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On-premise or Cloud-based ERP System?

Year 2019
February 2019
On-premise or Cloud-based ERP System?
18 Feb 2019

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When at the initial stage of the ERP system evaluation process, businesses may encounter unfamiliar terms such as “cloud-based ERP”, “web-based ERP” or even “on-premise ERP. To save time and eliminate the hassle of research, this post aims to consolidate all the specifications of on-premise and cloud-based ERP solutions including the deployment method, features, pricing, and guidelines for businesses to self-evaluate and select the most appropriate ERP system tailored for their business processes.

ERP System Deployment Methods

An on-premise ERP software is installed locally on a company’s physical office using its own equipment and servers. With full control over the system, the organisation is able to directly configure and manage the computing infrastructure and data to automate organisational processes.

On the other hand, a cloud-based ERP system is hosted on a cloud computing platform, which usually belongs to the ERP software vendor engaged by the organisation. Based on the role of the Internet in the computer network, the term ‘cloud’ abstractly refers to the infrastructure of the internet, which is provided as a service to software users. Therefore, cloud ERP system users are able to access and update data with real-time synchronisation through a web browser or through a mobile application. They are provided with all the benefits of an Enterprise Resource Planning system to focus more on their core business operations without worrying about the IT infrastructure, system maintenance and other related concerns.

ERP System Implementation and Training

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As mentioned above, organisations that own an on-site ERP system have more control over their implementation process. Therefore, businesses will be able to flexibly schedule their own ERP software installation as well as choosing when to conduct training programs for their staff members according to their work schedule.

Cloud ERP system users, on the contrary, are usually provided with a full service of support, data back-ups, data migration as well as implementation fully conducted by experienced ERP solution vendor technicians. Dedicated training support on how to operate the cloud software properly will be provided by ERP software specialists at the agreed location (vendor’s premises or company’s office) to facilitate the learning of the new ERP system.

ERP System Security and Customisation

When having an ERP system installed in-house, organisations should occupy a professional and experienced IT team, who can practice necessary system security protection, software improvements and maintenance as there is no free support from the ERP software vendor. Such heavy requirements for IT staff are not compulsory for companies acquiring a cloud-based ERP solution. Reputable cloud ERP vendors always have strict policies and standards to support companies with frequent software upgrades and security patches, which are consistent with the ongoing changes to better avoid cyber threats in the technology era.

Similarly, in terms of ERP system customisation, companies can rely on a software provider, who is specialised and experienced in providing customised ERP solutions, particularly to any unique and changing business requirements. Otherwise, organisations will need a team of talented IT technicians on hand, to handle the system development and modification especially when the business expands.

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ERP Software Pricing

Aside from the variables affecting ERP system costs of an organisation such as a business’ size, unique requirements, customisation and the scope of usage, there is a big difference in the ERP quotation of the cloud-based and on-premise software. Being aware of the cost difference is critical in evaluating the budget for business digitalisation.

Companies having ERP software installed on their own server will make a considerable upfront payment to have full management over the ERP system. In addition, there could be excess expenditures incurred in order to utilise the system properly. This could include salary paid to the in-house IT staff, and hardware investments, which could be considered a large upfront investment to small businesses.

With a cloud ERP system, users will save on incurring expenditures related to IT staffing, power consumption, maintenance, and security. As an ERP system’s full-service cost is often paid as a monthly or annual subscription, this expense can be considered the operating costs of an ERP system, significantly reducing the financial burden for businesses in the long-run.

The flexibility of cloud-based ERP System

In terms of flexibility, ERP systems deployed in the “cloud” far outweigh the traditional on-premise ones in several aspects. On the grounds that most cloud ERP software is developed into various modules, organisations can easily pick up or add on required functions based on their operational demands without making drastic, time-consuming back-end changes. Another highlight of cloud ERP software is the user-friendly mobile application which enables flexible accessibility and processing out of the office, on the go. With greater flexibility and convenience, businesses are able to exploit all the benefits of enterprise resource planning to experience and exceptionally improve productivity.

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How to self-evaluate and select a best-fit ERP solution?

Basically, an on-site ERP system is more suitable for larger corporations that have sufficient financial capability and human resources. Such a traditional ERP system enables organisations to self-manage and modifies system operations without third-party intervention. On the contrary, a cloud-based ERP solution is highly recommended for small-medium enterprises (SMEs). Outsourcing ERP services for a more reasonable upfront cost of digitisation, guarantees system stability and efficient accessibility. This is a smart strategy for SMEs considering expanding or in the stage of business expansion.

The main aspects to make the decision on an ERP investment is to consider your business’ requirements, capability and select a prominent ERP provider. You can follow this 5-step guideline to find a fitting ERP solution for your long-term utility in due time.

If this post has made you more confused and overwhelmed by the numerous ERP options in the market, feel free to contact us with your requirements. Allow our experienced and dedicated ERP software consultants to advise you on the appropriate ERP solutions for your business and also recommend Singapore Governmental Grants suitable for your business as it embarks on its journey into digitalisation.

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