Best ERP System for Business Growth: Cloud vs On-Premise

For many companies, the integration of an effective enterprise resource planning (ERP) system is a means to optimize costs and improve control over business processes. Managing a business’s operations is never easy, and, as the business grows, integrating and managing the different functions of the business using separated systems becomes more burdensome. These functions include finance, inventory, sales, HR, the supply chain, and reporting. An ERP system is designed to integrate all of these functions.

Investing in an ERP system is not the end of the decision-making process. The business must also determine the deployment method of the system. The common deployment options are cloud ERP and on-premise ERP.

Cloud ERP systems are maintained by the vendor and made available to customers over the Internet. On-premise ERP systems are maintained on the business’s IT infrastructure. Both options have their benefits and the best option is determined by a number of factors, including, resources available for IT and security, required customization, the size of the business, how fast the business is expected to grow, and costs.

At CodeChainTech, we strive to improve understanding of these solutions for our clients and integrate ERP systems where we see best fit. This guide attempts to compare Cloud ERP and On-Premise ERP to understand the applicability of each.

What Is an ERP System?

ERP systems are tools that help integrate the separate parts of a business. Normally these sections get separated due to the different business management tools implemented to cover each section. ERP systems are meant to capture and unify critical business data. They are designed to create a single place for the various business sections to collaborate, manage, and keep track of business functions. An ERP system can manage many functions, including

• Financials and accounting

• Human resources and payroll

• Inventory and purchasing

• Supply chain and logistics

• Manufacturing

• Sales and customers

• Reporting and analytics

Business decision-making processes can be improved by integrating the various business sections that an ERP system manages and simplifying the processes that were previously manual and increasing the accuracy of the captured data.

What Is Cloud ERP?

A cloud ERP solution is managed and maintained in the vendor’s data centers and is provided as a subscription or lease service instead of being purchased and installed on the client’s data centers. The vendor usually maintains the system’s infrastructure and a good bit of its security.

The Key Benefits of Cloud ERP

• Less of an investment in infrastructure

• Systems get implemented quicker

• Access to the system from anywhere, at any time

• Easier to make the system grow as the business does

• Automatic updates to the system

• Less work required to maintain the system internally

Cloud ERP is especially popular with fast-growing businesses, start-ups, and small- to medium-sized enterprises due to these reasons.

What Is On-Premise ERP?

An on-premise ERP system is installed and operated on servers owned or controlled by a company. The company takes on the burden of system control and administration, as well as maintenance, upgrades, and security.

This model of deployment is very useful for businesses that require a lot of customization and control or have specific compliance and data management demands.

Key Benefits of On-Premise ERP:

• Greater control over infrastructure/system

• Greater control and flexibility over systems

• Greater control over data/system

• Greater relevance/integration with specific systems/solutions

• Greater relevance for companies with a qualified IT staff

On-premise ERP is most often utilized by large companies that have complex and large business/IT infrastructures, have well-defined and established business processes, and have more restrictive business practices.

On Cloud ERP vs. On-Premise ERP

The primary difference between cloud ERP and on-premise ERP systems is the way the systems are deployed and managed. However, there are many other differences as well.

1. Cost

Cloud ERP systems are typically less costly to implement, as companies do not have to build and manage their own servers and systems. They typically just pay a subscription and/or licensing fee.

On-premise ERP systems are more costly to implement and own, as companies incur the costs of servers, system infrastructure, and system licensing. In addition, companies incur more costs for system maintenance, upgrades, and IT costs.

Best choice for reduced initial costs: Cloud ERP

2. Implementation speed

Implementation typically is quicker for cloud ERP options because the cloud vendor hosts most of the required systems/infrastructure. Implementation speed is more dependent on the level of needed customizations, the integrations and data, and the particular business requirements.

Best choice for faster implementation: Cloud ERP

3. Flexibility

Growth generally equates to more employees, more locations, more customers, and more transactions. Growth also tends to complicate the day-to-day business operations. Cloud ERP is good for considering all of this, because most companies just have to add more users, storage, and modules. Typically, companies do not need to expand physical infrastructure.

On-premise ERP may require additional hardware, more licenses, and more resources for expansions.

Best choice for maximum expansion: Cloud ERP.

4. Customization

Most cloud ERPs have good flexibility and can be adjusted and even extended easily to solve most business challenges. The flexibility and level of customization are dependent on the provider and the platform.

On-premise ERP systems give organizations more control of their system environment and, as a result, more support for customization for specific workflows.

Best choice for customization: on-premise ERP

5. Control of Data and Security

Cloud ERP provides companies with great security measures such as backup encrypted data and access controls. However, data is still outside the company's physical infrastructure.

On-Premise ERP offers companies control over data security by letting them decide where data is stored and how the supporting infrastructure is built. This is essential for companies with specific security or regulatory issues.

What ultimately matters is the configuration. Regarding security, there is no clear winner between either model. It is critical to explore the technology and security practices for both models.

6. Maintenance and Updates

Cloud ERP takes the burden off internal teams by having the provider maintain the infrastructure and perform all necessary updates.

The burden falls on the company with On-Premise ERP, as they have to handle all support services and plan for updates and backups.

Preferred model for easier maintenance: Cloud ERP

7. Accessibility

ERP systems that are based in the cloud can be used virtually anywhere, making them ideal for companies with remote, distributed, and hybrid workforces.

On-premise ERP can be made supportive of remote work but usually requires additional work on the network, security, and infrastructure.

Best option for flexible access: Cloud ERP

Cloud ERP vs. On-Premise ERP Comparison 

Which ERP is Best for Business Growth?

There is no singular ERP deployment model best suited for an individual business. The most advantageous model will depend on the specific present and future circumstances of the business.

Cloud ERP is more advantageous if:

• The business is a startup or gaining clients.

• The business wants to limit initial investment in infrastructure.

• The business employs people in multiple locations.

• The business wants to implement the model quickly.

• The business is expected to grow quickly.

• The business has a small IT workforce.

You want the Cloud ERP vendor to take responsibility for administering, maintaining, and updating systems.

Flexible scaling is the biggest benefit of Cloud ERP, according to most companies.

On-Premise ERP May Be More Appropriate If:

• Your organization has complicated business processes.

• You need significant system customizations.

• You have a competent and extensive internal IT workforce.

• Your organization needs more direct control of the ERP system.

• You have significant IT resources.

• Your organization is in a regulated industry.

On-premise ERP is a viable option for extensive and highly specialized organizations.

ERP Developments to Watch

As technologies continue to evolve, the rapid development of intelligent, integrated business systems causes ongoing change to ERP technologies and systems. Some developments in modern ERP have included artificial intelligence, automation, advanced analytics, mobile, and cloud.

Some other major developments in ERP are

- Intelligent, Automated ERP Systems

• Automated Finance and Admin Processes

• Mobile ERP

• Integrated CRM and eCommerce

• Industry-Specific ERP

• Real-Time Reporting

• Cloud ERP Solutions

Modern ERP systems are the foundation of business management and operations improvement.

CodeChainTech and ERP Solutions

When it comes to evaluating ERP systems, the differentiation of offerings is not a major consideration for most organizations. Rather, the key focus areas are evaluating business processes, future requirements, and resource and integration considerations, and the model of choice.

CodeChainTech evaluates and picks an ERP system that caters to the exclusive requirements of the business.

CodeChainTech offers the following services related to ERP:

• Cloud and On-Premise ERP

• Custom ERP

• ERP consulting and requirements definition

• Integration and data services

• ERP assessments and support

ERP services offer businesses an ERP system and the required support to carry out their business operations regularly.

Final Thoughts

The most important step for business growth when selecting an ERP system is addressing the specific requirements of the business in relation to its processes and budgets and selecting an ERP system that meets business goals. Of the existing options, many businesses that are in a growth stage would benefit from a cloud ERP solution due to the relative ease of flexibility, scalability, and the reduced burden of deployment and infrastructure. Conversely, businesses that are larger in size and have more complex requirements would benefit from the level of control and owned infrastructure that is offered by On-Premise ERP.

Prior to the selection of an ERP system, a business must perform a comprehensive evaluation of the various factors that would impact the overall system cost. An ERP system should have the flexibility to evolve and grow with the business and, more so, solve the immediate challenges of the business.

At CodeChainTech, we assess, design, and implement desired ERP systems for businesses. Businesses that integrate apt technologies and ERP systems enjoy improved operational processes and increased effectiveness in their decision-making, and they also have a more solid foundation for achieving prospective growth.