The fundamental differences between a cloud ERP and an in-house one

Cloud ERP is Enterprise Resource Planning software that leverages cloud computing platforms and services to provide a business with all the advantages of an on-premise or in-house ERP along with the added benefits of cloud hosting.

With a cloud ERP you don't lose any of the functionality offered by ERPs that are installed on local servers. They are capable of handling most business activities, such as purchasing, sales, inventory management, and even have finance and human resources modules. However, their arrangement in the cloud does mean some differences with respect to their on-premise version.

How to work with an ERP in the cloud?

Cloud computing or cloud-based computing (also called on-demand computing, Software as a Service or SaaS) uses the Internet to provide shared computing resources:
  • Processing power.
  • Memory.
  • Disk storage.
In this way, it is possible to run a multitude of applications without having to increase the capacity of our local computing. Resources can be aggregated as needed to be used by the different applications we have to run in the cloud.

When we talk about cloud computing, we are referring either to access to a simple photo sharing application, the use of an ERP in the cloud or even the hosting of the entire IT infrastructure of a global corporation.

Access to an ERP in the cloud is done through an Internet connection, which makes it possible to reach from the company to the servers that are hosted remotely in a provider's data center.

Generally, a cloud ERP has lower upfront costs than an on-premises ERP, as computing resources are leased on a month-to-month basis from data centers, rather than purchased and maintained on-premises.

The cloud is particularly valuable for small and medium-sized businesses (SMBs) because it provides access to feature-rich applications at a reasonable price, without the need to make a large upfront expenditure for either hardware or software. In addition, when the business grows or the company joins another through a buyout or merger, cloud ERP can scale quickly.

Benefits of cloud ERP

While technically the only difference between cloud ERP and on-premises ERP is where the software is maintained, there are other significant differences and benefits.

Cost savings achieved with cloud ERP:
  • The upfront costs of the entire IT infrastructure, such as hardware and data servers, are avoided.
  • Reduces the need for in-house IT support because IT support is provided by the data center.
  • Eliminates the upfront payment for software licenses in favor of a monthly fee.
  • The cost of cloud ERP maintenance and support is reduced because the vendor manages upgrades and version changes.
Other benefits of a cloud ERP are these:
  • You pay only for the computing resources you need.
  • You only pay a fixed monthly fee so companies can use their money for other business initiatives.
  • It is possible to take advantage of the benefits of ERP much more quickly, since no hardware or software installation on servers or user devices is required.
  • A company's computing or storage needs fluctuate over time. With cloud services it is possible to adjust that need easily and almost immediately.
  • With cloud ERP, you have the confidence that your data is backed up and that a disaster recovery plan is in place.
  • Attacks on the company's server are avoided because the data is not stored locally, but in the cloud.
  • It is possible to access the ERP in the cloud from anywhere so the company can expand geographically with ease. The Internet is everywhere and there is no need to deploy hardware or software in new remote locations.
A cloud ERP offers similar or even superior functionality than an on-premise ERP. It also offers multiple benefits related to agility, flexibility, immediacy and cost savings. If you want to have an ERP, consider which is the best option for your company: a cloud ERP or an on-premise ERP?