Cloud V/s OnPremise ERP


The Enterprise Resource Planning (ERP) structure of an organization forms the basis of data collection and analysis which determine a series of business decisions taken regarding the product cost, marketing strategies, and service delivery. Currently, two methods of executing ERP are available: On-Premise ERP and Cloud ERP.

On-Premise ERP
On-Premise ERP involves the installation of servers (for data collection and processing) within the physical locus of the office which are taken care of by the IT department of the company.

Cloud ERP
In the Cloud-ERP structure (also known as Software-as-a-Service/SaaS), the vendor’s cloud computing platform is used to process the data of the company. The company accesses and regulates the server through web-browser.

Differences between On-Premise ERP and Cloud ERP

The Physical Cost: Hardware Cost

On-Premise ERP requires the ownership of hardware and its upgrading consistently. This incurs a large amount of upfront expenses. The indirect costs include the training of an IT team which will be capable of managing the hardware and software efficiently.

In Cloud ERP, the hardware and training costs are eliminated. Since cloud system is under the care of vendors, the customers are generally not involved in the updating and upgrading of the system. The vendors possess an improvised idea of issues that might come up, owing to the access to different types of systems and company requirements. This prepares them to deploy the best solutions in a short period of time.

One of the recent concerns with respect to On-Premise ERP is the gradually increasing cost of licenses. Previously, the companies had to purchase a license for the ERP software. However, now there are subscription models available where a monthly payment option is provided.

Gartner report exhibits the shifting of preferences from On-Premise to Cloud ERP, due to the major factors including cost. It predicts that by the year 2018, a minimum of 30% of the service-oriented companies will shift a large part of their ERP apps to the cloud platform.

The Time-Limits: Uptime and Productivity

In On-Premise, you will have to find out the amount of time the system will be available for the applications. Generally, in Cloud ERP systems, a minimal of 99.9% uptime is provided. While enquiring about this, make sure you catch two uptimes: the server uptime and system uptime. While your server might be up and running for a long time (server uptime), your organization will only be able to use it, provided it is broadcast across the system.

Maintenance: Updating and Upgrading of the System

In On-Premise ERP, the time taken for upgrading the system will involve the IT teams’ re-arranging the system throughout the users’ networks and working on the personalization and integration which were previously available on the software. This occurs because the customizations are attached to the current software deployment and with the launch of new product updates, the previous personalization will be swept away, requiring the IT team to begin from the starting point again. This has led many a companies working on On-Premise ERP system to cling to outdated technologies.

In Cloud ERP, the upgrading is executed by the vendor such that no system changes have to be resolved- the previous personalization is kept intact. This permits the IT team to divert its energies into the growth and development of the company than into keeping tabs on On-Premise structures.

Performance: Versatility and Accessibility of the Structure

Added to the presence of all-time system availability, the Cloud ERP is a dynamic model which squeezes or expands depending on the running needs of the company. When there is an amplification in the company, the cloud ERP involuntarily adapts and supplies resources and tools which might be required to handle the rise. Such a versatile structure suitable to the changing needs of the company can be found in Cloud ERP, while the On-Premise ERP led by local IT resources is affected with the limitations of human and technical assets.

In a cloud-based ERP, the client has access to real-time data through the intranet or internet. The users thus have at their fingertips, the latest trends and happenings of the company- accessible on multiple devices (laptops, netbooks, wearables, smart-phones). This keeps away any additional installation charges or on-the-move costs.


During the movement from On-Premise to Cloud ERP, the most nagging issue is of the level of security available . The verdict inclines towards declaring that Cloud ERP is almost the same as On-Premise ERP structures.

Regulatory Measures

Security-standard systems in place are intended to ensure the safety of cloud-companies. These certifications include SSAE-16 Type-II and ISAE-3402 Type-II. While the former attests that the company is following the standard, the latter is a ‘guarantee’ certification. An independent PWC audit declares the security standard of cloud-ERP vendors.

Data Recovery and Restoration

The key benefit of Cloud ERP is the availability of entire backup of your data which is safe in storage, often at multiple locations. In case of any issues with the On-Premise ERP, recovery and restoration of data is almost impossible.

While the above two points pertain to the working of cloud-computing, you must also ensure that the vendor follows a strict code of regulations while recruiting members into their security department. The presence of a Security Officer in the vendor’s side, functioning solely for the purpose of ensuring safety and security of your data is ideal. To ensure that safety issues do not arise, a holistic approach needs to be taken up where the client also installs and upgrades to rock-hard antivirus and malware software along with individual security steps (like frequent changing of passwords).

A piece on the security status of cloud-based systems , authored by Jerri Ledford (a prominent writer on business technology), revealed that cloud-based systems are today gradually reaching a point where they will overpower the security standards and stand above the On- Premise safety benchmark. This is because the vendors provide services to many organizations and thus, are constantly in the process of expanding to fulfil diverse and high security needs.

So, which model of ERP does your company want to choose: On-Premise or Cloud? Leave your comments below.
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Author : Sahana Rajan Date : 16 Oct 2015