Why Cloud Based ERP is Taking Over On-Premises ERP Software

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Cloud-based ERP systems are becoming increasing popular, especially among small and mid-size businesses. However, there are still reasons why some businesses may stick with a traditional, on-premises system. Let's take a look at the advantages and disadvantages of both types of ERP systems, and consider the best way to determine which is actually best for your particular company.


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Reuben Yonatan is the founder of GetVoIP . Connect with Reuben on LinkedIn.

Why Cloud Based ERP is Taking Over On-Premises ERP Software
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Differences Between Cloud Software and On-Premises
The major differences between cloud and on-premises systems is their means of deployment and their pricing structures.

  • Deployment - On-premise software is installed directly onto a business's in-house servers and computers. Cloud-based software is hosted on a vendor's servers, from which you access it via your Web browser.
  • Pricing - Generally, on-premises software owners pay a one-time license fee based on the organization's size or its total number of current users. Under this pricing model, recurring fee updates, user support, and user training are additional costs. Alternatively, cloud software is priced as an annual or monthly subscription fee that includes recurring updates, user support, and training.
  • Taxes: Under these different pricing structures, taxes are charged differently. An on-premises software system is typically viewed as a capital expenditure (a one-time capital investment). A cloud-based system is viewed as an ongoing 
    operating expenditure (an operating cost the business will continue paying).

Why Is the Cloud-Based ERP Gradually taking Over

There are several major reasons why cloud ERP adoption has been increasingly expanding throughout the country.

  • Low Cost of Entry - Cloud ERP is cheaper upfront, compared to major investment in an on-premises system, including paying upfront for perpetual license fees.
  • Functionality - Mobile access to on-premises ERP systems may require a third-party provider to enable communication between on-site software and mobile devices, whereas ERPs provide this access.
  • Evolving Security Perspectives - The kinds of sensitive company financial, client and employee data, as well as trade secrets and other critical information kept in ERP systems once made business owners hesitant to make the move to a cloud-based system. However, reputable cloud ERP services vendors have since consistently proven to keep strict and effective security standards in place that keep data safe. Companies can go even farther to secure their information by using third-party security auditors.

Advantages of a Cloud-Based ERP System

Cloud-based ERPs are transforming U.S. American business operations due to several general advantages these systems provide in comparison to on-premises models. They differ from CRM's but are just as important in terms of the advantages your business gets.

  • Connectivity - The most affordable and effective way to connect and mine masses of data to acquire insights useful for improving operational efficiency, is by implementing a cloud ERP model.
  • Scalability - Connectivity and scalability required for taking full advantage of the IoT, mobile and big data are optimally facilitated by a cloud ERP system.
  • Analytics - Capabilities for a range of business data captures present vast opportunities to bolster efficiency and expand actionable business intelligence. Also, data consolidations involved in moving to the cloud expose business patterns that businesses find useful for across-the-board strategic planning.
  • Mobility - Analytics platforms and sensors embedded in wearable devices empower organizations with revolutionary tools for connecting, collecting, and utilizing data.

Hybrid ERP Cloud Alternatives
Hybrid solutions are available, in which cloud software remains hosted on a company's private servers. These applications can be integrated with traditional on-site ERP software to help businesses operate with increased agility, mobility and independence from traditional IT organizations.

The technological strides in business intelligence, analytics, mobile and cloud-based computation provide opportunities for mid-market hybrid providers to create options for organizations that need modernized ERP systems capabilities, but are not ready to modify or change their in-house legacy system. Hybrid ERP technology makes it possible for businesses to stay current and to better prepare their systems and teams for eventual transition to the cloud.

Conclusions
Over the past few decades, on-premises ERP systems have helped companies optimize their processes. However, costs of customization, maintenance and updates have made these systems increasingly less than ideal solutions for many organizations. Cloud-based ERP systems present new opportunities for organizations to rise to modern business challenges, making ERP software more accessible, less expensive, and more efficient.

A cloud ERP system provider handles updates, upgrades, maintenance and user support, and enables easy access and information sharing across devices. Cloud ERP systems implementations minimize upfront costs, expedite deployment times, simplify customizations, and allow seamless scaling of systems. With a cloud system, a business has a version-less ERP. In other words, new software enhancements, user support functions and security innovations are automatically added to update or upgrade the system.

To successfully compete in today's market dynamics, businesses need the agility and flexibility of the most highly-efficient, streamlined ERP solution. Increased efficiency in processes serves to increase productivity and decrease operating costs. Cloud ERP systems can free businesses from the more change-resistant traditional systems, and eliminate the waiting, expensive upgrades and compatibility risks.

For More Information
For more information about ERP models and which deployment is right for your organization's needs, click here.

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