Key Takeaways
- On-premise ERP provides control at the cost of upfront investment and IT burdens.
- Cloud-based ERP advantages include predictable costs with scalability and remote access.
- Both models can meet security and compliance needs with proper planning.
- Cloud ERP tends to shine for growth and distributed organizations.
Enterprise businesses need platform solutions that consolidate resources and improve visibility and collaboration. Many solutions present themselves, but the choice can first diverge on a single point. Should you keep everything on-premises, or should you choose a cloud-based system?
Both models have their merits and drawbacks, so take a few minutes to explore both in order to make a more informed decision.
What Is On-Premise ERP?
On-premise refers to an ERP solution that keeps all of the servers and infrastructure under your direct, physical control. Typically, this means housing infrastructure at your business site, but it could also refer to a private data center that is owned and/or managed by your organization.
With on-premise, your own IT staff will take care of hardware and software. They will manage patches, backups, and upgrades while monitoring performance and planning for disaster recovery.
On-premise ERP was the industry standard for a long time, but over the last decade, trends have moved away from this model.
What Is Cloud-Based ERP?
Cloud-based ERP moves your ERP solution into the cloud. This means that your software runs through cloud services. The physical hardware and infrastructure are managed by the cloud provider. They deliver updates and manage data.
Cloud access runs through internet connections. You can access your ERP anywhere you have internet access, but you need internet connectivity to use it. You will still need support, but with cloud ERP, you can look into specialized Acumatica support that streamlines adoption and long-term management.
It’s worth noting that Acumatica was designed specifically for cloud environments.
Advantages of On-Premise ERP
Despite the growth of cloud adoption, some organizations still prefer on-premise systems. Evaluating these benefits helps clarify how they compare with cloud-based ERP advantages and cloud erp disadvantages.
Full Infrastructure Control
You own and control all of the hardware and infrastructure for your ERP in this model. Best for strict regulatory frameworks and highly customized IT policies, having control over hardware, software, data, security, and upgrade timing empowers IT strategies and management styles.
One-Time Licensing
For the most part, on-premise ERP constitutes an upfront cost. In many cases, you can purchase a single, one-time license for your server infrastructure. Similarly, you have a single cost for your hardware in the beginning, and it can then run for an extended period.
While there will be ongoing costs, most of the expense comes in planned chunks, reducing monthly, quarterly, and annual costs for your ERP.
Customization
Because you control everything, you can take customization as far as you like. You can tweak hardware interaction, specifically control data storage and access, and meticulously design your ERP operations.
If your company has highly specialized operations, such a level of flexibility may seem appealing; however, you need to weigh these capabilities against the agility and scalability that often define cloud-based ERP advantages. Cloud-based installations still offer a great deal of Acumatica customization.
Disadvantages of On-Premise ERP
When considering an on-premise implementation, it’s important to keep these drawbacks in mind.
High Upfront Costs
On-premise models frontload costs. You can lower monthly fees, but the financial barrier to entry spikes as a result. On top of that, the high upfront costs do not eliminate ongoing maintenance expenses. You still need to pay for support staff and eventual upgrades.
Maintenance Burdens
In fact, maintenance costs for on-premise ERP can easily exceed cloud access fees. Your IT will need to run patches and maintain security. They will also have to keep up with backups and compliance.
Inevitably, hardware will require repairs and upgrades, all of which cost money. As far as long-term operational costs, there are no guarantees that keeping things on-premises will save money compared to using the cloud.
Complexity
As you take advantage of customization, you will introduce complexity to your build. This is multiplied by complexity of hardware and infrastructure. As a result, upgrades are likely to come with downtime. Changes typically introduce learning curves and growing pains. Customization can lead to conflicts, and there will always be budget constraints.
Cloud-Based ERP Advantages
While keeping ERP on-premises offers plenty to consider over potential cloud erp disadvantages, cloud designs dominate many industries. A handful of advantages will show you why.
Low Upfront Cost
The barrier to entry for a cloud ERP solution tends to be low. You don’t need as many IT resources, as you are not building infrastructure from scratch. In most cases, you can start paying a transparent monthly fee, and you gain access to your platform.
Some models might have startup fees that exceed the typical monthly or annual payment, but even in those cases, costs are usually dramatically lower than on-premise ERP.
Anywhere Access
If you have internet connectivity, you can use your ERP. This prevents limitations based on geography or even network position. It makes access much easier, and your teams can get more value from the ERP with improved access.
Work-from-home and remote options are much easier to offer and manage from a cloud platform, which is another of the cloud-based ERP advantages.
Scalability
Upgrading on-premise ERP requires hardware purchases and major launches. Upgrading in the cloud means expanding your service tier. Usually, a few button clicks solves the problem.
This scalability works in two directions. If you need to lower scale (especially for seasonal business models), cloud solutions easily accommodate you.
Cloud ERP Disadvantages
Cloud infrastructure dominates the modern landscape, but it is not ideal for all cases. A handful of disadvantages do exist and could push you toward on-premise ERP.
Recurring Fees
Subscription fees never end. While these costs are predictable, they create opportunities for savings when you run things yourself. It’s also likely that subscription fees will rise at some point in the future.
While many businesses still find that cloud-based ERP advantages outweigh these costs, long-term financial planning should always take these recurring fees into account. A qualified expert Acumatica ERP business consultant can help you build a long-term success plan.
Internet Dependency
Anywhere access creates strong benefits, but it comes with a catch. If you lose internet connectivity, you lose your ERP. Internet outages can become crippling for organizations that build critical workflows around ERP solutions.
You can solve this issue with redundant internet options, but that increases the regular costs associated with cloud ERP.
Reduced Control
With cloud solutions, you have no direct control over hardware and software. This can create discomfort and distrust for some operational models. If you need more meticulous control, or if compliance standards make cloud solutions unviable, then control becomes a deal breaker.
However, many organizations discover that the reliability, scalability, and support associated with cloud-based ERP advantages compensate for this reduced level of direct control.
Consider Acumatica Support With Etticus Solutions
Etticus Solutions is a partner offering specialized Acumatica support. As a cloud-based ERP, Acumatica offers many benefits. Paired with Etticus expertise, you can utilize powerful customization for a complete ERP solution. Contact us today to learn more.
FAQ
Is cloud ERP secure?
Yes. In many cases, cloud ERP is more secure than on-premise ERP solutions. You have to vet your provider, but if they are up to industry standards, you can expect thorough, reliable security.
The nature of cloud design builds redundancy into your infrastructure and data. As long as data is properly encrypted, it remains safe, and you can recover it as long as you have access to the internet.
Which model is more cost-effective in the long term?
The answer depends entirely on system designs and business models. For an organization with sustained, rapid growth, cloud will likely save substantial money over time, as cloud upgrades tend to cost far less than on-premise upgrades.
For slower growth, on-premise ERP models can cost less, but it still depends on your level of support, update schedule, and more.
You may ultimately determine that the flexibility and predictable budgeting associated with cloud-based ERP advantages simplify long-term planning.
Regardless of cost-effectiveness, cloud model budgets are almost always easier to predict.
What about hybrid models?
Hybrid models do exist and merit exploration. Hybrid systems may create more robust data protection and access. They also open up unique customization options.