The Advantages and Disadvantages of Cloud and On-Premise ERP Systems

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When selecting a new Enterprise Resource Planning (ERP) software, one of the first considerations to make is whether to go hosted (on the cloud) or on-premise. Although both types have their advantages and disadvantages, it’s worth taking a closer look and offering points of consideration to make the software selection process less daunting. Software Advice, an advisory firm that helps buyers select ERP software, conducted research to create a comprehensive guide to help buyers determine the best type of software needed for their organization, with findings compiled in this article.


The biggest difference between the two types of systems is cloud-based software is hosted on the vendor’s servers and accessed through a Web browser, while on-premise software is installed locally, on a company’s own computers and servers. Although over time, both systems’ cost tend to converge, cloud-based software is priced under a monthly or annual subscription basis, while on-premise software is usually priced under a one-time perpetual license fee.


Some advantages of cloud-based ERP software include its shorter implementation time, great stability with frequent updates from the vendor and no additional hardware investments. On the other hand, some disadvantages of this type of system are its less customizable functionalities and an organization’s possible less peace of mind that comes with data security being in the vendor’s hands.


On the other end of the spectrum, on-premise ERP systems are known to be more customizable and offer greater control over data. However, the implementation process can take longer and organizations have to pay associated hardware and IT costs. Organizations will find that cloud-based ERP systems are more mobile-friendly compared to their on-premise counterpart.


It would be in an organization’s best interest to first assess its needs, budget and top concerns before deciding on the right type of ERP system that will be the right fit.


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Linz Tan, Web Marketing Assistant, WebSan Solutions Inc. a 2014 Ontario Business Achievement Award Winner for Service Excellence

6 thoughts on “The Advantages and Disadvantages of Cloud and On-Premise ERP Systems”

  1. The choice between cloud and on-premise ERP depends on the requirement of user. For general purpose cloud ERP is beneficial where there is no such fear of security issues. But for Organizations, it is better to use on-premise ERP.

  2. Good Post!

    Yes both Cloud & On-premise ERP has many advantages and disadvantages.But the Cloud ERP has more benefits than on-premise ERP such as

    Cost & Maintanence - The initial installation cost of on-premise ERP is expensive. You may need to splurge on purchasing, housing, configuring and maintaining servers.

    Cloud ERP is fast and it gives better ROI than on-premise ERP and few more Cloud ERP benefits are listed here

  3. With the multiple data breaches happening this year, software to prevent attacks, such as ERP, is deemed useful. The 2 kinds seems promising. Although the cloud-ERP is amazing since you don't have to worry about anything since the vendor will take care of it, it's still better to have your own security on your own hands that leave it with someone else because you never know how tight their security is or how vulnerable they are from hackers. Regardless, both are efficient and secure but it depends on the needs of the company and the risk its willing to take.

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