One of the most prominent trends in ERP recently is the emergence of cloud-based solutions. There is so much talk about cloud ERP that sometimes it is hard to tell hype from the truth. Before you decide whether to choose a cloud or on-premises system, there are some common misconceptions that should be dispelled.

Is cloud ERP not as secure as on-premises ERP?

Some executives may find the idea of keeping their data “in the cloud” risky. But cloud ERP is actually as safe as or even safer than on-premises ERP. As of today, there has not been a single security breach at any major cloud ERP provider. It is not surprising given the fact that such companies typically employ full-time teams of professionals who can provide far better security than any typical internal IT team can.

Major cloud service vendors are independently audited and certified to ensure they comply with a wide variety of industry standards, including those concerning security.

Another aspect of cloud security is data recovery and redundancy. When your data is stored in the cloud, it is backed up regularly and often stored in several places. Most on-premises implementations may not have that level of redundancy.

Read more: How to protect your data when employees leave

Is cloud ERP always cheaper than on-premises ERP?

Lowered cost is often cited as a major advantage of cloud ERP. While cloud-based solutions are generally less costly in short term; in the long run, there is a break-even point.

SaaS (Software-as-a-Service) model allows you to avoid upfront investment in hardware. Just a stable and fast internet connection is sufficient. Additionally, you do not need dedicated IT staff to deal with your in-house hardware and network issues. This represents massive savings, especially if you are a mid-sized company. Faster implementation also leads to cloud ERP’s lower entry costs. 

Read more: 3 key technologies for the next generation ERP software 

You have to, however, continually pay the rental fee which over time may exceed the cost of paying upfront for the on-premises solution plus maintenance fees. You also cannot skip maintenance charge which is already included in the rental fee.

As opposed to cloud ERP, traditional on-premises software is installed locally on your company’s computers and servers. You have a permanent licence to use your software, to which you have to pay an upfront licence fee. On top of that, there is an annual maintenance fee.

If your company is a large enterprise and has already invested substantially in hardware, using on-premises ERP may be a rational decision.

Is cloud ERP the only way to go?

While cloud ERP dominates the industry headlines, on-premises systems are not going away anytime soon. In reality, on-premises ERP software still makes up the majority of projects implemented. A survey of 215 companies in the US by the research firm Panorama shows that most (56%) of the ERP projects implemented in 2016 are on-premises systems.

Nevertheless, the market share of cloud ERP is rising fast. For instance, 29% of SAP’s ERP implementations in 2015 were cloud-based, while the number in 2013 was only 18%.

Read more: [Infographic] - A comparison of Tier 1 ERP Vendors

On-premises ERP systems still have some significant advantages. They offer greatest customisation ability and can function without an internet connection. Companies have more control over the implementation and maintenance activities. On-premises ERP clients can work with vendors to customise the software to their niche requirements. SaaS ERP is typically managed as a multi-tenant application which means you may not be able to achieve the same advanced customisations as in on-premises ERP.

Selecting deployment option is just one among many critical decisions that must be made when you embark on an ERP project. Subscribe to our blog to keep informed about latest news and trends concerning ERP selection and implementation.