Study - The Difference between the Hosted and Cloud ERP – Which One Is Better for Your Company

Enterprise resource planning software has been on the rise, mainly because it provides a way to simplify business processes and openly share data and information between departments. This solution allows for better collaboration and seamless communication between marketing, accounting, order management, purchasing, sales, and any other department for that matter.

The ERP market continues to grow as the market size is expected to exceed $49.5 billion by 2024. With the rise of this new type of software came a split between two general versions—cloud-based and hosted enterprise resource planning. 

What is Cloud and Hosted ERP?

So what are the differences between these two types of solutions? Before we take a look at the differences between cloud and hosted ERP, it’s important to understand the basic functions of ERP. At the core, what an ERP solution does is provide a company with one centralized dashboard for all company processes such as cost center management, human resource management, payroll processing, forecasting business analytics, workforce planning, project management, and so on.

Anyone exploring a logistics career will understand how difficult it can be sometimes to integrate their systems with other departments. And the same scenario rings through for other professionals. How can marketing collaborate better with accounting to get financial data or how can purchase and order staff collaborate with warehouse staff to keep better track of inventory? These problems and more can be solved through ERP systems.

Essentially, a business can run these systems two different ways—one is on a cloud-based system, meaning it’s available and accessible online, or a hosted or onsite system that allows for location-dependent access. Currently, about 21% use cloud ERP and only 15% use on-premises. 

Major Differences between hosted and on-premise

On resolving the on-premise ERP vs cloud ERP discussion, we must first understand the major differences that set apart these two categories of ERP software:

Access

The first and probably most distinguishing difference between the two is how the system is accessed. Setting up cloud-based ERP involves subscribing to an internet based service and then accessing it via an internet connection. Accessing an on-premise version of an ERP software involves hooking on to an intranet system that employees can only enter when they are in the office or working premises. 

ERP solutions on cloud-based networks allow for more flexibility as it gives staff access to the system no matter where they are. This feature gives it an edge for scenarios and businesses that allow for work-from-home setups. The only downside is that it’s highly dependent on reliable internet whereas an on-site solution won’t need internet connection and can be accessed offline. 

Payment models

The next difference between hosted ERP vs cloud ERP is how to pay for the service. Cloud-based models follow a subscription-based system, which providers charge monthly or annually. Hosted solutions often don’t have subscriptions but need a huge setup fee which can go up to a few thousand dollars. Hosted ERPs will also need a dedicated IT-solutions expert to maintain and check in the cases of bugs or problems. 

Hosted ERP solutions cost more at the onset and need regular maintenance. Cloud-based systems are more plug-and-play and require lesser technical maintenance and oversight.

Technical Support Needs

Because maintenance looks different for both, technical support needs will differ as well. When training someone for ERP setup, hosted systems will need a more specialized professional to build and maintain the system. Some might opt to hire a full-time IT professional to oversee the system plus other systems in the company or get someone at an on-call or retainer basis to make regular checks and be available for rush system fixes once bugs arise. 

Cloud-based systems come from SaaS companies that provide the solution as a service and so they provide technical support and customer service channels that companies can access. Support channels and availability vary per cloud-based system provider, but generally there is always email and hotline support at the bare minimum. In such cases, there is little to no need for dedicated in-house tech staff to maintain the system.

Security

Security will look a little bit different for both systems too. A cloud-based ERP is available online and so can be hacked by bots and malicious individuals. Generally speaking, cloud-based softwares has a lot of security systems to protect information and access however and won’t be invaded if all employees take good care of login details and passwords. 

But when applying an ERP to an office via a hosted service, there is little to no access to the system from the outside since people who want to get into the service will need to be within range of the system’s intranet. Of course, there are some who might try to access the system by going within premises, but that’s a less likely scenario.

The Verdict?

Looking at the advantages and disadvantages of on-premise ERP and cloud-based ones, it’s hard to really put a finger on which system works best. It depends on your company’s context and needs. But the bottom line is that an ERP system can help your business run smoother processes, so whichever ERP system you choose, getting one to integrate various business operations will increase your business’ efficiency and productivi