Traditional ERP systems are finding themselves challenged in the current market by a faster, simpler and arguably more effective solution: the cloud-based ERP. While its benefits are many, this solution is not always the answer in all cases. You will find there are still several considerations when choosing between the two options, or even a hybrid, if available.
The main drawback to on-premise ERP solutions is a steep up-front cost, since software is generally run on a company’s own servers, with a one-time licensing fee to use the product and a lack of integration with mobile platforms. Cloud-based solutions tackle these concerns with ease but introduce new considerations such as security and an increased cost of ownership over time, depending on how long the system is in use. Customization also plays a role, but it’s a much smaller component.
Cloud-Based vs Traditional ERP
The major selling point for cloud-based ERP adoption is a two-fold solution to today’s most pressing concerns. Cloud-based systems are cheaper up front because most providers charge a monthly subscription fee. Since the hardware is stored at the provider’s facility, at its own expense, there is no need for costly purchases prior to implementing the system, let alone with factoring in consistent upkeep charges. This reason is enough to convince most potential customers to switch over to cloud-based ERP. However, cloud-based software also provides a much simpler link to mobile-based applications; most packages even come with built-in mobile solutions.
This link makes ease of access a non-issue and generally improves overall company performance. However, again the drawback comes with security, especially when employees access company files via personal devices. A firm utilizing cloud-based ERP needs to be vigilant in understanding the scope of security offered by the software provider. If the company feels like its interests are better served by in-house IT, then perhaps in-house ERP is also the preferable option. Third-part audits of a potential provider’s security are possible, but the key point is that external programs create unique security scenarios that must be addressed adequately.
Lastly, while cloud-based ERP is cheaper up front, the monthly costs can mount over time and eventually surpass the initial investment required for traditional ERP. The company may be short on funds for upgrades or plans to switch out the ERP in the future, but the cost is still a consideration in the bigger picture.
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