Even though cloud ERPs are not brand new, there is still some confusion over the difference between them and legacy (on premise) ERP systems. I hope that the simple explanation I give in today’s blog post will help clear up some of that confusion and make your decision of which option to choose a little easier.
Legacy Versus Cloud ERP: The Basics
The major difference between legacy versus cloud ERP lies in how you deploy and access the software. Cloud ERPs live on servers the vendor owns or leases. And, users access cloud ERPs through a web browser.
Conversely, legacy (on premise) ERP systems live on computers and servers you (the user) own or lease and maintain. Therefore, your access is limited to those machines.
Now that you know the fundamental difference of legacy versus cloud ERP, let’s look at a few more important distinctions between these two ERP options.
Legacy Versus Cloud ERP: Other Considerations
Cost and Time
Cloud ERPs are most often bought as software as a service (SaaS). This means you pay a subscription fee which includes the software itself and rights to use the hardware it runs on. Since you pay for a cloud ERP in installments, depending on the subscription options your vendor offers, it represents an operating expense.
Legacy ERPs require you to buy the software and hardware upfront. If you do not already have an IT team equipped to handle your ERP software, you will need to add staff members with the right skills or hire an outside consulting company to help with this. Because of the specialized skill it takes to set them up, deploying it on premise ERP system can be a time and labor-intensive process.
Whereas we classify cloud ERPs as an operating expense, legacy systems represent a capital one. This is because with legacy ERP systems, you pay for everything upfront. Which expensing option is best, depends on your perspective and unique situation.
Customizations and Updates
With most legacy and cloud ERP systems, it is possible to customize the software to your specific needs. In both cases, if your customization needs go beyond simple tweaks, you will probably need the help an outside consultant or VAR (value-added reseller).
Regarding updates, with a cloud ERP system, your vendor automatically applies these changes. With an on-premise ERP it is your responsibility to take care of updates. Unless your internal IT team is well-versed in your ERP software, you will probably need the help of VAR (value-added reseller) to do this. Because of the time and expense that comes with updating a legacy ERP system, sometimes users will forgo an update. But, if you do this for too long, you risk your software becoming obsolete.
Mobile Access
Since cloud ERPs are available through a web browser, you can use any computer or mobile device to access them. Many vendors even offer mobile apps designed to make using the software on specific devices easier.
Conversely, because on premise ERPs live on computers that exist within your office walls, they do not offer mobile access out of the box. However, if you have a legacy ERP, you need to access on the go, you may be able to set this up with specialized tools and the help of your value-added reseller.
Data Security and Data Ownership
Cloud ERP systems require you to store your data on a server you do not own. Reputable cloud vendors understand this requires you to put a lot of faith in them. So, they invest much time and effort into the encryption and other security techniques to keep customer data safe.
Legacy ERPs allow you to keep full control of your data. It exists only on a server under your control. But with this control comes great responsibility. It is up to you to keep your data safe. Ask yourself, “do I have the resources to put in place the necessary data security?”
Scalability
No matter whether you use a legacy or cloud ERP, as your business grows, you may need to adjust your ERP. Most vendors, cloud and legacy charge you based on the number of users you have. So, as your headcount grows so too will your costs.
Besides adding users, a growing business may find it needs to increase its ERP system’s computing resources. When that happens, cloud and legacy ERPs handle it a little differently. With a cloud ERP, your vendor may charge you for the added resource usage. But they will take care of any hardware adjustments needed to support the additional workload. With a legacy ERP system, you must make sure you have the hardware to handle your computing resource needs.
I hope after reading this post you have a better handle on the legacy versus cloud ERP debate. For more information choosing the right deployment method for you, download the Acumatica white paper “?
When you’re ready to explore viable ERP options for your business, . There you can explore many of the most popular systems available today.
Still have questions about whether a legacy or cloud ERP is the best fit for your business, ! You will be happy to discuss your needs and use our nearly 20 years of experience to help you find the right match.
By: Laura Schomaker, Intelligent Technologies Inc., a South Carolina Microsoft and Acumatica partner
Awesome post. This is a quite informative article.
Thank you. I'm glad you enjoyed it.