On-Premise ERP vs. Cloud ERP vs.—Which Is Better?

For businesses that are looking to deploy an enterprise resource planning (ERP) system, choosing between a cloud-based solution or an on-premise one is a crucial decision.

Cloud ERP software systems have become increasingly common, with more and more vendors offering some type of cloud-based solution to clients. Many have also gone as far as to stop offering on-premise ERP systems altogether.

However, when it comes to small and medium-sized businesses, the conventional on-premise ERP system offers several benefits, which, until quite recently, was the go-to option in the industry.

Ultimately, the decision comes down to you, but it is a decision best made after understanding and weighing the benefits and drawbacks of each system, with respect to your workflow and resource allocation.

That’s why we’ve created this piece, where we will comprehensively weigh the pros and cons of on-premise and cloud-based ERP systems.

Deployment: On-Premise vs. Cloud ERP

The primary difference between on-premise and cloud-based ERP systems is in how they’re deployed.

  • On-premise ERP systems are locally installed on an organization’s own computers and servers.
  • Cloud-based ERP systems are hosted on the provider’s or the vendor’s computer servers. The client accesses the system using a web browser.

Pricing: On-Premise vs. Cloud ERP

There is also a significant difference in how the two ERP systems are typically priced:

  • While there are exceptions, cloud-based software is generally subscription-based, with monthly or annual charges, along with additional fees for updates, training, and support.
  • On-premise ERP system software, on the other hand, typically has an upfront license fee. The fee depends on the number of users and/or the size of the company. As with cloud-based systems, recurring fees for updates, training, and support apply.

Based on the pricing structures, on-premise ERP system software is usually taken on as a capital expenditure (an upfront investment). Cloud ERP systems, however, are taken on as an operating expenditure (additional overhead cost).

While cloud-based ERP software’s low entry fee is partly due to its popularity, the costs of the two systems ultimately converge.

On-Premise vs. Cloud ERP: A Complete Breakdown of Pros and Cons

In this section, we’ll provide an in-depth breakdown of the pros and cons of each type of ERP system software based on four primary factors:

  • Cost
  • Security
  • Customization
  • Implementation

Cost

The upfront investment and costs of hardware and IT for an on-premise ERP system may be seen as riskier by some, while the predictable costs of a cloud-based system are seen as more business-friendly. However, there is a good chance that businesses may end up spending more on a cloud-based ERP system over the course of its lifecycle. – Read More

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