Enterprise resource planning software, most commonly referred to as ERP, integrates functions into one system designed to streamline daily business processes and information across an entire organization.
ERP, which is used as a great organizational and collaborative tool, can be implemented in two different ways: on-premise and in the cloud. Both on-premise and cloud ERP share similarities, but making a decision based on which you prefer is a matter of what works best for the company and its employees.
What is On-Premise ERP?
In the simplest of terms, on-premise ERP is enterprise resource planning software that is implemented in-house and maintained in a physical office space. On-premise isn’t accessed through the internet and cannot be used outside of a physical work space. On-premise ERP, like the cloud, can be used on different mobile and handheld devices. It also has the ability to assist with and streamline production, marketing, sales and business finance processes.
How is it different from the cloud?
The major, and most obvious, difference between on-premise and cloud ERP is how it is implemented. Your chosen vendor will implement the system in house on your company’s own computers and servers. This leaves your business’s IT team with control of the system. With on-premise ERP, you have ownership of the entire system once it is implemented.
With the cloud, the software can be accessed in the workspace or outside of it, so long as users have internet access, which differs from on-premise.
The cost of on-premise differs from ERP in the cloud, as well. Because the implementation process is completely different and more extensive than that of the cloud, the price point is higher. Typically a business is charged under a one-time perpetual license fee. Additional fees may occur in the form of training, updates and support. Whereas with cloud ERP, is priced under a monthly or annual subscription. Reoccurring training, support and update fees may also occur.
It is important to take into consideration the reasoning for why a business may choose a more expensive option, which tends to involve ownership of the software and it being closer in proximity, which is literally inside of your business.
On-premise ERP offers greater control over data and more customization. Users are able to select specific modules needed for their daily business. Modules include:
- Human Resources (HR)
There is also the added security benefit of all of your information being stored in house and not with a third party outside of business grounds.
If you are considering an ERP system for your business, you may have found yourself overwhelmed with the options. From numerous software vendors to different price points and whether on-premise or the cloud is the better fit for your business, there is a lot to consider.
When finalizing your plans to implement on-premise ERP software, begin with what works best with your company’s culture and work style.
Benefits of On-Premise ERP
- Data control – ERP contains hordes of information, whether that information is sensitive company and client information or data about company inventory, on-premise ERP maintains and updates that information for all of its users to have when needed. Hosting your ERP on-premise gives your business the ability to control all of the data that goes inside of it as well as the secure measures needed to access the material inside of the software.
- Less of a need for vendor dependency – while the cloud is often referred to as being more flexible than on-premise, the cloud often times finds itself locked into technology decisions made by its vendor. There is the worry of what happens if your vendor goes out of business, leaving you scrambling to find a new host. These worries are legitimate, but with a system set in place in-house, that is one less thing to worry about.
- On-going cost boundaries – as mentioned, one of the differences between on-premise and cloud ERP is the price. While one payment is made for on-premise implementation, the cloud acts as a monthly (or annual) subscription. In the long run, paying one sum for on-premise ERP may eventually be the cheaper option. Once getting the upfront cost out of the way, the only ongoing expenses that may occur are those for training and upgrades.
- Security – normally considered to be secure because the hardware is installed locally, on-premise software can be better controlled and closely monitored.
It is important to find a software that works best for your business, while also keeping in mind that no software is perfect. There will be setbacks and we are here to help you avoid potential pitfalls.
- Eventual outdated software – over time your ERP software will need to be updated to better reflect your needs. Software also needs to be updated because businesses could be at security risks and simply miss out on important and helpful updates. This could be considered a setback because with outdated on-premise software there could be a chance that your vendor is no longer in business, meaning the search for a new one begins. There are also the costs of implementing upgrades and security risks.
- Lack of flexibility – with on-premise, the only time users have access to the software is while on company grounds. Cloud ERP allows employees to have access anywhere they are so long as they have access to the internet, creating more opportunities to complete work and update information inside of the software.
- Long implementation period – finding a vendor, installing the software and the subsequent training that follows can take up a lot of a business’s time. While these things are necessary with on-premise ERP, it can be time consuming and stops a business from having a smooth ride with their daily processes for a specific period of time.
Industries That Use On-Premise ERP
You would be surprised at the different industries that use ERP software. While they may seem completely different, they all have a mission, which is to streamline their business processes and create open communication between numerous departments. Here are some of the industries that use ERP:
- Manufacturing – this industry relies on ERP to communicate data between production, purchasing, accounting and other departments. The system also helps manufacturers keep their costs and inventory under control.
- Construction – an ERP system can help this industry manage inventory, keep costs under control, as well as stop the flow of endless paperwork in exchange for putting company information into the software.
- Healthcare – patient care, supplies control, payroll, etc. are examples of some of the things that can be best organized and stored with the help of ERP software, especially because the health care industry serves a large number of people and the information that is shared is sensitive and private.