Cloud ERP, SaaS, On-Premises—Which is Best?

Cloud Computing Circles with textMany best-in-class organizations select their enterprise resource planning (ERP) system because it can be deployed in the cloud. While the traditional deployment model was always on-premises, rapid improvements in Internet capabilities have made cloud ERP a viable, and in many cases, a preferred model. If you have a traditional on-premises ERP, it may be time to consider a cloud-based system.

Knowing what is most important to you in your ERP selection will help determine the best deployment option. Not surprisingly, organizations choose their ERP primarily based on three things: functionality, ease-of-use, and total cost of ownership. Best-in-class organizations also consider the ability to tailor functionality without programming, integration of suites, and the quality and availability of support. While the deployment model has not been a key ERP selection criteria in the past, that is changing.

ERP Deployment Models Explained

Let’s look at the differences between the three primary ERP deployment models.

On-premises: Traditional ERP implementation is with software on servers that are located and managed in-house. The ERP software is managed by the in-house IT team who are responsible for customization, application upgrades and maintenance. However, these software functions are often outsourced to the ERP vendor.

Cloud based: Cloud ERP implementation is one in which software is delivered via the Internet. Software and servers are located elsewhere—they can be hosted by the ERP vendor, a third party, or by the company itself. In this implementation, companies can choose how much control they want over their software and technology environment.

In very simple terms, cloud computing delivers cloud applications in the same way that a power grid delivers electricity. It offers the advantage of delivering technology without the company needing an IT department or server infrastructure. Cloud software can be developed much more rapidly and deployed in a more user-friendly way.

Software as a Service (SaaS): SaaS ERP implementation is a subset of the cloud deployment model. In this situation, the cloud software and servers are hosted by the ERP vendor. All software maintenance and upgrades are performed by the vendor as a part of the service. Pricing is usually a set fee per user, per month.

By delivering computing, storage, and cloud applications as a service, not a product, the cloud offers both a cost and business advantage. SaaS increases computing capabilities without having to provide a new technology infrastructure. Users interface with the cloud applications using their web browser, eliminating the need for installing numerous software applications.

SaaS ERP Deployment Models are Growing Rapidly

Many businesses are moving away from traditional licensed ERP on-premises to a cloud ERP. According to Aberdeen Group, in 2012, 77% of mid-sized businesses deployed their ERP on-premises, with the remainder in some type of cloud software including SaaS, or hosted by the vendor or other third party. But, as more companies look to upgrade their ERP system, they are also looking to change their deployment. The biggest changes have been in small organizations (<$50mm in annual revenue). Here, there was a 53% increase in the adoption of SaaS in just one year.

Aberdeen Group also found that best-in-class organizations are over twice as likely as other companies to have a multi-tiered ERP strategy. These companies choose the deployment method that fits best, depending upon the functionality required at different locations. Often, there is one type of deployment for the corporate offices and another for business units. When growing companies need to implement an ERP in a new business location, the fastest and most cost-effective means to do that is through the cloud.

To read more about the Aberdeen Group study, download our free whitepaper, “SaaS and Cloud ERP Observations: Is Cloud ERP Right for You?

With Mindover Software, you are not tied to one deployment approach. We can deploy on-premises, in the cloud—either on-site or hosted—or a combination of these. The flexibility of our software platforms and broad experience of our business consultants means that we can create the right solution to help you operate more efficiently and profitably. Contact us if you would like to discuss your ERP implementation and what may be the best deployment option for your company.

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