With numerous ERP options available, selecting the right system for your business can be overwhelming. One of the crucial decisions you'll face is whether to opt for a cloud-based ERP solution or an on-premise installation.
The fundamental difference between on-premise ERP and cloud ERP is apparent: on-premise solutions are installed locally on your company's hardware and servers, and managed by your IT team, while cloud ERP, also known as Software-as-a-Service (SaaS), is provided as a service. In this deployment model, the ERP software and data are centrally managed by the vendor in the Internet "cloud," accessible to customers through a web browser.
However, what may not be immediately evident is the significant impact the chosen deployment model can have on your entire business. To make an informed decision between on-premise and cloud-based ERP software, it's essential to consider several key factors. This blog will guide you through these considerations, helping you determine the best fit for your organisation's needs and objectives.
Cost Considerations: On-Premise ERP vs. Cloud ERP
Implementing an ERP system involves significant costs, and it's crucial to carefully evaluate the financial implications. On-premise ERP systems often require substantial upfront investments in software, hardware, servers, and infrastructure management. Additionally, companies lacking an experienced IT team may need to invest in additional personnel and training. Furthermore, maintaining on-premise systems demands dedicated IT resources and budgets to ensure continuous operation, including hardware maintenance and server room management. Upgrading an on-premise ERP system involves redeploying it across users' computers and re-implementing customisations and integrations from the previous software.
In contrast, cloud-based ERP solutions typically entail lower initial costs. Implementation involves tailoring the software to your requirements and accessing it through an internet connection. The responsibility for hosting, maintaining the IT infrastructure, ensuring system availability, data security, and seamless deployment of product enhancements rests with the cloud ERP provider. This liberates your IT resources to focus on innovation and business growth rather than the maintenance and management of on-premise systems. Moreover, cloud ERP offers a predictable, pay-as-you-go subscription model that simplifies cash flow management and planning.
The long-term savings from utilising cloud ERP accumulate significantly. According to an industry analyst study, comparing the total cost of ownership over a four-year period, cloud-based ERP can be 50% less expensive than on-premise ERP for a company with 100 employees.¹
Streamlined Upgrades and Continuous Enhancements
Customisation is an essential aspect of ERP software, but with on-premise solutions, these customisations are closely tied to the specific software deployment and pose challenges for future versions. When you choose to upgrade your on-site ERP software, all the previously implemented customisations are at risk of being overwritten, requiring your IT team to start the customisation process anew. This predicament often leads companies to avoid upgrading, resulting in the continued use of outdated technology. Astonishingly, research shows that around two-thirds of mid-size businesses are operating on obsolete versions of their ERP software.²
In contrast, cloud ERP solutions like NetSuite offer a different experience. The cloud platform on which leading cloud applications are built ensures that your customisations and integrations seamlessly carry forward with each update. As a result, you can embrace the latest and most advanced version of your ERP software without concerns about losing your tailored configurations. Cloud ERP providers consistently enhance their solutions, meaning you can take advantage of new features and functionalities as soon as they become available. This automatic and hassle-free upgrade process eliminates the need for additional investments or the fear of losing your customisations. With cloud ERP, you can confidently stay at the forefront of technology without compromising the unique configurations that optimise your business operations.
Enhanced Performance and Accessibility for Optimal Operations
Cloud ERP solutions offer significant advantages in terms of performance and accessibility compared to on-premise alternatives. The architecture of cloud software is purpose-built to deliver exceptional network performance, resulting in superior application availability when compared to traditional on-site ERP systems. With cloud-based ERP, you can experience optimised performance that adapts to your business needs. In the event of a surge in your operations, cloud ERP automatically scales and provisions additional resources to efficiently handle the increased workload. For instance, NetSuite guarantees 99.5% availability to its customers and has maintained an average uptime performance of 99.98% over the past 12 months. You can access real-time uptime performance information anytime at https://status.netsuite.com, demonstrating the commitment to reliability that surpasses the capabilities of a local IT department.
Furthermore, cloud-based ERP offers the advantage of real-time data accessibility from anywhere, at any time, through internet connectivity. This means your staff can securely access accurate information on laptops, smartphones, and tablets while travelling or working remotely, without incurring extra setup fees or ongoing expenses. The convenience and flexibility provided by cloud ERP enable seamless collaboration and decision-making, empowering your team to stay productive regardless of their location.
In addition to performance and accessibility, cloud-based ERP solutions prioritise robust security measures. Cloud ERP providers like NetSuite specialise in securing their systems and ensuring compliance with industry-standard data security certifications. They implement rigorous security protocols, disaster recovery strategies, and backup procedures that would be cost-prohibitive to replicate with on-site ERP solutions. By leveraging the expertise and dedication of cloud ERP providers, you can confidently safeguard your data and mitigate potential security risks, allowing you to focus on core business activities.
Accelerate Your ERP Deployment with Cloud Solutions
When it comes to deploying an ERP system, the speed of implementation is a crucial factor to consider. In this regard, cloud ERP stands out by offering clear advantages in terms of deployment speed. Unlike on-premise solutions that involve procuring and installing additional hardware, cloud ERP eliminates these time-consuming steps. With cloud ERP, you can swiftly roll out the system across multiple regions, subsidiaries, and divisions without incurring the associated costs of hardware acquisition and deployment. This translates into significant time savings for your business. On average, cloud ERP deployments can be completed within 3-4 months, whereas on-premise solutions typically take around 6-12 months to implement.
The agility of cloud-based ERP extends beyond deployment speed. It also enables seamless scalability, providing you with the flexibility to accommodate your business growth. Adding more users to a cloud ERP system is a straightforward process, as you can easily scale up your subscription to meet evolving demands. On the other hand, on-site ERP solutions often require provisioning additional hardware to grant more employees access, which can be time-consuming and resource-intensive.
Every business has unique requirements and considerations, making it essential to carefully assess how different ERP deployment options will impact your company. If you're interested in exploring the benefits of deploying a cloud-based ERP solution, we invite you to get in touch with us. Our team is ready to provide further information and guide you towards a successful ERP implementation that aligns with your specific needs.
Streamline your operations, enhance collaboration, and drive business growth with the agility and efficiency of cloud ERP. Contact us today to embark on your ERP transformation journey.
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1. "The TCO of Cloud Computing in the SMB and Mid–Market Enterprises; A total cost of ownership comparison of cloud and on–premise business applications," Hurwitz & Associates.
2. "Why Cloud Computing Matters to Finance," Ron Gill, CMA, CFM: Strategic Finance, January 2011.
