Most business organisations have workflow solutions in place, and many will have already considered dedicated ERP (Enterprise Resource Planning) software systems. The real corporate dilemma is whether to opt for ‘tried and tested’ on-premise ERP software or migrate to a cloud-based ERP solution.
Any automated ERP system will impact the operational efficiency of your business, but choosing the best option needs careful evaluation. With that in mind, let’s look at the ERP concept in more detail, considering the pros and cons of on-premise and cloud-based ERP software to maximise the potential business benefits on offer.
So what exactly is ERP software?
ERP, otherwise known as Enterprise Resource Planning, refers to the ability to deliver an integrated software suite of business applications. This means ERP software tools share a common process and data model, covering broad and deep operational end-to-end processes. With the right system in place, an organisation can reap the benefits of flexible, streamlined operations. ERP systems are commonly deployed in sectors such as finance, HR, distribution, manufacturing, service and the supply chain.
ERP applications automate and support a range of administrative and operational business processes across multiple industries. This includes fundamentals like the line of business, customer-facing, administrative and asset-management features of an enterprise.
A cloud-based ERP system—also known as a SaaS (Software as a Service) facility—is deployed and centrally managed via the Internet. The servers running the system are either owned or leased by the service provider, who also supplies the software and associated infrastructure. The business client uses a web browser to directly access the system.
By contrast, a business will deploy and manage an on-premise ERP system locally. They’ll install the ERP software on company-owned (or company leased) computers and servers. So ongoing management tasks become the responsibility of your in-house IT staff.
Whichever solution you choose, ERP delivers major business benefits. For instance, ERP can:
- Drive business innovation
- Ensure business process efficiency
- Create process standardisation
- Produce IT cost savings.
Analysing which ERP solution is best for your business
Many sources note an accelerating demand for cloud-based systems. For example, the Panorama (2018) ERP Software Report shows new adoptions running at 15% (on-premise) and 85% (cloud-based). Nevertheless, the core requirement is always to choose the ‘best fit’ ERP solution for your enterprise.
Here are the key factors to take into account:
Cost and time-investment
A cloud-based ERP system is pre-configured and ready to use. There is no operational time-lag involved, which means a system can be rapidly deployed. The subscription fee, which covers all hardware and software costs, and is generally lower than the cost of a comparable local system.
There will be up-front capital expenditure on software and equipment, and the system will require expert configuration and a period of commissioning prior to deployment.
Deployment and implementation
With cloud-based ERP software remotely hosted on Internet servers, some systems can launch and become active within 24 hours. Employees can access the system via mobile apps and Internet browsers, and a well-designed facility should integrate seamlessly with staff working practices.
An on-premise system, which is locally installed and managed, can be readily customised to create an extremely sophisticated facility. However, this may delay its launch and implementation. In addition, system maintenance and occasional failures may mean an on-premise ERP facility is not always continuously available.
A cloud-based ERP client can expect the vendor to provide regular system updates as part of a rolling programme of improvement. This ongoing optimisation means the latest software enhancements will always be available to your business without the need for extensive downtime.
A local system will require ongoing maintenance and monitoring by IT staff with high-level expertise. System updates will need careful planning, and thus tend to happen periodically. As a result, an on-premise system may not benefit from frequent interim updates.
A major advantage of a cloud-based ERP facility is that it can be readily scaled to meet fluctuating business demand. Such agility is highly cost-effective because a business will only pay for additional system resources during the period they are actually required.
Scaling up an on-premise ERP facility often requires the purchase of additional elements. So this kind of system may be slower to adapt to changing market conditions.
With a cloud ERP facility, the remote supplier is responsible for data security. They’ll use encryption to protect your data, and shield against known vulnerabilities through regular security updates. Scheduled data backups will also allow data recovery if a problem should occur.
A local ERP facility should be a relatively secure option because it doesn’t involve third-party data handling. However, if a business chooses not to implement regular and timely security updates, or follow other security protocols, they could expose themselves to threats.
For those choosing ERP options, there’s undoubtedly a lot to be said for the ‘always-on’ adaptability of a cloud-based facility. But if your business deals with a niche market, or values certain USPs which differentiate you from the competition, you might be more reluctant to surrender the close control a bespoke on-premise solution can deliver.