Cloud vs On Premise Pros and Cons for ERP Software

There are many pros and cons of on premise vs cloud, and when it comes to making the decision to implement ERP software, one of the main considerations is the debate between deploying in the cloud or on-premise. 

What is On-Premise deployment?

On-premise relates to the deployment of IT services through in-house resources and IT infrastructure. This is usually on the business premises and managed internally through a dedicated IT team which covers the maintenance and daily running of IT services.    

What is Cloud deployment? 

Cloud relates to the hosting of the same initial services through an external provider. This can be achieved in a variety of different cloud environments including public cloud, private cloud and hybrid cloud where users are able to access these services at any time and any place, via an access device (for example, a computer, laptop or mobile phone), requiring just an internet connection.

We look at the cloud vs on-premise pros and cons for ERP software, including the cost of ownership, deployment, security, and control. 

On-premise vs cloud: Cost of Ownership 

Cloud 

The cost of cloud-based ERP software usually comes as a subscription cost which is billed monthly, or sometimes annually, and provides a business with ongoing maintenance and support throughout their contract. This not only helps businesses to predict their spending more accurately but also helps to keep initial costs down due to the implementation being cheaper. In the on prem vs cloud debate, cloud solutions are generally considered cheaper than on-premise. 

On-premise  

On-premise ERP solutions usually have a much higher initial cost for businesses such as one-off licence fees, hardware, running costs, maintenance and hosting. Choosing an on-premise ERP solution could mean unpredictable spending, such as updates, modifications to the system and support throughout the duration of the contract. Implementing the system on-site at the business location and training users to utilise the system correctly can also come at an additional cost. 

Cloud vs on premise: Deployment / Implementation 

Cloud 

Deployment of ERP software through cloud-based services usually provides a quicker installation process. It requires a business to have devices and hardware in which they can access the software via the cloud. This takes a lot less time as opposed to an on-premise installation as the ERP software is hosted with the partner (vendor) rather than the business. Due to a quicker and less complicated installation process, this usually results in low initial investment.  

On-premise 

ERP software installed on-premise usually takes longer than cloud-based deployment; it can typically fall within the 150-200 days estimated by most software partners. Careful consideration is needed, as higher costs can be associated with the longer installation time and also the physical servers required.

On-premise vs cloud: Security 

Cloud

Security with cloud-based ERP software is the responsibility of the partner that a business chooses. This means that software and security updates are usually included in the monthly subscription price. With data and information being stored off-site, the partner will need to ensure strict security procedures and adhere to relevant data protection and security legislation. Although cloud security has been questioned since its emergence, continuous security advancements further close the gap as new technology enters the field. 

On-premise 

On-premise usually poses less of a risk to business data when stored on-site at a business’s location. However, this data is still susceptible to hackers and viruses like any company would, even without ERP software. The data security responsibilities lie with the business and continuous monitoring of the system must be ensured to maintain security.

Advanced backup and recovery strategies would need to be put in place to ensure the business can return to its operations should a loss of data occur. This can take time and additional investment to set these procedures in place. If your business is in a location where natural disasters are likely to occur, the security risk becomes higher due to an increase in the chance of your data being affected.  

Cloud vs on premise: Control 

Cloud 

When weighing up the cloud vs on premise pros and cons, the consideration of control will be another important aspect to consider. With cloud-based ERP solutions, the level of control you have is limited in comparison to that of on-premise ERP. The level of control within a cloud environment is more restricted due to most of the services being provided by your software partner.  

On-premise 

With on-premise ERP solutions, you have complete control over security, updates, modifications made and all hosting aspects alike.