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Difference between Cloud vs On-Premise Software

Estimated reading time: 5 minutes


The widespread implementation and adoption of the cloud have led most people to shift their focus from an on-premise solution to a cloud-based model. However, some individuals, who believe in the ‘traditional way’ of doing business, still opt for the former. 

Such a situation naturally presented the question – which option is ideal for your job? 

Since the rise of enterprise IT, almost everyone has started relying upon cloud technology to ensure a better business flow. But does it do the job perfectly?  

And if it does, should you ditch your former on-premise software without thinking twice? The answer is yes. And this article will tell you the reason behind it. 


On-Premise ERP – An Elaborate Introduction 

On-premise software is something that resides within your literal organisational boundary. Once you’ve purchased it, you can assume complete ownership without any 3rd party involvement. If you want, you can install it on your server instantly. 

However, depending on the option you have bought, it may require an additional power server and a software-specific operating system. Whether it’s about running the software or offering maintenance, everything will be done internally by a dedicated team of specialists. 


The Benefits of an On-Premise ERP

Even though everything must be done manually, a well-polished on-premise ERP can still benefit a business. For instance, it will – 


1: Decrease Long-Term Expenses  

The initial up-front expense of an on-premise software program tends to be much higher than a cloud-based offering. However, as it’s handled in-house, there’s no need to spend additional money on subscriptions or anything similar. Also, you will need your resources to ensure the system works perfectly. So, the risk of getting scammed will be low too. 


2: Increased Independence 

As mentioned before, with on-premise ERP, the entire system will be in your hands. So, there is no need to worry about the ramifications, even if the vendor goes out of business. Also, you don’t have to abide by any rules or limitations while upgrading your system or integrating an additional software program. You can do whatever you want with it. 


3: Lower/No Dependence on Internet Connection 

An on-premise system, fortunately, doesn’t solely rely upon your internet connection. Hence, even if you’ve encountered an unfortunate power cut, your business will still be able to ensure its productivity till the very end. Besides, as you are handling both the hardware and software on your own, their security will be in your hands too. 


Cloud-based ERP – What’s the Fuss about? 

Although they serve the same purpose, a cloud-based ERP system tends to work differently in one critical way – in this case, a third-party vendor will host everything for you. You won’t be able to have physical control over the software or hardware here. 

However, there’s one way it may help you out. A cloud environment can ensure that you’re paying on an as-required basis and scaling your business as needed. 

A cloud-based server will utilise virtual technology to preserve and host the offsite organisational applications. The data will be backed up frequently, there is no need to pay any capital expense, and you’ll only have to pay for whatever resource you use. 

The cloud can offer even greater appeal for people planning to expand aggressively. This, in turn, will help them collaborate with their partners, customers, and other businesses. 


The Benefits of a Cloud-based ERP

As you probably already have guessed, a cloud-based ERP system can come with an excellent benefit or two of its own. Here are a few of them. 


1: Lower Operating Cost 

While the subscription-based payment system might look expensive in the long run, the cloud-based ERP can lower your operating cost if appropriately strategised. For example, the startup fee, in this aspect, will be much lower, as you don’t have to purchase anything. Also, the cost of the subscription will be tailored to the extent of the application you are using. No hidden fees. 


2: Robust Security 

Hosting ERP on the cloud can offer numerous benefits to businesses, but it is important to ensure that security is given due consideration. Industry-standard security measures provided by your chosen hyperscalers can protect against data breaches, compliance violations, downtime, and reputation damage, thereby safeguarding the business and its stakeholders. 


3: Flexibility of Accessing 

Unlike an on-premise ERP system, cloud computing can perform everything remotely. Hence, even if you have taken a leave from your office, you can effortlessly access whatever information you seek. However, you will need a working internet connection to access it. In any case, it can let you collaborate with others – so that’s a win for you. 


Cloud System vs. On-Premise Software – The Differences  

As outlined previously, an on-premise software program can differ greatly from a cloud system. We have mentioned some of them here through an elaborative discussion.  

Hopefully, it will help you come up with a proper decision. 


1: Deployment 

Cloud: The resources a cloud vendor provides will be kept within the system itself. Thus, you can access them anytime and use them as much as you require. There won’t be any restriction posed on it, as long as your subscription model doesn’t have a say in it. 

On-Premise: In this case, the resources will be displayed and deployed in the infrastructure of your organisation’s IT section. You will solely be responsible for managing and maintaining a solution you’ve bought and the other related processes. 

2: Control 

Cloud: In a cloud-based system, the encryption or data keys will reside within the third-party vendor you have opted for. Hence, if something unexpected happens in your case, you’ll have to wait until the downtime is over. It might prevent you from doing any organisational task.  

On-Premise: An on-premise ecosystem will ensure that you retain all your data and have complete control over it. In this case, the risk of someone else stealing your data will be non-existent. However, if something unfortunate happens, you’ll have to deal with it alone. 

3: Expense 

Cloud: In cloud computing, you’ll only be using the resource you currently use. Hence, there’s no need to pay any additional price to buy any other software. Your vendor will take care of the management and maintenance without additional expense. 

On-Premise: You will have to purchase everything while setting up an on-premise system. Therefore, the price you have to pay upfront will be much higher than usual. Besides, the ongoing cost of maintenance and upkeep can be quite a nuisance too. 

4: Security 

Cloud: The security segment of modern cloud-based technology has enhanced quite a lot at this point. However, for some reason, it’s still vulnerable to breaches, hacks, and server-based issues. The most common problem with it is the loss of intellectual property or credentials. 

On-Premise: Organisations with extra-sensitive data, like a bank or a government-based company, will require a specific level of security. Now, in an on-premise system, a corporation will handle all the data and everything else. Hence, the risk of losing whatever information you have currently will be nearly impossible. 

5: Compliance 

Cloud: An organisation that opts for a cloud computing model, Must do their due diligence and make sure that their 3rd party provider is up to the government code. It will comply with almost every regulatory model as a whole. But, before you move on, it will be essential for you to secure all your sensitive data and ensure your privacy accordingly. 

On-Premise: When it comes to an on-premise solution, every company should operate under regulatory control, notwithstanding the industry. The best and most common option is HIPAA (Health Insurance Portability and Accountability Act) for health information. But in addition to this, you can also opt for FERPA and other education-related regulations. 


The Final Say! 

When running a business, both of these can offer an excellent outlook – no matter how you look at it. Hence, it’s best to look at your organisational structure and choose the one that’s suitable for your business. 

However, if you ask us, we’ll always ask you to go for a cloud-based solution. It’s much more effective, eloquent, and can offer the resources you want. 

Your contact

For a detailed consultation, we are of course also happy to assist you personally. Simply contact us directly:

Jonas Heymann
Senior Consultant
cbs Corporate Business Solutions
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