The search for an ERP (enterprise resource planning) infrastructure that fits your business is a herculean task. It’s never easy because there’s no designated right software, really. There’s not even one direct way of predicting long-term ERP system specifications due to diverse, changing business needs.

But as you consider your choices, you’ll be narrowing your options down to two major implementation types: cloud or on-premise ERP.

In many cases cloud solutions may be more cost effective vs. on-premise ERP, but that “depends.”

The Advantages

The cloud is basically a software hosting service, meaning that a remote computer or server is doing the heavy lifting. Hence, the user gets the end-product, without investing in expensive infrastructure.  You can run a powerful software that would’ve otherwise taken a powerful in-house computer to host.

It’s a trickle-down effect from there.

Cloud software architecture targets for maximum performance. As such, you may expect a smoother experience. Cloud service providers also employs stricter security protocols in safeguarding your data. These are on top of the universal access, no installation, and easy rollout, which are the hallmarks of a cloud service.

One thing that you may encounter in cloud applications is sometimes called Software-as-a-Service (SaaS). SaaS is a type of cloud computing, a Netflix-esque subscription where you pay for access.

SAP vs. Oracle Case Study

SAP and Oracle both invest heavily in cloud technology. However, our client was skeptical about cloud scalability and unsure if the products were mature and proven.

The Disadvantages

There are internal and external issues that can limit cloud applications. At the top of internal problems is a cloud outage. If your business relies on having uninterrupted access to customer information and financial data, loss of connection is highly detrimental.

Security is another contentious issue for cloud applications. To your advantage, cloud computing makes your data accessible anywhere with an Internet connection. To your disadvantage, it’s within reach of hackers.

With the number of cyber-attacks recently, you may not be confident in uploading business data on the Internet. You may not even be so confident about trusting someone else with your data. It should be noted that cloud software providers are addressing this issue head-on, spending massive amounts on bolstering security.

Hence, the accessibility is its biggest advantage and disadvantage.

As for external issues, your Internet connection will be a point of contention. No Internet, no cloud service. Furthermore, it may not be viable to run a performance-intensive application over the cloud. It would most likely mean that you have to subscribe to a more expensive SaaS plan or Internet package.

One other factor worth noting is that many cloud applications aren’t as flexible. If you depend on offering unique services, these cloud applications may seem rigid and not permit the flexibility your business demands.

Where Cloud and On-Premise ERP Meet

Cloud applications aren’t the complete solution, yet. There are still holes in many programs.

Let’s talk about the costs. This is the biggest pull for most cloud users, but is it as affordable as providers make it out to be?

While you may not pay for new infrastructure or hefty licensing fees, SaaS subscriptions still command considerable costs. When compounded, the costs may equal to what you would’ve spent on on-premise ERP.

There’s also data transfer cost, which is primarily about outbound transactions. Most cloud providers charge on a GB basis. So, if you regularly download documents, those are expenses on top of your subscription fee. In addition, if you’re not getting a complete cloud service, you may not get all the features you’re looking for from the software.

The Take-Away

In the end, it’s not always an either-or situation. One platform doesn’t offer everything, while the other may be too expensive for SMBs (small-to-medium business). Convenience and streamlining aren’t the only things that matter, because you’ll be sacrificing an awful lot to possess these software qualities. This is why hybrid systems exist, where for every compromise, there’s a cloud or on-premise feature or bolt on that can make up for a feature loss.

Each platform has its strengths, as well as drawbacks. But your priority must always be your business’s wellbeing, and what system fits your needs the best.

What you can do is to confer with an independent consultant like Panorama Consulting to help you identify a suitable solution for your business. Let us advise you whether cloud applications, on-premise ERP, or a hybrid system works best for you.

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