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The Advantages and Disadvantages of Cloud-Based Enterprise Resource Planning (ERP) Systems

Posted by Scott A. Holter on Apr 6, 2020 11:56:34 AM

Cloud-based enterprise resource planning (ERP) systems are simply a suite of ERP applications delivered to users over the Internet, usually accessed via a standard web browser. While these systems share most of same features as “on-premise” ERP systems (ERP software that runs on in-house servers), there are several critical areas we discuss with our clients when considering the advantages and disadvantages of purchasing a cloud-based ERP vs. on-premise systems. The best choice will depend on the organization’s structure and business strategy.

Cloud-based ERP

Advantages for Cloud-based ERP

• Ease of Implementation: Cloud ERP systems are faster to implement than on-premise ERP systems. The technical environment for cloud technology can be configured in as little as 24 hours.
• Limited “In-House” IT Resources: Rarely do we hear of companies where the IT department is looking for things to do. With cloud-based solutions, the provider takes care of hosting the solution, as well as the support, so there’s no need to hire and train additional IT resources.
• Scalability: One of the most appealing features of any cloud-based ERP is the ability to easily scale as a company’s needs change. For an on-premise system, it is a time and labor-intensive process to upgrade and scale.
• Mobility and Access to Information: Mobile devices are now firmly embedded as an essential business tool. Where on-premise ERP software has been slow to adapt to the mobile world, cloud-based software allows sophisticated access and control through ERP-enabled mobile devices.
• End User Adoption: Cloud technology typically have modern user interfaces that make them easier to adopt than on-premise software, so employees may be quicker to embrace software changes.
• Regular Upgrades: With cloud-based ERP, software updates are deployed from the manufacturer or vendor’s cloud servers, removing the burden of constantly updating the system from IT departments.

Disadvantages for Cloud-based ERP

• Data Security: There is an ongoing debate whether cloud or on-premise ERP systems are more secure, with the widespread perception that the cloud is unable provide the stability or security of an on-premise ERP system. The main concern for cloud system security is that there is no luxury of assuming that the service will have a secure moat built around it. This places more security responsibility on the shoulders of a client’s employees.
• Customization Limitation: Customization options are restricted in cloud-based software, this is why some manufacturers are still utilizing on-premise ERP systems that are best suited for their specific operations.
• Price/Cost Savings: While the initial cost of cloud technology is lower than on-premise technology, subscription costs add up over time, many business leaders are more concerned about minimizing capital expenditures than reducing operating costs.

The MCS team has the expertise and experience to dig deep into our clients’ challenges and specific operational requirements to present a side-by-side comparison illustrating which type software is ultimately best for their business. Please contact a Meaden & Moore ERP expert today if you have questions. 

Topics: ERP

Scott A. Holter

Scott A. Holter

Scott Holter is the Director of Meaden & Moore’s Business Solutions Group. He has spent 20 plus years in manufacturing and technology consulting.

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