasks seamlessly from wherever they are instead of having to report to a main office.
• Superior scalability – Expanding businesses need software systems that can easily be scaled up to do more work and incorporate more complex processes as the enterprise grows. Cloud ERP systems are designed to do just that, as they’re built for flexibility and can easily manage multiple business units at once.

These many benefits don’t mean a cloud solution is the right choice for every company, however. Certain drawbacks may cause certain businesses to reconsider choosing a cloud-based ERP system, such as:

• Dependent on internet connectivity – A powerful, stable internet connection is a must for organizations running cloud-based ERP systems. Since it’s impossible to access these systems without internet connectivity, companies that employ them must also make sure to choose reliable and consistent internet providers.
• Recurring payment model – Cloud-based ERP systems are considered software-as-a-service (SaaS), which means that companies must pay regular subscription fees for access to the system. For some business owners, these monthly or annual fees represent an unwelcome ongoing expense.

Pros and Cons of On-Site ERP Systems

On-site systems were once the default ERP option for businesses the world over, and many companies prefer them to this day. Features of these systems that generally find favor with businesses include:

• Perpetual software license – Many business owners prefer to own their software rather than rent it. While on-premise systems tend to be more expensive than online solutions upfront, some companies may prefer to put down a large lump sum rather than paying frequent subscription fees to maintain access.
• Extensive customization capabilities – Because on-site systems are housed on a company’s own servers and maintained by local IT staff, it’s possible to customize them extensively. This is an especially crucial feature for businesses with highly specialized needs, such as those in niche or underserved sectors.
• Maximum control over system security – On-premise ERP systems offer businesses the highest possible degree of control over company data and security. The company’s IT team is fully responsible for implementing the system’s security measures, controlling user permissions, and other essential tasks.

While some companies may view certain features of on-premise systems as highly beneficial, others might see the same features as major drawbacks. The following challenges, for instance, are heavily associated with on-site ERP:

• Steep upfront cost – On-site ERP systems ask for a high upfront financial investment that may be out of reach for small-to-medium enterprises. Companies may also have to shoulder additional fees for IT staff training, maintenance, and support of the system over time, and these may become especially expensive for old and outdated systems.
• Lack of flexibility – Demand for flexible or remote work options is higher than it has ever been. Companies running legacy systems that require their staff to be on-site can’t claim to offer such opportunities to their current or prospective employees. These organizations may thus miss out on opportunities to hire talent from beyond local borders.

At the end of the day, the right ERP deployment model for you will depend on the size, industry, and specific needs of your business. If you’re unsure which system is the better choice, consider seeking advice from a capable partner like ANSI, one of the foremost business solutions providers in the Philippines. Contact us today and we’ll happily help you elevate your enterprise with state-of-the art ERP systems.