In today’s ever-changing business landscape, organisations are facing numerous challenges, such as growing competition and economic crisis. Staying as efficient and agile as possible is key in maintaining a strong competitive edge. Enterprise Resource Planning (ERP) systems have therefore become a crucial tool for businesses addressing these challenges.
One of the main decisions to make when choosing the best ERP software for your business is whether to opt for a cloud-based or an on-premise solution. So, in this article, we will be discussing the main differences and considerations when looking at cloud-based or on-premise ERP systems.
What are ERP systems?
Before we get into the different hosting types, let’s briefly cover what an ERP software is. ERP or a business management system is generally a suite of different applications that integrate business processes across various departments, including finance, human resources, procurement, supply chain, and customer relationship management.
This software provides a centralised platform for businesses to streamline their operations and improve collaboration across the board. Many of the solutions available on the market will also offer customisation opportunities, meaning that organisations may develop tailor-made modules and apps meeting their specific business needs.
Key features and benefits of ERP systems include:
- Integration of business processes
- Automation of routine tasks
- Real-time access to data
- Improved team collaboration
- Better decision-making
- Adaptability and scalability
There are several types of ERP systems you may choose from. Some are open-source, meaning that they are openly and freely accessible for anyone to modify and distribute. Others may be industry-specific, with pre-configured modules tailored to the requirements of a particular industry.
The hosting type of the BMS, however, is one of the main differences you will notice when looking for the most suitable option. You will find that there are cloud-based, on-premise and hybrid software available. Here are the pros and cons of each.
Cloud-based ERP systems
Cloud-based ERP software, also referred to as SaaS (Software as a Service) are essentially hosted on a cloud-based platform, and accessed through the internet. This means that the ERP system's software, servers, and data are all stored in the cloud provided by the vendor, and users can access the system from anywhere with an internet connection.
Cloud software will typically be priced with a monthly or annual subscription model. Extra fees may accrue when it comes to training, support or system updates, however, the initial costs tend to be much lower than those of on-premise software. Therefore, it is a common choice for small to medium-sized businesses with less budget available.
One of the greatest considerations when choosing a cloud-based system is the lack of control over the ERP security tools and methods used. The vendor is fully responsible for storing sensitive company information as well as handling any cybersecurity issues that occur. While this may cause concerns to some businesses, others are happy to leave the data regulatory compliance matters with the service provider.
Furthermore, a significant benefit of cloud software is how easy and quick it is to initially integrate. They also offer easy scalability as your business grows (typically, it’s as simple as purchasing extra services or storage space). On the other hand, the customization options tend to be very limited when choosing cloud-based ERP systems.
Advantages of cloud-based ERP software:
- Lower upfront costs
- Automatic software updates
- Easy scalability
- Access from anywhere
- Vendor is responsible for disaster recovery
- Quick and easy implementation process
Drawbacks of cloud-based ERP software:
- Dependence on internet connectivity
- Limited customization options
- Security concerns (no control over security measures)
On-premise ERP systems
On-premise ERP systems are installed on a company's own servers, and managed by their in-house IT team. This means that the software, servers, and data are all located within the company's premises.
With on-premise software, there is usually a significant upfront fee followed by ongoing investments, as you continue to develop and upgrade your software. The initial set-up will not only require financial investment but also knowledgeable IT staff or third-party Odoo system implementation services to help you integrate the best solutions for your business. The software will need regular maintenance too.
However, on-premise ERP systems also provide businesses with much more control. The security of data is in the hands of the company itself, so cybersecurity measures must be implemented and regular audits completed. Larger organisations that hold a lot of sensitive customer data tend to see this as an advantage.
Additionally, customisation options are vast with on-premise software. As long as you have the resources and budget to do it, you may customise the standard apps, modules and other solutions to perfectly fit with your business needs and industry requirements.
Advantages of on-premise ERP systems:
- Greater control over data and security
- More customization options
- No dependence on third-party vendors
- Better ROI long-term
Drawbacks of on-premise ERP systems:
- Higher upfront (implementation) costs
- The business is responsible for system / hardware maintenance
- Updates are done in-house and cause more disruptions
Factors to consider when choosing between cloud-based and on-premise
Based on the above advantages and disadvantages of each hosting type, there is no right or wrong choice when it comes to the deployment method of your chosen ERP system. Instead, it’s based on the company’s needs, preferences, and financial health. So, to sum up, here are the key factors to consider when choosing between cloud-based and on-premise business management software.
| Cloud-based | On-premise | |
| Cost-of-ownership | Typically have lower upfront costs, but higher recurring costs; | Typically have higher upfront costs but lower recurring costs and a better long-term ROI; |
| Scalability | More scalable and can easily adapt to the changing business needs; | May require hardware and software upgrades to accommodate growth; |
| Customization options | Limited customization options and may require additional integration work; | Offer more customization options and may be easier to integrate with other systems; |
| Security and data privacy |
Have more security concerns due to data being stored in the cloud;
| Provide greater control over data and security; |
| Accessibility and user experience | Greater accessibility and are generally easier to use; | May require more IT expertise to manage and use effectively; |
Hybrid ERP systems
Hybrid ERP systems are a combination of both on-premise and cloud-based ERP hosting methods. This type of system allows companies to choose which parts of their business management software they want to host on-premise and which parts they want to host on the cloud. It provides businesses with greater flexibility and control over their ERP system, scalability and customisation options while still being highly cost-effective - thus making maximum advantage of both options.
Odoo ERP system - best of both worlds
Odoo is an open-source ERP software that offers all three of the hosting options: cloud-based, on-premise and hybrid. It therefore provides its users with the unique flexibility to choose the deployment method that best suits their needs.
Odoo Online
The cloud-based option, or their SaaS solution, is called Odoo Online, and it is hosted and managed by Odoo on their own servers. This option offers businesses the ultimate simplicity - you may register within minutes and access your ERP system through a web browser. Meanwhile, Odoo takes care of the rest, including the automatic updates and maintenance.
Odoo on-premise
Odoo has an on-premise software option too: you may choose between the free Odoo Community version and the paid Enterprise edition. This option requires the user to install the software onto their own server, giving you full control and autonomy over the system implementation and how you handle your own data. It offers limitless opportunities on customisation, as you may easily tailor existing Odoo modules or third-party apps to your own workflows as well as design your own solutions from scratch.
Odoo.sh
Lastly, the Odoo.sh PaaS (Platform as a Service), managed by Odoo SA, is the hybrid “best of both worlds” option. Odoo.sh is an all-in-one business management software that allows you to deploy your own cloud platform in a couple of clicks. It also comes with an integrated email server.
The platform is designed to simplify the deployment and management of Odoo applications. It allows developers to quickly build or customise Odoo applications without having to worry about infrastructure and server management. You can easily install standard Odoo modules as well as third-party solutions available on the apps store. The built-in tools also help develop custom features with ease.
The unique thing about Odoo ERP system is that, despite offering on-premise and hybrid software deployment types, it retains an extremely competitive subscription pricing. Therefore, what is generally a substantial initial cost-of-ownership for on-premise ERP systems, businesses will receive for a much cheaper price with Odoo (excluding any implementation and customisation costs that apply to all software).
Speak to Odoo ERP specialists
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