Cloud ERP vs On Premise ERP

Cloud ERP is growing by leaps and bounds and is edging out primitive on-premise ERP’s.


Enterprise Resource Planning (ERP) applications arose to meet challenges in managing demand
and ordering materials in the manufacturing domain. Material Requirements Planning (MRP)
applications merged with other functions and then eventually Enterprise Resource Planning
systems came into existence.

Information is the key to smart accurate informed decision making by the company
management.ERP systems integrate all the company’s functions like Finance, Manufacturing,
Human resources, Inventory and others into a single system that will help to provide an
enterprise wide view to the management. This is aided today with real time reports and analytical
dashboards accessible from anywhere on multiple devices.

Cloud ERP has been witnessing phenomenal growth due to the flexibility and integration
capabilities unlike the traditional On-premise ERPs. According to, the
Cloud Enterprise Resource Planning (ERP) market size is estimated to grow from USD 18.52
Billion in 2016 to USD 29.84 Billion by 2021, at an estimated Compound Annual Growth Rate
(CAGR) of 10.0%.

How is Cloud ERP different from on-premise ERP in technical architecture?

On-premise ERP systems: ERP systems started out as ‘on-premise’ systems which were
installed at the organization’s offices and were managed by the information technology
department staff. Most of the ERP’s used a three-tier client-server architecture that comprised of
following three components.

  • Application server
  • Database server
  • Presentation layer

Client machines talk to servers which exchange information with the central server. Local data is
stored on a local server while organization wide data is stored in the central server and the
replication mechanism syncs the data periodically. This works more like a stand alone or
distributed systems and are not linked to the cloud. All the hardware, software and infrastructure
will have to be procured by the organization.

Cloud Enterprise Resource Planning (ERP):In Cloud ERP, the key difference is that the ERP
software is hosted remotely in the cloud and accessed through internet. Shared resources like
computing power, disk storage and memory are made available in the cloud and ERP
applications are installed in the cloud and use cloud computing resources. Cloud ERP is accessed
through the internet from office desktops and other devices. Companies using Cloud ERP need
only a thin client desktop machine to access the internet.


Why Cloud ERP is the only way forward for organizations to be competitive?

Businesses these days are contemplating whether they should be moving to a Cloud based ERP
or go for an on-premise ERP solution. This is a critical decision that businesses need to make.
Cloud computing is more powerful, flexible and economical. The benefits of cloud computing
clearly outweigh any benefits of using On-premise ERP’s.

In today’s world, technological changes are happening at a rapid pace with the ‘Internet of
things’, Smart devices, Big Data and data analytics. Organizations need the power of cloud
computing to enable usage of improved technology and productivity enhancing applications to
gain a strong competitive edge.

Today’s technologies are disrupting the marketplace leading to new business models and wiping
away traditional organizations that do not adapt fast. Uber and Airbnb are classic examples.

On-premise ERP data seems secure, but is data safe in the cloud ERP?

On-premise data is not secure as it sounds as any office servers can have its risk of being hacked.
Consistently investing in anti-virus upgrades or maintaining multiple back up servers requires
expensive upfront investments. The networking capabilities also may not be of the high quality
and speed as offered by the cloud. Besides that, there will be a need to maintain qualified IT staff
at all times, that add to the budget expenses.

Cloud ERP, like the leading Oracle Netsuite for example, are highly secure with multi-level
security features as below:

    • Role definition and role based access are provided for the business users
    • Idle times are detected and application automatically locks.
    • Netsuite can be accessed with confidence and ease securely through the 128-bit SSL
      encryption for user logins and it is the same global standard used by banks on the
    • Netsuite provides user access to only the cloud application and not the database.
    • IP address restrictions in Cloud ERP can limit number of machines on which users can
      access the application.
    • Password policies are very strong and complex. Netsuite supports multifactor

authentication with an optional physical token too.

Security in the cloud is more enhanced and managed by highly specialized technical experts in
the IT security field.

How can organizations gain the upper hand with Cloud ERP?

Cloud ERP on a SaaS model has many clear advantages for businesses. Cloud ERP applications
like Oracle Netsuite have been leading the way by providing ERP in a software as a service
(SaaS) model and has carved a successful path in the Cloud ERP industry. Cloud ERP offers cost
savings, enhanced security, flexibility, scalability, and speed that growing companies find highly
beneficial and profitable in today’s IT world and one which can help to take on disruptive

What benefits does Cloud ERP offer?

Cloud ERP saves money:In an on-premise ERP deployment, businesses will need to invest in
setting up the required hardware, software, server machines and necessary environment in their
premises, maintain IT staff, besides more expenses on upgrades to the ERP applications,
antivirus patches etc.

In a cloud based ERP, it is the cloud service provider who maintains all the hardware, software
applications and the IT environment in the cloud. The initial costs are thus lower for Cloud ERP
in a SaaS model as payment is like a subscription based ‘pay as you go’ model.

Cloud ERP performs much better:The cloud architecture is optimized for performance as it
will be supporting multiple applications and services and is designed for maximum performance.
On-premise ERP infrastructure has its limitations and cannot match the cloud environment.

Cloud ERP improves productivity:On-premise ERP’s have limitations in flexibility, mobility
and integration with other applications. The cloud ERP on the other hand is very flexible and can
be integrated with multiple applications and platforms.

Cloud ERP increases accessibility:Cloud ERP’s always have the latest updated information
and can be accessed across multiple devices like smart phones, tablets or laptops. Cloud enables
mobility solutions and helps the organization workforce to work on an ‘anywhere – anytime’
mode which improves productivity.

Cloud ERP makes system upgrades easier:ERP application may have customization,
technical upgrades and enhancements at various points of time. In an on-premise ERP depending
on the architecture, ERP system upgrades may have to be done on multiple instances or locations
too if the ERP is located at different offices. This is very inconvenient and resource intensive.

In Cloud ERP, the environment and ERP application updates are done centrally on the instance
in the cloud and there is no impact to the business users. Business users save, time, effort and
money in a cloud ERP in case of enhancements or upgrades. The changes are easier to deploy
and roll out in the centralized cloud instance and are done by the Cloud Service Provider.

Cloud ERP is faster to deploy:Deployment and upgrades in an on-premise environment takes a
lot of time in the range of 6 to 12 months whereas on the cloud ERP, it can be rolled out much
quicker like 1 to 3 months due to centralized cloud deployment. The Cloud ERP deployment can
be done centrally in the cloud as all the customers’ access it from the net. Everybody across
multiple locations around the world will access the latest version.

Cloud ERP is easier to scale up:Cloud ERP is easier to scale up or scale down in terms of
adding more users if needed or opening of new offices and requires expansion in accesses or
functionality or computing power.

Cloud ERP is flexible:Cloud ERP services are flexible. A client can pay only for the resources
they use. They can scale up the computing power, storage, access or functionality on demand and
scale them down when it is not needed. This type of flexibility is not provided by the on-premise
ERP. Cloud ERP is economical as it is in a ‘Pay-as- you-use’ mode.

In today’s world which is going in to a connected mode with more and more devices getting
linked through internet, mobility solutions, big data and analytics, Cloud ERP is the wise choice
for the future.

Maxcon consulting is a certified partner of Oracle NetSuite in the GCC region with years of experience. If you have any specific queries regarding Cloud ERP or on ERP efficiency on your current system feel free to contact us at or Call +971 4 3207181

ShareShare on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn

Leave a Comment

Your email address will not be published. Required fields are marked *