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Cloud vs. On Premise vs. Hosted ERP: What’s the Difference, and Which One is Right for your Company?

signs for cloud and on premise

When searching for an ERP solution, the first question many companies ask is, "What's the difference between an on-premise and cloud solution? Which is right for me?"

With an on-premise solution, you purchase the software and license, install it on your own server, and maintain it yourself.

With a cloud solution, you pay a monthly fee (typically per user), and the supplier provides everything: the software, updates, server, maintenance, etc.

In between these options is a hosted solution. With a hosted solution you still provide the software, license, and maintain it yourself, but someone else provides the server that it runs on.

To illustrate the difference, let's use a water utility: With an "on premise" water utility, you would build the pipe that goes to your house, choose the water source, filter it, etc. You have complete control over the water and its delivery.

A "cloud" water utility is what most of us are accustomed to. The utility company provides everything: the pipes that go to our homes, the water source, filtering, etc.

With a "hosted" water utility, you would provide the water source but someone else would provide the pipes that go to your house.

All solutions have pros and cons, and your organization’s structure, processes, and needs will determine which option is best for your business.

Cloud Pros

  • Lower upfront costs
  • Lower maintenance costs
  • Most providers maintain very secure environments
  • Easy to scale as users are added/removed
  • Available on most devices anytime anywhere (with an internet connection)

Cloud Cons

  • No control over software updates and changes
  • Little customization available for company specific needs
  • Less control over security policies
  • Without an active internet connection, most cloud-based ERP solutions don't work offline.

On-Premise Pros

  • Typically lower long-term cost (No monthly costs)
  • Heavily customizable for business requirements
  • Control over all security and data storage procedures and policies
  • Depending on setup, can access without an internet connection if needed
  • Control over updates and software changes

On-Premise Cons

  • Higher upfront costs (hardware and license)
  • Updates require heavy IT involvement
  • Must have team to backup and maintain system
  • More difficult to scale if significant number of users are added

To discuss cloud and on-premise ERP options and which is the right choice for your organization, contact the experts at ArcherPoint.

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