If you’re in the market for an ERP system, chances are you’ve thought about whether a cloud-based solution or one that is installed locally is right for your organization.

The difference between on-premises ERP and cloud ERP is fairly straightforward: on-premises solutions are installed and stored locally on a company’s servers and hardware, while cloud ERP lives on a centralized offsite server. In an on-premises model, every user owns a complete, self-contained copy of the software, which is then managed by a company’s IT staff. In the cloud model, ERP software, along with its data, lives offsite on remote servers managed by a service provider and accessed using a web browser.

What isn’t so straightforward is the impact each of these deployment models can have across your organization. Below, we highlight some of the factors you need to consider before choosing a cloud or on-premises ERP solution. This post is part one of two on this topic. Click here for part two.

Women performing quality audit at food manufacturing facility

Pricing

An on-premises solution typically requires a large cost investment upfront for both the hardware and software required to run the system effectively. If your company doesn’t have a large or experienced IT team, you may have to allocate a significant amount of your technology budget and resources to training and hiring. In addition, a large amount of your IT team’s budget will need to go towards ensuring your system is consistently maintained, updated and secure. As upgrades and enhancements occur, more internal resources will have to go towards redeploying and reimplementing the software on your internal servers and other devices, and to ensuring there are no bugs or issues.

Alternatively, cloud ERP comes with much lower initial costs because there are no hardware requirements – the software and hardware is provisioned for each company, customized for the unique way your company operates, and then accessed using your internet connection. Your ERP vendor is responsible for upgrading your system, maintaining uptime and dealing with outages. This ultimately allows you and your IT team to worry about running your business instead of maintaining your hardware to support your business. Upfront costs are also much lower because pricing is typically based on a monthly subscription model rather than purchasing a perpetual license for the software and paying for ongoing maintenance and support.

Consider this: One of the big selling points of cloud ERP is its low cost of entry (especially in comparison to the substantial upfront fees associated with an on-premises solution). Though over time system costs tend to converge, purchasing an ERP as an operational expenditure (an overhead cost an organization continues to pay) instead of a capital expenditure (a large one-time investment upfront) tends to be more attractive to small to medium-sized businesses.

Implementation

It’s no secret that an ERP implementation of any sorts can be a long, tedious process. With an on-premises solution, organizations must purchase and configure new hardware and test this hardware numerous times before going live on the software. With a cloud ERP, implementation is streamlined because no additional hardware is required, and organizations can begin working within the solution right away.

One of the benefits of an on-premises solution is the added control organizations have over the implementation process and the greater ability they have to customize the software to fit their needs. This control and ability to customize, however, tends to slow down implementation considerably and make upgrading to future versions of the software much more complicated.

Consider this: Cloud ERP allows organizations to leave the hardware, testing and backups up to the professionals and focus on the operational side of implementing instead. Choosing the right solution for your business, like an ERP that is specific to the food industry, gives you the option to deploy in the cloud while removing the need to customize generic ERP solutions, which helps dramatically reduce implementation costs and accelerate time to value.

Security

One of the biggest concerns we hear from prospective customers about cloud ERP is around data security. Issues like sharing processing resources with strangers or having your data located who-knows-where with who-knows-what levels of security and oversight are front-of-mind for those trying to choose between on-premises and the cloud. For business leaders used to complete control over the most critical parts of their business, this all sounds terrifying.

But that terror is often misguided. First, the perceived risks of a cloud solution are mitigated by IT professionals who think about nothing else. Second, storing your own software and data locally is much more dangerous than you realize, precisely because you may not have expertise in that area.

Many organizations who choose an on-premises solution don’t make security a priority because it can come in contention with functionality. For example, managing user security levels within the system takes an extreme amount of effort on the part of your IT team; often, on-premises organizations grant admin rights to all or many users to avoid this, which can be detrimental to the security of your data.

Consider this: Most reputable cloud ERP vendors offer safeguards like SSL encryption and multiple layers of authentication by default to help protect your system. In terms of disaster prevention, in the cloud, data backups happen continuously, while on-premises solutions require you to physically take backups offsite in case of an emergency like a fire or flood.

Ready to learn more? JustFood ERP software is available in the cloud and on-premises. Whichever solution option is best for you, JustFood will be there providing your business with enhanced security, performance and reliability across any device, any time.