This post is part of a series. We recommend checking out The Evolution of ERP and its Transformational Impact before reading this blog.
When choosing an ERP, make sure to find one that caters to your business structure and needs. Each system offers its own unique set of advantages and disadvantages, so it’s essential to know what you want to gain before investing. All ERP systems can be broadly classified into three types — On-premise ERP, Cloud ERP, and Hybrid ERP.
What is an On-premise ERP?
This ERP software is a traditional software in that the system is locally installed on computers and servers situated within the business. You generally purchase the software license to gain full control of the system but note that it’s a hefty upfront cost to do so. You will also be responsible for end-user license management, server security and maintenance, all of which typically require having an in-house IT team.
Best suited for:
- A business that already has a well-trained IT department to help with security, implementation, optimization, and troubleshooting.
- A business that wants to purchase an ERP software solution right away and doesn’t want to pay a subscription.
- A business that wants flexibility in their system and doesn’t want to be bound to the ERP system vendor’s modules.
- A business that wants complete control over their data and doesn’t want third-party accessing it.
Disadvantages of On-premise ERP software:
- Higher upfront software cost.
- Longer implementation timeline and cost.
- Can become outdated very quickly because of the advancement in technology at breakneck speed as updates and upgrades tend to be made available less often.
- Significant new releases often overwrite deployed customizations and may require new hardware to take advantages of new features.
What is Cloud ERP?
Cloud-based ERP software is the most popular choice in the ERP landscape. It runs on the vendor’s cloud platform which businesses access via the internet. Unlike on-premise ERP, Cloud ERP comes with a lower upfront cost because you don’t have to purchase servers or pay enterprise software licensing fees.
Best suited for:
- Small to enterprise-sized businesses wishing to limit upfront investment or lacking in-house IT infrastructure to purchase, implement, and maintain an on-premise ERP. Cloud ERP costs 30% less than on-premise ERP solutions.
- A company that needs access to data in real-time from anywhere.
- Companies that need an ERP solution built to scale as they grow. Cloud ERP can be easily customized to fit the business and modules can be implemented in a phased approach as dictated by business needs.
- A business that doesn’t want to worry about software upgrades and updates. Most Cloud ERP vendors ensure that all their customers are using the most up-to-date technology with minimal disruption by deploying automatic updates and upgrades silently behind the scenes.
Disadvantages of Cloud-based ERP:
- Cloud ERP runs on a monthly subscription model, so you will have to pay the vendor over time.
What is Hybrid ERP?
A Hybrid ERP solution uses a combination of on-premise and cloud-ERP capabilities to satisfy a company’s specific needs. Two-tier business ERP is a common type of hybrid ERP arrangement where you continue using an existing on-premise ERP to handle core business functions but include Cloud-ERP to support some processes such as CRM.
Best suited for:
- A business with an existing on-premise system that wants to leverage cutting-edge innovation right as it’s released. Cloud ERP vendors add new features quicker than on-premise ERP system producers. Plus, you don’t want to face the hassle of manual updates; the vendor handles it for you. Some on-premise vendors have added cloud software to their offerings. With a Hybrid approach, you can quickly access new features, earning yourself a competitive advantage while still using the on-premise solution.
- Small business for whom affordability is a significant concern. Hybrid ERP is less expensive than implementing a single on-premise solution throughout the entire infrastructure. It also eliminates the need for a considerable upfront cost compared to a new on-premise ERP implementation.
- A business that wants to test Cloud ERP. A hybrid approach gives you a way to determine Cloud ERP’s efficacy before making a full commitment.
Disadvantages of Hybrid ERP
- Although more affordable than on-premise solutions, the initial cost of deploying Hybrid ERP systems exceeds Cloud ERP.
- The performance of on-premise ERP systems may depreciate when combined with Cloud ERP.
The success of your ERP solution doesn’t solely depend on what kind of software you decide to choose. It also requires choosing a partner who understands your business and possesses the technical expertise to provide a successful integration. can help you reap an array of benefits while avoiding setbacks from the onset. In our next blog, we will discuss the top 7 benefits of ERP software for businesses. Be sure to follow us on social media to stay up to date with the newest releases.
Would you like to know if an ERP system is right for you and unlock the specific values it can bring to your business? Contact Us today to learn more. Let us help you get started on your ERP journey.
About 9Gauge, an E78 Partners Company
9Gauge will work with you to make sure you leverage your ERP system to its fullest potential. We conceive and build a solution for your business from the ground-up or optimize your existing system so your ROI is supercharged. Let us help you navigate these changes to ensure a seamless transition into growing your business and accelerating your vision. We look forward to using our technology and management expertise to help your business grow, pivot, and transition to new heights of success.
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About the Author
Ken Schatz, Director
As the Practice Director for 9Gauge Partners’ Technology Enabled Services-NetSuite Practice, Ken’s ultimate goal is ensuring the successful implementation of NetSuite to our clients. In this role, he is involved in everything from people management to delivery and sales enablement and is tasked with growing and maturing our industry-leading NetSuite team.