What is Cloud ERP?

There are two main differences between on-premises and cloud ERP systems.

• Deployment: On-premises ERP systems are installed locally on your organization's hardware and managed by your IT department. In contrast, cloud ERP systems are hosted remotely and accessed via a secure connection through the Internet.
• Payment Model: Cloud ERP systems are purchased as a subscription service where companies pay for access to their ERP system on an ongoing basis. On-premises ERP is purchased via a larger up-front payment.

It isn't always obvious which ERP deployment model is best for your company. Here are some important considerations to keep in mind when deciding between an on-premises or cloud-hosted solution.

Ownership Cost

On-premises enterprise resource planning (ERP) requires significant upfront and ongoing investments to purchase, install, and maintain the software and the related infrastructure necessary to run it. Cloud-based ERP solutions are typically much less expensive because they're delivered via the Internet rather than installed locally.

System Upgrades and Enhancements

On-site ERPs are customizable but require customization for each new release of your ERP system. In contrast, SaaS ERP systems, like Deltek, are continuously updated, so you can be sure you're always using the most up-to-date version of your ERP solution.

Improved System Performance and Accessibility

Cloud ERP typically delivers better overall system reliability than on-premises ERP systems. Cloud ERP architectures are built from the ground up for optimal network connectivity, which means they're usually able to deliver greater system uptime than traditional on-premises ERPs.

Deployment Speed

Cloud ERP has the ability to run without additional hardware so your company doesn't need to spend time procuring and setting up IT infrastructure.

Software-as-a-service enterprise resource planning (ERP) advantages are many—and growing. Today, more than 2,500 companies are offering some form of SaaS ERP, according to Gartner Inc., up from just 300 in 2013. And while the appeal of SaaS ERP is clear, it's essential to understand the specifics.

"Cloud-Based ERP global market to reach $32.18 Billion by 2023,"
Allied Market Research.

Here are three reasons why SaaS ERP is continuing to grow in popularity:

1. SaaS ERP offers out-of-the-box functionality for crucial business processes such as accounting, inventory, orders, and customer records management. For example, Sage Intacct provides basic financial reporting capabilities, whereas Microsoft Dynamics 365 includes comprehensive sales force automation tools.
2. You don't need to invest in additional hardware or infrastructure as the business grows; SaaS ERP automatically scales to meet demand. This eliminates the need to buy additional servers, storage, networking equipment, and IT support personnel.
3. SaaS ERP typically provides automatic upgrades by the vendor (generally several times per year). These updates usually address security issues and add new features, keeping all users current with the most recent enhancements.

In short, SaaS ERP and cloud ERP have similar goals: To help businesses manage operations and improve productivity. But there are differences between the two approaches. Here are four significant distinctions between the two:

1. Security: A cloud ERP is hosted on a secure network where only authorized users can access the information stored within. The user interface is delivered via a browser, so no special software needs to be installed on your device. All data is encrypted at rest and in transit, ensuring privacy and compliance. SaaS ERP solutions are generally less secure because they run on a private server.
2. Scalability: Because cloud ERPs are hosted on shared computing resources, they can quickly expand to accommodate growth without requiring any upfront investment. As a result, you can quickly adapt to changing demands. SaaS ERP vendors also often offer subscription plans that allow you to pay for only the services you use.
3. Cost: SaaS ERP vendors charge monthly subscription fees based on usage. If you use less than the average amount, you pay less than if you use more. Cloud ERPs are billed hourly, so their cost depends on how much time you spend using the system.
4. User experience: With SaaS ERPs, you get a consistent user interface across all devices, whether working on a desktop computer, tablet, smartphone, or laptop. Cloud ERPs may not look exactly like the same applications you've been using before, but they should still work well.

Organizations looking to move from on-premises ERP to SaaS ERP often face a dilemma: choose a hosted solution that runs within a customer's network or one that lives entirely outside it. Both cases have pros and cons, depending on what you value most in an ERP solution.

A single-tenant model might be the best choice for large organizations and those with nuanced business models or stringent security requirements. These businesses typically have the IT staff and budget necessary to manage the software, and they can tailor the software to meet specific needs without relying on a vendor.

However, many more organizations will find a better business case for a multi-tenant solution. There are several benefits to running a single instance of ERP across multiple customers, including cost savings, faster implementations, and increased flexibility.

In addition, Cloud ERP solutions tend to provide a much smoother onboarding experience since they don't require employees to download client applications or install software on their computers. And because they run entirely offsite, they eliminate the risk of losing access to critical systems due to a natural disaster or cyberattack.

Finally, Cloud ERP solutions have built-in support, maintenance, and monitoring tools that help keep the software up-to-date and secure. Cloud software vendors are equipped to handle complex security issues like PCI compliance, HIPAA regulations, and GDPR requirements.

A cloud ERP solution might not make sense if you're starting out as a small business owner. You won't need the extra features offered by a larger enterprise software package, and you probably don't want to invest in a new technology platform.

But even though you may not need all the bells and whistles, a cloud ERP offers some advantages over traditional on-premises ERPs. For example, cloud ERPs are easier to implement, scale and maintain than on-premises software. They also provide greater flexibility, allowing you to customize your software to fit your unique business processes.

And while cloud ERPs aren't necessarily cheaper than on-premises ERPs, they do save money over time. The most significant benefit comes when considering the ongoing costs of maintaining a legacy system. While you could pay for upgrades and patches through annual subscriptions, these expenses add up quickly.

Instead, cloud ERP allows you to purchase only the functionality you need, which means you can avoid paying for unnecessary features. This frees up cash flow so you can focus on growing your business instead of worrying about how much you spend on software.