Cloud ERP vs Traditional ERP: What to Know

Businesses in a variety of industries are incessantly looking for ways to make processes, resources maximization, and decisions promoted to a greater level. The most powerful instrument driving this shift is Enterprise Resource Planning (ERP) software.

ERP solutions integrate key business functions such as finance, human resource, supply chain, procurement, and customer relationship management into a single system. With this, they establish a single source of truth for data and allow businesses to work more cohesively. However, in the ERP adoption scenario, there remains one huge decision that takes center stage: whether to go for Cloud ERP or Traditional ERP.

Both approaches have their own advantages, and an understanding of what differentiates them will allow businesses to make the most informed choice for their goals, budget, and growth strategy.

What is Traditional ERP?

Traditional ERP or on-premise ERP is locally installed software on a company’s hardware and servers. The organization itself maintains the system with hardware support, security, upgrades, and storage.

Developed for this behavior, this model held sway for many years, especially with bigger businesses with the infrastructure to back it up. In a classical ERP system, data would be kept inside the company, and thus absolute control over data and processes was possible.

• Installed and supported on company-owned servers
• Heavy initial investment in hardware and licensing, and so on.
• Internal IT staff to handle upgrading, security, and system performance.
• High control over data and personalization.

What is Cloud ERP?

Cloud ERP is a new approach in which an ERP software is installed on a vendor’s cloud infrastructure and accessed by users over the internet. The access will be through any web browser or an application from mobile phones, therefore, barring huge investment in hardware or big IT support.

Being a vendor-operated system, the software provides automatic updates, patches, and security, automatically! In particular, it is very flexible, scalable, and inexpensive-so, preferred by small and medium-sized businesses as well as large companies that require agility.

• Hosted on the vendor’s cloud infrastructure
• Connected remotely via the internet
• Subscription basis (monthly or annual fees)
• Vendor handles updates, security, and infrastructure
• Scales as the business scales

Cloud ERP vs Traditional ERP: A Detailed Comparison

What are the Advantages of Cloud ERP?

Cloud ERP boasts a number of benefits making it a feasible choice for businesses of any size. Cloud ERP stands out from the traditional ERP, with on-premises installation and deep IT involvement, in that it leverages the cloud’s flexibility and scalability to streamline processes and offer efficiency. Among some of the key benefits are:

1. Cost Efficiency

Cloud ERP reduces upfront costs since no huge investment in servers, hardware, or IT infrastructure is needed. Typically, businesses pay an annual subscription fee, which covers usage of the software along with its maintenance and upgrades. Thus, the setting of an annual budget becomes predictable and, as a consequence, cost-effective.

2. Scalability

If the business grows, the Cloud ERP will grow to serve more users, additional modules, or more storage capacity. Such scale-up ability allows organizations to quickly adjust to the rapid pace of change in their requirements without costly upgrade to hardware.

3. Remote Accessibility and Working

Cloud ERP can be accessed with any internet connection, and thus employees can work remotely or from different locations. This brings collaboration, enhances productivity, and promotes business continuity despite working remotely.

4. Automatic Maintenance and Updates

Vendors are responsible for updates, patches, and security upgrades, which maintain the system up-to-date and minimize downtime. This minimizes businesses’ reliance on internal IT staff for upkeep.

5. Faster Implementation

Cloud ERP solutions are often deployable in weeks, not months, and have the potential for time gains in going live. This enables companies to start reaping the advantages of the system sooner compared to traditional ERP implementations.

6. Enhanced Security

Moderately well-known industry giants would provide highly sophisticated protective measures and encryption. Included within such providers are backup solutions for business data whenever the unthinkable might happen. Disaster recovery, therefore, usually consists of the data and may be undertaken by any service provider if needed.

The Future of ERP

The landscape of ERP is evolving at a rapid rate. As work-from-home and digital transformation are now becoming mainstream, Cloud ERP usage is accelerating in industries. At the same time, legacy ERP is not disappearing.

Many legacy systems of large-scale organizations with tested legacy systems continue to rely on it due to the requirement of heavy customization and data control. Some businesses are also set up as hybrid ERP systems by combining cloud-based applications with onsite applications so as to bring forth flexibility and control.

Final Thoughts

Any business which intends to work more efficiently, collaboratively, and forge better decisions requires an ERP in place. So it is actually not about whether Cloud ERP is somehow a little better nor about whether Traditional ERP somehow wins. It is all about what fits a company best. Hence, a company that considers agility, affordability, and simple remote access as top priorities find Cloud ERP more appropriate.

In contrast, the Traditional ERP might be better suited for organizations requiring greater control, high-level customization, and data sovereignty. The current business processes, business expansion, and resources meant for system management are what should be scrutinized before making a choice. Hence, having an ERP system in the line of these requirements will prepare an organization for success in a more competitive, digitally-influenced environment.