ERP or Enterprise Resource Planning  refers to reference software which can help enterprises or organizations to run smoothly. Although the software is known to offer multiple advantages as far as the operations of organizations are concerned, the system is one of the most difficult to manage. Today, you will find multiple ways in which the ERP system can be installed. They are typically hosted in 3 ways, on-premise ERP, traditional ERP and cloud hosted ERP. The cloud ERP refers to a situation when licensed software is hosted within a cloud infrastructure. The cloud ERP is very often used to describe what is called SaaS or Software as a Service ERP. The SaaS ERP is owned and hosted by the provider and users pay for it on an on-demand basis. The SaaS ERP is a kind of cloud computing system; however, not all cloud ERPS will be SaaS. Although goals of this software remain quite the same regardless of where it may be hosted, there are some key differences between the cloud hosted ERP and cloud based ERP.

What is the Difference Between Cloud-Based ERP and Cloud-Hosted ERP?

The cloud based ERP are web based and they will follow a subscription model whereby you pay monthly fees to the vendor to make use of the software. These systems however are not very customizable and this is one of the major drawbacks. Software gets updated automatically regardless of your wish and you may not even be the owner of your own data. The cloud hosted ERP is similar to the traditional ERP in many ways. You can implement this system in your own servers and ensure that you can conduct your daily business. This is hosted environment and you must buy the software license. But instead of installing the software in your own infrastructure, the provider will host the software for you. So, you can access the ERP or other business applications from any device that has Internet connectivity. The cost of entry is higher compared to the cloud-based ERP because you must pay for the full server licenses but the ongoing expenses of buying hardware, maintaining the IT set-up, updating the anti-virus or firewalls, data backups etc are taken care of by the provider. You can customize the ERP software to cater to your business needs. You can also enjoy full control over the data your own.

In the case of cloud hosted ERP, the provider is responsible for your uptime and availability. This is why when you want to enjoy ERP on cloud; you should review their Service Level Agreement carefully to find out about the uptime guarantee. Cloud based ERP is likely to provide a better uptime which can help your business. Moreover, cloud based ERP will have automatic upgrades; so, you do not have to worry about the costs or the time when upgrades must be carried out. But when your software is hosted on a cloud server, you must find out about who will perform the upgrades and what the costs of those upgrades will be. In cloud hosted ERP, you need to inquire about ways in which the provider will authenticate users, how data transmitted is encrypted etc.

When you need to move to the cloud is a decision that needs much thinking and deliberation because it will differ from one business to another depending on their particular needs. When you have bought new server hardware it definitely does not make sense to move to the cloud. However, when your servers are old and outdated and your ERP software needs an update urgently that may or may not be compatible with the software of the old servers; you should consider moving to the cloud. So, the decision to move to the cloud to take advantage of ERP solutions is one which should not be made in haste. You must consider many factors before you choose between cloud-based ERP and cloud-hosted ERP. Cloud based systems are scalable and easier to improve. This is one of the main reasons why shifting to cloud-based or cloud-hosted ERPs is a good move. Businesses can also come up with customized profiles; since employees belonging to different departments are using the same suite, managers can make profiles that give them limited access in other areas. You can also start adding more solutions to this suite as time passes by. For instance you can start with the payroll solutions initially and then add management of human resources or procurement solutions later on.

Factors to consider while selecting one of them-

Ownership costs- 

ERP cloud services ask for a lot of expenditure in most cases. While with the ERP hosting services, you will not need to put money on managing the software or the related hardware. An on-premises cloud ERP system will not ask your support team to invest anything additional in them or any other technology. Cloud-based ERP software deploys the system across various systems and enables various customizations and integrations within your business. 

There are no such questions that exist with cloud-based ERP like which operations can be hosted on cloud ERP. The initial costs are comparatively much lower than the ERP hosting on the cloud. The sole reason for cloud-based ERP being so affordable is because it accesses your internet connection. 

Better system performance- 

When there is an improvement in the accessibility then the systems’ performance improves evidently. A cloud ERP is designed to work at maximum network performance. Unlike cloud-hosted ERP it provides real-time data solutions.  

Speed of deployment- 

Cloud-based ERP does not take much time to deploy as cloud-hosted ERP. This is because with cloud ERP there is no need for any additional hardware. 

In Conclusion

Just because the ERP service provider calls its product ‘cloud’ does not mean that it is actually a cloud. Beware of the hosted ERP systems acting as the true cloud solutions that are just legacy ERP systems hosted on the service providers and lack the benefits of a true ERP solution. Do your necessary research before you look for the signs that say ‘cloud’ ERP solutions are sold by them but the reality is different.