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Will Cloud ERP Replace On-premise ERP, Eventually?

Written by Laura Schomaker

September 22, 2022

One of the most flexible types of ERP systems, Cloud ERP is becoming increasingly relevant for companies in various industries. Cloud options have certainly made ERP more approachable and attainable for businesses of all sizes. But will its growing momentum eventually mean that Cloud ERP will replace on-premise versions? What are the advantages and benefits of either approach? Let’s jump in.

Cloud ERP vs On-Premise ERP

Before addressing the question, “Will Cloud ERP replace on-premise ERP,” let’s look at what exactly distinguishes these two different approaches to enterprise resource planning.

Cost

With on-premise ERP, expect to invest a sizeable chunk of change upfront; ongoing maintenance costs, including IT staff, are also coming your way. Cloud ERP is an operational expense, the cost of which is broken down month-to-month over the life of the solution.

Deployment

Regarding the deployment and an on-premise ERP solution, see above. Your company will remain responsible for the complete care and feeding of the system over its lifetime. Initial implementation can take time, too, and require a real build-up of infrastructure components.

Scalability

Will your ERP solution grow easily with your company? With Cloud ERP, absolutely. With on-premise, not so much. On-site solutions are often not as flexible with adding users and can require a good deal of additional hardware to scale up. 

Will Cloud ERP Replace On-Premise ERP?

The answer for most is “yes.” There will continue to be some exceptions, however, which we’ll explore below.

For many SMBs, cloud ERP will continue to be the most affordable and viable approach. A primary driver for many SMBs will be the lower cost of entry to cloud ERP. By going with a cloud-based solution, smaller businesses can sidestep the significant upfront investment required by on-prem.

Cloud ERP also offers “hands-free” ongoing maintenance. SMBs don’t need a deep IT bench to keep a cloud solution going, as they would with an on-premise solution.

What about the exceptions mentioned above?

They might be businesses in highly regulated spaces. Companies in finance and healthcare, for example, who must adhere to strict data security and ownership requirements. They may feel more secure sticking with on-premise. Or they may consider a third, hybrid option, which combines the ownership of on-premise with the flexibility of Cloud ERP. Many cloud-based solutions are taking impressive steps, too, to address security in the cloud, making them very reliable for security conscious firms and companies. Where will you land in the conversation? Let us help you weigh your ERP options

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