Today’s businesses face pressure to remain competitive in an ever-changing landscape. Data is a crucial asset for companies shifting to a digital environment. With information flowing back and forth from different channels, companies need technology capable of integrating data into a centralized platform. That’s led to an explosion in the use of enterprise resource planning (ERP) software. One big question enterprises work to answer is whether to go with a cloud ERP vs. an on-premises setup.
What is an ERP?
ERP platforms help organizations manage information by integrating all facets of the enterprise into one comprehensive system. They help businesses streamline and automate time-consuming manual tasks, which helps boost the productivity of employees working in areas like:
- Accounting
- Finance
- Production
- Customer Service
- eCommerce
- Warehouse
- Inventory
- Business Analytics
An ERP system gives business leaders clearer visibility into operational functions. They also make it easier to see challenges and find new opportunities for process improvements. Employees have ready access to data needed to fulfill their job roles. ERP software also comes with reporting and forecasting tools to help company leaders make critical business decisions about the direction of their enterprise.
How Does a Cloud ERP Differ from On-Premises ERP?
The primary difference between an on-premises ERP and a cloud ERP is the method of information storage. An on-premises ERP gets deployed on an organization’s local servers and hardware. Businesses have complete control over all information. However, that also means the company maintains full responsibility for addressing any issues around security or updates.
Cloud ERP software works similarly to an on-premises instance. An ERP provider hosts all servers and data storage for the ERP. Users access the ERP by logging into a website. Many organizations opt for cloud ERP platforms to lower maintenance costs, provide easy access to employees, and have more flexibility over configuration.
Below are more details about key differences between an on-premises and cloud ERP instance.
Maintenance Costs
If you choose an on-premises ERP, your organization will need to foot the up-front costs of installing the software. Smaller organizations without an IT team usually hire a partner to assist them in managing and deploying the ERP. It takes longer and costs more to install an on-premises instance.
Cloud ERP platforms get deployed to the cloud, removing the need for organizations to purchase and maintain expensive servers and hardware. Businesses typically pay a subscription fee that covers the cost of accessing software and paying the ERP provider to perform server and data maintenance. Cloud ERPs take less time to deploy versus on-premises.
Customization
An on-premises ERP platform gives organizations complete control over how they customize the application. However, making changes to fit the needs of a company can delay ERP implementation. If there is an update to the platform, your organization must allow time to update the system, which can lead to disruptions in service. An on-premises ERP may not have real-time data available for employees.
If you go with a cloud ERP system, it receives real-time updates with minimal downtime for your company. Your provider also assumes responsibility for performing any security patches to keep your instance secure. They can also make any requested changes to your ERP to fit your organization’s business needs.
Scalability and Integration
When working with an on-premises ERP implementation, you must consider the need to integrate with an existing legacy system. Any missed details could result in users being left hanging while technical support works to resolve the issues. For cloud ERP systems, the service provider takes care of integrating all moving parts to ensure seamless integration with existing company resources.
Your organization can expand the capacity of your ERP based on the growth of business operations, making them a more flexible option. Your company would need to purchase additional hardware and server resources to accommodate those exact needs for an on-premises ERP, not to mention the time it would take for your IT team to implement the changes.
What Does ERP Implementation Involve?
Planning is essential whether you’re considering an on-premises ERP or a cloud ERP implementation. You should construct a roadmap, typically a checklist, that covers the tasks that go into moving the project along. Some of the high-level steps to consider during the process include:
Discovery and Planning
What business problems are you trying to solve? What condition is your data currently in, and how much work would it take to move it to an on-premises ERP or cloud ERP implementation? Speak directly with the teams using the ERP platform to get a sense of their needs. This is also the time to set timelines, budgets, and finalize management plans.
If you’re going with an on-premises ERP, look at the hardware costs and the IT department's implementation time. For organizations using an outside provider, go over the costs of paying for the installation and maintenance of your ERP instance. If you decide to go with a cloud ER provider, factor in the monthly or yearly costs.
Set Action Plans
Come up with a plan for getting your ERP system deployed. Go over the technical details of any customizations. If you’re doing an on-premises deployment, ensure the IT team receives those plans promptly. For cloud-based applications, make sure you have enough licenses and a training plan for users.
Implement the Platform
The final part of setting up an on-premises or cloud ERP implementation is getting the final details in place. Complete all data migrations and testing while making sure the production environment is ready to go. Once that’s done, it’s time to flip the switch and start working on your new ERP platform.
Receive Guidance on Your ERP Implementation
Internet eBusiness Solutions can provide direction and support on setting up your new ERP platform. Learn more about how we can help by reaching out to one of our experts.
