Cloud Vs On Premise IT System- Which Option Is Best For Your Business?

Advances in technology have provided businesses with a range of options and decisions to take when adopting any system from a standalone application to an Enterprise Resource Planning system. One of the most critical factors in your decision will be whether you choose to deploy it on-premise or in the cloud.

Cloud-based systems are more common than ever before, and all software vendors provide some form of Cloud offering and some have ditched their on-premise solutions altogether.

Which one is right for your organization? Only you can make that decision, but this rundown on the pros and cons of each should make it easier.

By knowing the advantages and disadvantages, business owners can determine the best fit allowing for a more informed allocation of resources and efficiency benefits.

Deployment and Pricing of Cloud ERP vs. On-Premise ERP

The biggest difference between these two systems is how they are deployed. Three distinct models exist for your business to assess:

• Cloud-based software is hosted on the vendor’s servers and accessed through a web browser.
• On-premise software is installed locally, on a company’s own computers and servers.
• “Hybrid” deployments, in which cloud software is hosted on an organization’s private servers.

Another key difference between cloud and on-premise solutions is commercial pricing:

In general, cloud software is priced under a monthly or annual subscription, with additional recurring fees for support, training, and updates.
On-premise software is generally priced under a one-time perpetual license fee (usually based on the size of the organization or the number of concurrent users). There are recurring fees for support, training, and updates.

Thus, on-premise systems are generally considered a capital expenditure (one large investment upfront). Cloud-based systems, on the other hand, are typically considered an operating expenditure (an additional overhead cost the organization will continue to pay).

Cloud software’s low cost of entry—especially compared to large upfront perpetual license fees—has contributed to its widespread adoption. According to one recent study, 93 percent of enterprises currently use cloud-based software or system architecture

However, studies show over a 10-year period, system costs tend to converge assuming your business will sustain the same platform.

Advantages and Disadvantages of Cloud

Security is often the top concern. This is unsurprising considering the critical information stored in any system—including company financials, corporate trade secrets, employee information, client lists, and more.

In the earlier phases of cloud technology, buyers were wary about the security of cloud-based software. This less evident today (evidenced by the adoption rates).

Reputable cloud vendors have strict standards in place for data security. The industry has worked diligently to define standards and protocols which are set out in the ISO/IEC 27000 family of standards. It is arguably more secure to adopt cloud systems on premise for many businesses.

Most cloud systems enable easy mobile accessibility, and many even offer mobile apps. But this ease of access also comes with greater security considerations, especially if employees access company files on their personal mobile devices.

More accessibility means less customization—and the cloud offers less flexibility for businesses that seek to tailor their system. However, organizations with less specialized needs will not be disadvantaged by a cloud system’s out-of-the-box capabilities.

Cloud ERPs are therefore best suited for small and midsize businesses seeking lower upfront costs, system stability and ease of access.

Advantages and Disadvantages of On-Premise

Typically, you will find many of the same features in an on-premise system. However, there are a few differences between the two deployment strategies.

In general, on-premise systems are much easier to modify or customise. The ability to customize to their specific needs and requirements for some businesses is paramount especially in niche industries with unique processes.

On-premise ERPs put more control in the hands of the organization, up to and including the security of its data. It’s therefore essential that a business be capable of safeguarding sensitive information—a frequent target of cyber criminals.

Mobile accessibility can pose an issue for on-premise deployments. These often require a third-party client to communicate between a mobile device and the on-premise software. It’s definitely not an insurmountable problem, but it can be a pain point and require specialist expertise and budget.

Conclusions

When it comes to choosing an application or system, there are more options than ever for businesses of all sizes. Cloud-based deployment models have made this software more accessible for SMBs—though these systems come with a few drawbacks, such as limited customization.

Conversely, on-premise ERP systems offer advantages in customization and control, but are more expensive upfront, and many don’t support mobile. This can be problematic for smaller buyers but, as is usually the case, it depends on the specific needs of the individual business.

However, if you are an SMB, the cloud’s ease and speed of deployment, limited budget requirements, and increasing functionality and configurability to deliver automation will prove to be the best option for your business.

Ensure security standards, the ability to retrieve all your proprietary data, and system availability questions are addressed and your business can leverage the best technology at a fraction of the cost.

About SimplySolved

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