As more businesses move towards digital transformation, the demand for cloud-based ERP (Enterprise Resource Planning) systems has grown. With the rise of cloud computing technology, companies now have the option to choose between cloud-based ERP vs traditional on-premise ERP systems. In this article, we will explore both ERP options’ key differences and features. And ultimately answer the question: Which is better for your business?
Table of Content
- What is Traditional ERP
- What is Cloud ERP System
- Cloud based ERP vs Traditional ERP
- Advantages and Disadvantages of Using Cloud ERP
- Advantages and Disadvantages of Using Traditional ERP
- Why Cloud Based ERP is Better vs Traditional ERP
What is Traditional ERP
Traditional ERP systems are software solutions installed and run on local servers within a company’s data center. These systems have been used for several decades and are built to manage a wide range of business processes. Such as accounting, human resources, inventory, supply chain, and customer relationship management.
In traditional ERP, a company typically purchases a license to use the software and installs it on its own servers. The company is responsible for maintaining and updating the system and providing the necessary infrastructure and IT. This can include managing hardware, software updates, security protocols, and system backups.
What is Cloud ERP System
Cloud based ERP is a type of ERP system that is hosted in the cloud and accessed through the Internet. With cloud-based ERP, the software and data are stored on remote servers maintained by the ERP vendor. Companies typically pay for cloud-based ERP on a subscription basis. Which can provide a more cost-effective and scalable solution for some businesses.
Cloud-based ERP systems offer a wide range of benefits compared to traditional on-premise ERP systems. One of the main advantages of cloud-based ERP is that it offers a more flexible and scalable solution. Companies can easily scale up or down as needed, and they can access their data and software from anywhere, making it a great option for companies with remote or distributed teams.
Cloud based ERP vs Traditional ERP
As businesses continue to digitize their operations, the choice between cloud-based ERP vs traditional ERP has become increasingly important. Both options offer unique advantages and disadvantages, making it crucial for companies to understand the differences and decide which solution best fits their needs.
Cost of ownership
Implementing traditional ERP systems involves significant upfront and ongoing costs, including purchasing and managing the necessary software, hardware, servers, and facilities. Additionally, if your company lacks an experienced IT team, you may need to invest more resources in hiring and training personnel. Moreover, maintaining traditional systems also requires significant time and budget allocations from the IT team.
Cloud-based ERP systems typically have lower initial costs since you only need to implement the software to your specifications and access it via your computer’s internet connection. The cloud ERP provider takes care of hosting and maintaining all IT infrastructure, ensuring system reliability, data security, and seamless deployment of product upgrades without affecting previous customizations.
While traditional ERP software is customizable, those customizations are typically specific to your current software deployment and not easily transferable to future versions. As your ERP provider releases new product updates and enhancements, any previously implemented customizations will be lost during upgrades, and your IT team will need to recreate them from scratch. Consequently, many companies avoid upgrading their traditional ERP software and prefer to migrate to cloud-based ERP.
Unlike traditional ERP software, cloud-based ERP solutions are continually updated by the provider to ensure that you always have access to the latest, most advanced version of your ERP software. With the cloud-based platform that powers today’s leading cloud applications, any customizations and integrations that you have previously implemented are automatically carried forward when the solution is updated, eliminating the need for additional investment.
Cloud-based ERP solutions often outperform traditional systems. This is because cloud software architecture is designed to deliver maximum network performance, resulting in better application availability than traditional on-site ERP systems. Additionally, cloud-based ERP systems offer optimized performance that can scale up or down to meet your needs.
The speed of deployment is a critical factor when considering any ERP system. Cloud-based ERP offers clear advantages in this regard since it does not require additional hardware or infrastructure setup, saving your business valuable time and money. Additionally, rolling out cloud ERP across multiple regions, subsidiaries, and divisions is a breeze, avoiding the costs associated with such rollouts.
Advantages and Disadvantages of Using Cloud ERP
Prospective ERP buyers often prioritize security as their top concern, given the critical information an ERP system holds, such as company finances, trade secrets, employee data, and client lists. While cloud-based software was once viewed skeptically, many buyers are now more willing to consider it. Reputable cloud vendors implement strict security measures to protect data. And prospective buyers can further alleviate concerns by seeking a third-party security audit of the vendor.
Although cloud ERP systems offer easy mobile accessibility, this also brings security considerations, especially if employees access company files on their personal devices. However, cloud systems provide less flexibility for customization than on-premise solutions, making them more suitable for organizations with less specialized needs.
Advantages and Disadvantages of Using Traditional ERP
In general, traditional ERP systems offer more flexibility and ease of customization, which is crucial for many organizations. Especially those in niche industries with unique processes. Traditional ERPs also give organizations more control, including the ability to manage the security of their data, which is often a target for cybercriminals.
However, mobile accessibility can be a challenge for on-premise deployments, as they often require a third-party client to communicate between a mobile device and the traditional software. Although this issue can be overcome, it can be a source of frustration for users.
Why Cloud Based ERP is Better vs Traditional ERP
As businesses grow and evolve, they often need an ERP system to manage their operations, financials, and customer data. But with so many options available, it can be challenging to determine which type of ERP system is the best fit. Traditional on-premise ERP systems have long been the standard, but cloud-based ERP solutions are rapidly gaining popularity. There are several reasons why cloud-based ERP is often a better choice than traditional ERP.
Compared to traditional ERP solutions, cloud-based ERP systems are more cost-effective. With cloud ERP, there are no large upfront costs or long-term investments required. Instead, organizations only pay for the services they use or subscribe to, allowing for significant savings on capital costs and operational expenses.
With cloud-based ERP, organizations gain the ability to access their data anytime and from anywhere. This allows employees to access vital information from a range of devices, including laptops, smartphones, and tablets. The result is greater connectivity and collaboration among team members, regardless of their physical location.
With cloud-based ERP solutions, companies can leverage automation to eliminate manual processes that are prone to errors and delays. This streamlines operation and frees up employees to focus on more strategic tasks that drive business growth. By automating routine processes, such as data entry and report generation, cloud ERP can significantly increase productivity and efficiency while reducing the risk of errors.
Cloud ERP systems provide businesses with the flexibility to scale their operations up or down based on changing business needs. This means that companies can easily adjust their systems to accommodate new customers, growth. Or changes in demand without the need to invest in additional hardware or infrastructure.
Cloud ERP systems provide businesses with high protection for their valuable data through robust security measures designed specifically for this purpose. These measures include advanced encryption technology, secure firewalls, and regular security audits to identify and address vulnerabilities. Therefore, by relying on a cloud-based ERP solution, businesses can benefit from the expertise of dedicated security professionals.
In conclusion, cloud based ERP vs traditional ERP solutions have their advantages and disadvantages. Traditional ERP systems may offer more control and customization options, but they also require significant upfront costs. On the other hand, cloud-based ERP solutions offer greater flexibility, scalability, and cost-efficiency, but may be less customizable and require careful consideration of security and data access.
At HashMicro, we offer a cloud-based ERP solution that provides businesses with the best of both worlds. Our ERP system is highly customizable, scalable, and secure, while also offering the benefits of cloud-based software. Including mobile accessibility and cost savings. We also work closely with our clients to understand their unique needs and requirements and provide tailored solutions that meet their business objectives. Try a free demo today and see how HashMicro can help your business.