Difference between Cloud and On-premise ERP

ERP (Enterprise Resource Planning) software solution is one which works with different business functions such as inventory management, customer management, human resources, and customer relationships, all taken into one system. Using the On-Premise technique, ERP can be deployed, and this also works with the cloud network providers that can also deploy ERP. Generally, ERP is hosted on the vendor’s servers and can be accessed through the internet while it is installed thoroughly on the organization’s server.

Importance of Choosing the Right ERP System

ERP is necessary for any organization's smooth and efficient workflow, and it helps them grow and survive in the changing market. Following are the key features of why it is important to choose the right ERP system.

  • Improved customer satisfaction

  • Scalability

  • Efficiency and Productivity

  • Regulatory Compliance

  • Data Accuracy and insights

  • Financial Techniques and market strategies

Difference Between Cloud and On-premise ERP Systems

Some key differences between on-premise and cloud ERP systems can be classified on cost optimization, features, and security purposes. One of the major differences is the deployment. On-premise ERP requires an installation and configuration strategy on their servers, which can be time-consuming and require technical expertise. On the other hand, cloud ERP is deployed and maintained by the vendor itself; hence, no configuration is required from the client side.

Talking about the cost, the On-premise ERP requires a sudden investment significant enough to sustain all the servers' resources, hence more cost. This also includes investment in hardware, software, maintenance, licenses, and expertise to resolve errors. Cloud ERP is generally a paid service run by vendors and provides subscriptions with different plans as per the requirement.

The most beneficial thing in On-premise ERP systems is that they can be easily customizable however anyone wants to; they have full access to each and every component of the software and every part of the server. Cloud ERP is less customizable and limited access to change only the necessary things.

The security issue is the most tricky one because even cloud vendors sometimes face security breaches. Talking about privacy, the On-premise ERP systems provide a more remote environment, far from the direct open internet. Hence it reduces vulnerabilities occurring due to lost login credentials. Here the company can implement its own security protocols, own techniques to resolve any vulnerable window, and information is not passed out of the organization.

How Does Cloud ERP Work?

Cloud ERP can be taken as a Software as a Service (SaaS) model because the ERP system is hosted on the provider’s servers and can be accessed anywhere in the world with the internet. Cloud ERP is highly scalable because it is cloud-based, and all required is a paid subscription for the service. The storage and servers are dynamically handled by vendors all across the globe. This system is helpful for small-level organizations and companies that want to quickly adopt enterprise resources plannings and solutions because it is quick to implement and does not require a big investment.

How Does On-premise ERP Work?

These ERP system solutions are generally used by experienced companies and larger organizations which have enough members to contribute, monitor, maintain, and resolve any issue that comes up during the working period. As this is highly customizable, it is preferred by big, sustained tech giants. They do not rely upon the vendors because they already have the expertise to build up On-premise ERP systems. Once the ERP model is formed, it is deployed on the company’s own server and offers greater flexibility. Organizations have strict security plans and highly important databases prefer On-premise ERP solutions.

Benefits of ERP Systems

ERP systems provide a large number of good tactics and numerous benefits to any organization. These are the key features that cannot be seen at a larger level but have a tremendous effect on the industry's growth because those small-scale techniques together benefit the whole company. Following are some of the benefits of ERP systems.

  • Efficiency improvement

  • Streamlined processes

  • Better decision power

  • Optimized resource management

  • Enhanced collaboration

  • Greater data security

  • Better protection against vulnerabilities

  • Scalability

  • Business Ideas and startups

  • Backups and finding lost data

How to Choose the Right ERP Solution for your Organization?

Choosing Cloud ERP systems for the initial phase of your small-scale organization is not necessarily important. Because On-premise ERP systems can help shortly to grow more quickly. The following are the factors that should be considered to choose the right ERP solution.

IT Infrastructure and Capabilities

Generally, companies with strong IT profiles can choose On-premise ERP, no matter if that organization is small scale but good expertise can bring On-premise ERP systems more powerful. If there is no IT expertise available or having a time shortage can look into Cloud-based ERP solutions.

Budget and Finance

As mentioned above, financial constraints are also important because a good investment is required to build up its own On-premise ERP system. This is a one-time investment, while cloud ERP systems are temporary and do not require large investments but time-based plans.

Business Size and Growth Plans

The current market strategy and proper investment planning will lead to good On-premise ERP solutions, which will ultimately help more than the Cloud ERP techniques. Investing in On-premise ERP systems is recommended once the organization has the IT expertise. Cloud ERPs are temporary and can be used up to a good extent but switching to On-premise ERP can be the smart move at expanding business levels.

Some more factors like user accessibility, mobility, data security, etc., also affect choosing the right ERP system for any organization. Both systems have their own advantages and disadvantages.


Both the On-premise ERP systems and Cloud ERP systems play an important role in the growing organization on a small scale. At a lower level, any industry would have good expertise in ERP solutions and planning, which they didn’t have initially. Hence they can start by using the Cloud ERP systems, which have the necessary expertise and market technique. Then gradually switching to an On-premise solution with its own market growth techniques.

Updated on: 08-May-2023


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