Enterprise Resource Planning (ERP) systems have been circulating for decades. As companies continue to expand and choose to scale through digital transformation, ERP’s are becoming more and more common.
While the need to implement a new ERP software has become rather obvious, many organizations still struggle with the dilemma of where to begin their software journey: on-premise or on the cloud.
When it comes to comparing an on prem server vs cloud software, there are pros and cons for both. It boils down to understanding your company’s goals and objectives as well as security and compliance regulations that can deter you from using specific software applications.
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What is On-Prem Software?
On-prem or on-premise software is a system that is physically installed and located on-site of a company. All applications, systems, and hardware are housed within a physical server.
Businesses who implement this software monitor their own data center that they privately own and control as well as maintain.
Often found with businesses that are highly regulated, where having in-house servers and a tech stack provide a greater protection against fraudulent access than a cloud infrastructure.
On-premise infrastructure, while necessary in some cases, are becoming more rare due to the associated costs with the management and maintenance of a legacy server.
From the get-go, an on-premise system requires hardware, software licenses, integration capabilities, and employees to keep the system in check and monitor any issues. Not to mention incorporating a budget to include upgrades and maintenance for when something doesn’t function properly.
What is Cloud Software?
A cloud ERP is quite different from that of one on-premise. Most evidently is that instead of hosting on-site, a third-party provider will host software for you. It’s a great option for companies who don’t need all the bells and whistles at the beginning, but want the option to add as they grow and scale.
The beauty with a cloud-based choice, like NetSuite, there are no capital expenses and the businesses only pay for the resources that they use. It has a licensed subscription cost where you can slowly invest in certain resources as you notice quick growth and expansion.
Data on the cloud is backed up regularly and requires no additional help thanks to automation. And once implemented, it’s ready to use since everything is already configured from the get go. Of course you will still need to think about working with a partner to help you with the complex aspects.
Maintenance is also a thing of the past with cloud deployment, since most cloud vendors have automatic yearly updates. While the system can break down, you don’t have to add an extra budget and time for repairs.
For companies who have a large volume of data, cloud storage is ideal as there aren’t any limits to how much you can house.
ERP systems have traditionally been hosted on-prem, but with recent developments in private and public cloud services, companies can easily move onto the cloud for a better cost-effective solution.
Save money on installation costs and instead of incurring unforeseen costs, you have a recurring contract that is charged on a yearly basis.
On Prem vs Cloud
As you’ve probably noticed reading up until now, there are quite a few differences between on-premise and cloud software. There is no right or wrong answer, the final decision is based purely on your needs and what you’re looking for.
We’re here to help you out and showcase those differences.
Deployment
• Cloud
Information is hosted in a data center by a third-party service provider and customers can access these resources whenever, wherever they want.
Cloud users easily log in via an internet connection and enjoy stress-free access to all applications available within the account. This can become an issue whenever there is a disconnection with wi-fi or internet.
And, as mentioned above, since the system is hosted externally, you never have to worry about compatibility, upgrades, and hardware - these are all taken care of for you.
• On-Premise
Everything is hosted in-house within the IT infrastructure of the company. They are then responsible for maintenance, installation, and applications that are required by employees.
Implementation can take a bit longer than that of the cloud due to the time-consuming process of installation hardware on servers and on each individual laptop.
If there ever is a connectivity issue, your company is in good hands as you don’t need the internet to access your software.
Cost
• Cloud
For a deployment on the cloud, there is the licensing cost, followed by monthly subscription payments. This is incurred as an operating expense, and can add up, but remember there is no need to budget for maintenance and support services.
The flexibility within a cloud system also means that you pay for what you use. In the beginning you may not need all the customizations and modules, but as you grow you will always have the opportunity to add certain features.
Unless there are specific vendor changes, cloud costs are relatively predictable and cover licensing, upgrades, support, and data backup.
It’s important to note, that cloud ERPs can still be costly in the long run as while the upfront investment is low, the additional customizations throughout the course of its life can add up.
• On-Premise
There are a lot of upfront costs to consider when deploying on-prem: installation, ongoing costs of servers, hardware, power consumption, and space are just a few to consider.
An on-premise solution can have a lower total cost of ownership (TCO) than a cloud system as you’re only paying for user licenses in the beginning.
Security
• Cloud
Security will always be on the top of any company’s list. And many organizations feel hesitant to go with the cloud because of this particular factor.
Over the years there have been published accounts of security breaches within the cloud, but it’s crucial to note that this can happen anywhere.
Cloud data centers employ security measures that are well beyond the affordability of businesses. Meaning your data is more secure in a cloud data center than a physical server.
• On-Premise
Depending on your industry (banking and government require an extreme high level of security and privacy), the on-premise environment is the more sensical choice. Companies are in control of their data and everything is managed internally.
This is often more important and trumps the price and maintenance.
Compliance
• Cloud
When shopping around for a cloud solution, do your due diligence and ensure that your third-party vendor is up to code and is compliant with all mandates that concern you.
Typically speaking, the well-known companies are compliant, however, the security of sensitive information is of the utmost importance and must be set in stone.
• On-Premise
Due to certain regulatory controls (HIPAA for healthcare, FERPA for education), on-premise software is the choice as these industries must remain compliant at all times and know exactly where to find their data.
Data
• Cloud
Companies tend to move to the cloud for data storage and gain full control over their data and reports.
It can occur, sometimes, that if something does happen - unexpectedly - your third-party vendor has the data and encryption keys, so that would mean you won’t be able to access that data until the issue is resolved.
• On-Premise
An on-premise software gives companies complete control over their hardware, data, platforms, configurations, upgrades, and system changes.
This is ideal for organizations who need that control, such as the regulated industries mentioned above. These extra privacy concerns are generally why certain industries and companies don’t move towards a cloud application.
If you’re currently deployed via an on-prem solution and ready to move towards a cloud solution, here at GURUS we know how important it is. Give us a shout to learn more.
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