Cloud-Based ERP vs. Web-Based ERP vs. On-Premise ERP
While the terms cloud-based ERP and web-based ERP sound similar and have a lot in common, they’re separate from one another. You also have subcategories based on where the technology is hosted — on-premise at your facility or off-site at a third party’s center.
With two different ERP options, as well as multiple hosting options, it’s clear that ERPs are not a one-size-fits-all solution. You have lots of options when it comes to setting your system up, which is good because your business doesn’t have the same needs as other companies.
On this page, we’ll dive into the debate between cloud-based ERP vs. web-based ERP, as well as discuss the pros and cons of each ERP system, plus offer some advice on how to choose the right ERP and hosting option for your company.
Cloud-based has become a buzzword — and for a good reason. Cloud technology is now a popular option across a variety of industries, giving businesses new capabilities that they didn’t have before. Analysts have forecasted that enterprise cloud spending will expand at a 16 percent compound annual growth (CAGR) run rate from 2016 to 2026.
You’ll often find a cloud-based ERP system on a third party’s infrastructure, usually that of the service provider. The company doesn’t purchase the system but instead pays the provider for permission to access it, although there are occasional exceptions to this. Typically, these payments work based on a subscription model with companies paying by the month, year or user for access.
The service is usually accessible via an application, sometimes with the additional option of access through a web browser. All of the related data, including the data the user generates, gets stored in the cloud. Cloud-based systems also include some user support and customization capabilities.
Web-based ERPs are accessible via a web browser — and almost always without the option of using an app. Developing the application relies on the provider, however, but may employ some client-side script as well. These types of systems are often available for purchase at a per-organization, per-user or per-device price. They can also use a subscription model like a cloud-based ERP.
Web-based solutions are often less customizable than cloud-based ones. You pay to access something that already exists rather than, as with cloud-based software, pay for remote access to software that all your employees can use and that you can modify as you see fit, often with the help of your provider.
Another option you have when choosing how to set up your ERP is where to host it. Hosting options include:
- On-premise: You purchase the licenses for the software and then deploy it and store the associated data on your company’s existing
- Service provider: You purchase the software licensees and pay the provider to host the equipment and data on their infrastructure.
- Third party: You purchase the licenses and work with a third party that will provide hosting services to you and your team.
No matter where you host your ERP, an advantage of both cloud-based and web-based ERPs is that you can access them from anywhere — so long as you have an internet connection. Cloud-based services offer the benefit of enhanced customization, management services and customer support. Web-based systems can provide ease of access since you can use any web browser and without a dedicated app.
Many cloud-based platforms do, however, offer a web browser option.
Cloud-based tools don’t often offer as much flexibility when it comes to hosting options. One of the hallmarks of cloud technology is that a service provider or a third party hosts it. Web-based applications may be more likely to deliver on-premise options, which give you the benefit of having more control over your information. That does mean a higher up-front cost, but you avoid paying hosting subscription fees.
You have a lot of options when it comes to choosing an ERP system. To get the most out of your ERP, you need to pick the setup that’s right for your company and fits your needs the best. So, how do you figure out which one is best for your team?
How Do You Know Which ERP Is Best for You?
Choosing between cloud-based or web-based, as well as on-premise or off-site, can feel like a daunting task. To make it a bit easier, ask yourself the following questions:
Where Do My Employees Work?
If you do all your work from a central office, an on-premise system may meet your needs. You could even use a solution that you install on each computer, instead of relying on your internet to access company data.
If your employees work from different locations, but you want them all to be able to access the same software, you’ll need a cloud-based or web-based version. That way office employees, remote workers and staff that’s on the road can access the software and information from anywhere they have an internet connection.
The number of people who work remotely is growing, so the usefulness of cloud- and web-based platforms is growing too. In a recent survey, 43 percent of U.S. workers said they work at least some of the time remotely — a four percent increase from 2012.
What Is My Budget and Would I Rather Pay Up-Front or Over Time?
To figure out how much an ERP system will cost you, you’ll have to evaluate each option in-depth. Here’s an overview of what to expect though.
Cloud-based and web-based systems have a lower up-front cost because you don’t need to install and set up anything on-site. Instead, you’ll pay the subscription fee, which is relatively predictable and consistent. Those costs do add up over time, though.
With an on-premise setup, you pay a higher initial cost, but you might not have to pay a subscription fee. Making this investment up-front is riskier than having a third party host it, but you might save money in the long run. You do have additional costs, however, as you’re responsible for managing, repairing and upgrading your system.
What Are My Deployment and Scalability Needs and Capabilities?
If you want to deploy your system fast, the web-based or cloud-based route is your best bet. These options involve minimal setup, and providers can usually have them ready in no time. Web-based solutions might even have a slight advantage if the cloud option requires you to customize the setup.
Cloud-based and web-based ERPs also scale to your needs — and it’s often a hassle-free process too. Since you have to install the infrastructure for an on-premise system yourself, the initial set up, as well as future upgrades, can take longer.
What Are My Infrastructure Needs and Capabilities?
Do you have the space to set up and install the necessary infrastructure, plus store all the associated data on-site? If so, an on-premise system is a possibility for you. If not, you’ll have to rely on the service provider or another third party to host your ERP.
What Are My IT Needs and Capabilities?
If you have on-premise ERP technology, you need an IT staff that you can contract with to maintain, repair and upgrade your technology as necessary. But, if you have an IT team with the right skills and knowledge, you can consider an on-premise solution. If not, choose a web-based or cloud-based system that the provider or another third party will manage for you.
What Are My Security Needs and Capabilities?
Cyber threats ranked as the second leading concern of U.S. CEOs. Chances are, your business deals with some sensitive information, so it’s important to keep security in mind. With an on-premise system, you handle your security. If not, the provider or another party you contract with manages it for you.
If you have the necessary security capabilities, you might choose an on-premise option, which allows you to maintain total control of your data. If you’re not confident in your security, you can leave it to the company hosting your data.
Just make sure that you’re satisfied in advance with the security features a provider offers since you will have less control over your information. If you don’t want to handle security yourself, but still want peace of mind, you can opt for a private cloud, rather than use a public one.
How Important Is Customization?
The level of customization available depends on the product you choose, but in general on-premise systems offer the most flexibility since you’re in control of how you deploy and implement your system. That’s assuming, of course, that you have the capabilities you need to setup your ERP the way you want.
Cloud-based systems often come with some customization options, though you’ll have to use the provider’s framework. You also get the benefit of having the provider’s help, such as them designing unique solutions according to your needs. Web-based tools tend to be less customizable than those hosted in the cloud, but they still offer some opportunities for personalization.
Pros and Cons of Cloud-Based and Web-Based ERP
The pros and cons of ERPs vary from provider to provider and from product to product. Different users will also prefer different features, plus need different things depending on their ERP usage. In the spirit of helping you choose the best one for your business, here are the typical advantages and downsides of cloud-based and web-based tools, as well as the various hosting options:
Advantages and disadvantages of a cloud-based ERP include:
- Pros: Cloud-based ERPs give you access to their tools without having to set everything up yourself and host the system on-site. You can also access IT help and regular upgrades. Since the setup is relatively simple, up-front costs are low. Because everything’s available in the cloud, all you need is an internet connection and possibly an application to use it.
- Cons: When your system and data is in the cloud, you lose a little bit of control over it as your provider or third party stores it for you. This arrangement can present security concerns for some organizations, plus it gives you fewer customization options than if you managed everything. Because you pay a subscription fee, you may end up paying more over time than if you had bought the technology outright.
Perks and drawbacks of a web-based ERP include:
- Pros: Like a cloud-based solution, you don’t have to set up, manage or host anything. Up-front costs are low as well. You can also access your ERP from anywhere you have an internet connection and a web browser. You don’t even need to use an ERP-specific app. With web-based tools, you might have the option to pay per user or module, allowing you to avoid regular subscription fees.
- Cons: Because you don’t host or manage your ERP, you lose a bit of control over your data, like when using cloud-based solutions. You might also lose customization capabilities — compared to on-premise systems or off-site cloud-based ones. Although your provider handles most of their development and operation, web-based options require a bit more on the user’s end.
Benefits and drawbacks of ERP systems hosted on-premise include:
- Pros: A significant advantage of hosting your ERP system on-premise is that you maintain total control over the technology and your information. This setup may enhance security and give you more flexibility in how you implement it. You’ll also save money in the long run because you won’t have to pay fees for hosting, IT and security services.
- Cons: If you store everything locally, it might not be accessible via the internet, which means you could only use the software when you’re in the office. You’ll also bhave to do a lot more work to deploy the system and manage it, as well as handle its security and IT needs, which can be costly and complicated. You’ll also need to use both physical and virtual space to store infrastructure, data and other necessary components.
Off-Site With a Provider
Advantages and disadvantages of an ERP hosted off-site with your service provider include:
- Pros: If you host your system with the provider, you avoid having to manage your deployment, repairs, upgrades and security, as well as storing your infrastructure. The provider will also know the product well and can help you make the most of it. Plus, they’ll provide you with regular technology updates.
- Cons: You don’t have sole control over your technology and data. Depending on your provider, you may not be able to customize your system that much. You’ll also have to pay a fee for hosting, IT, security and other services.
Off-Site With a Third Party
Perks and drawbacks of an ERP hosted off-site with a third party include:
- Pros: This option has many of the same benefits of hosting with your service provider, as a third party will manage various aspects of deploying, maintaining and upgrading your system. If you have a third party you trust and already work with, you may feel more comfortable choosing this option, which may streamline things for your company.
- Cons: Again, this option has many of the same drawbacks as hosting with the provider. You lose some control over the system and have to pay extra for hosting and related services. Another potential disadvantage is that the third party won’t know the technology like your provider, so they may be less effective in managing it.
Schedule a Live Demo of an ERP
Hopefully, you now know more about the various options you have when choosing how to set up and operate your ERP. Sometimes, firsthand experience is the best way to get a real understanding of an ERP system. At FDM4, you can test out our ERP and see how it works with our live one-to-one demo.
You’ll get to see how our ERP can help you with order management, purchasing, inventory management, accounting and manufacturing, as well as provide support for warehouse and freight management. You’ll also get a glimpse at its multi-site, multi-language and multi-currency capabilities and how you can integrate it with zero hassle into your existing systems.
Ready to give it a go and settle the cloud-based ERP vs. web-based ERP debate? Request a demo today! And if you have any questions, from how to optimize your operations to how an ERP system can help you do that, don’t hesitate to contact us.