ERP: Cloud vs. On Premise vs. Hybrid

Visit Website View Our Posts

When it comes to ERP solutions, one of the most frequent questions companies ask is "What are the differences between on-premise, cloud, and hybrid or hosted solutions, and which one is right for me?"

An on-premise solution means you would purchase and license the software, install it on your own servers and take care of the maintenance yourself. With a cloud solution, you would pay a monthly fee (often based on the number of users) and the supplier would handle everything from the software, updates, and server maintenance.

A hosted solution is a middle ground between these two options. With a hybrid or hosted solution, you would still own the software, license, and maintain it yourself, but the server would be provided by a third party.

What is an ERP?

Enterprise Resource Planning (ERP) is a software solution that helps businesses manage their core processes, such as accounting, inventory management, and human resources. There are three primary deployment options for ERP systems: cloud, on-premise, and hybrid.

In this article, we'll explore the key differences between these three options, and help you determine which one is the best fit for your business.


  • Cloud ERP systems are hosted by a third-party provider and accessed over the internet. This means that businesses don't need to invest in expensive hardware or software and can instead pay a monthly or annual subscription fee. Cloud ERP also offers the added benefit of being easily scalable, as businesses can add or remove users as needed. Additionally, cloud ERP systems are typically updated automatically, so businesses don't need to worry about maintaining or upgrading the software themselves.
  • On-premise ERP systems, on the other hand, are installed and run on a business's own servers. This option provides greater control and customization over the software, as businesses can tailor it to their specific needs. Additionally, on-premises ERP systems can be integrated with other in-house systems, such as CRM or accounting software. However, on-premise ERP systems can be costly to implement and maintain, and businesses will need to invest in hardware, software, and IT personnel to keep the system running.
  • Hosted ERP systems are a middle ground between cloud and on-premise systems. Like cloud systems, hosted ERP is accessed over the internet, but it is run on a provider's servers, which the business rents. This option allows businesses to take advantage of the cost savings of cloud ERP, while also having more control and customization options than a cloud-based system. Additionally, hosted ERP can be integrated with other in-house systems, similar to on-premise ERP.

In terms of cost, cloud ERP is typically the most affordable option, as businesses only pay for what they need and can scale up or down as necessary. On-premises ERP is the most expensive, as it requires businesses to invest in hardware and software, as well as IT personnel to manage the system. Hosted ERP falls somewhere in the middle, as businesses will need to pay for the use of the provider's servers but won't need to invest in their own hardware or software.

When it comes to security, all three options have their own pros and cons. Cloud ERP systems are generally considered the most secure, as providers typically have robust security measures in place to protect their systems from cyber threats. On-premise ERP systems are considered the least secure, as they are managed by the business itself and may not have the same level of security as a cloud provider. Hosted ERP falls somewhere in the middle, as the provider typically has security measures in place, but the business will still need to manage security on its own.

The best ERP deployment option for your business will depend on your specific needs and budget. Cloud ERP is the most affordable and easiest to manage, but may not offer as much control or customization as on-premise or hosted options. On-premise ERP offers the most control and customization, but is also the most expensive and complex to manage. Hybrid ERP offers a balance between cost and control, but may not be as secure as a cloud-based system. Ultimately, the choice between cloud, on-premise, and hybrid ERP will depend on your business's specific needs, budget, and priorities.

ERP: Cloud, On-Premise, and Hybrid Pros and Cons

Cloud ERP Pros:

  • Flexibility: Scalable resources allow for easily adjusting to changing business needs.
  • Cost-effective: Pay-as-you-go pricing model reduces upfront costs and eliminates the need for expensive hardware.
  • Accessibility: Access to data and applications from anywhere with an internet connection.
  • Automatic updates: Regular software updates are handled automatically, ensuring the latest security and performance enhancements.

Cloud ERP Cons:

  • Security: Data stored in the cloud is at a higher risk for cyber-attacks.
  • Dependency on internet connection: Interruptions in internet connectivity can cause disruptions in access to data and applications.
  • Limited control: Limited control over the physical infrastructure and configuration of the cloud environment.

On-Premise ERP Pros:

  • Control: Full control over the physical infrastructure and configuration of the environment.
  • Security: Data stored on-premise is less susceptible to cyber-attacks.
  • Customization: Tailored solutions for specific business needs.

On-Premise Cons:

  • Cost: Higher upfront costs associated with purchasing and maintaining hardware.
  • Limited scalability: Limited ability to adjust resources to changing business needs.
  • Maintenance: Regular maintenance and updates must be handled in-house.

Hybrid Pros:

  • Scalability: Easily adjust resources to changing business needs.
  • Maintenance: The hosting provider handles regular maintenance and updates.
  • Cost-effective: Lower upfront costs compared to on-premises solutions.

Hybrid Cons:

  • Dependence on the hosting provider: Limited control over the physical infrastructure and configuration of the environment.
  • Limited customization: Tailored solutions may not be available.
  • Security: Data stored with a hosting provider may be at a higher risk for cyber-attacks.

Looking for a partner in your country to help with your Microsoft Dynamics implementation? Get in touch with Dynamics Square consultants and make your digital transformation journey a success.

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Show Buttons
Hide Buttons