If you are running a business, then there is almost nothing more important than your single source of truth. This is the system your employees fall back on, the process your managers use to allocate resources, the Bible your entire team relies on to operate efficiently. So, when installing one, it’s vital to be sure you’ve selected the right ERP solution.

 

Venturing into this world, you might notice that you have a few options available. Specifically, you’ll need to make a choice between on-premise ERP vs. cloud ERP. But are there any significant differences between the two, and what do you stand to gain (or lose) by making a certain choice for your business? Read on as we explore the difference between these two ERP options.

What is an ERP Solution?

An ERP solution – which stands for ‘Enterprise Resource Planning’ – is an integrated software system that has all of the required tools and processes for running a company under a single umbrella. Everything from financials to the CRM to human resources management is all accessible from a single portal, and each piece of data can be understood in relation to every single other piece of data. But why is this so important?

 

Before the existence of ERP systems, companies operated with siloed data that could not be integrated or interacted with; this led to missed opportunities, financial fallouts, and teams that had no way to collaborate seamlessly to grow the business.

 

With a pool of data that captures and simplifies internal performance, financial needs, supply chain operations, e-commerce sales management, and even customer relationships, businesses can use a deeper understanding of how their business is operating to stabilise and grow. They simply need to choose the right one for their business.

 

What is On-Premise ERP?

When you select an on-premise ERP, you are committing to installing and maintaining your resource planning system locally. You will have your own servers and infrastructure, with full control over data, infrastructure, and any customisation options.

 

This is undeniably full-on, requiring businesses to invest in licensing fees, in-house server hardware, and a significantly expanded IT staff to manage the ongoing needs of an on-site server bank. All upgrades and patches to software will also be handled internally, including those that address bugs that can cause downtime to this vital system. The growth of this system will always require more capital investment, simply to expand the server bank to handle more data.

 

That said, this is a fantastic option if you are seeking total control and customisation, and you are happy to front the cost of this expansion. This is why on-premise ERP solutions like this tend to appeal to businesses with strict data governance requirements.

 

On the other hand, we have cloud ERP systems…

 

What is Cloud ERP?

A cloud ERP system is not hosted in-house. Instead, you gain access to a secure personal back door to a vendor’s maintained server bank via the internet, where a section of the processing power is carved out for your particular system. There is no need to manage your servers or software internally, as everything, down to the smallest bug fixes and patches, is taken care of by the vendor.

 

Businesses typically access a cloud ERP solution via a SaaS model, subscribing to a specific data capacity that meets their needs without needing to install an in-house server. This makes expansion much easier, as the only real cost would be a slightly increased subscription price. This version of the ERP solution is well-loved for its ability to run seamlessly in the background. It can be implemented much faster than on-premise solutions and has a significantly lower upfront cost. Not to mention, internet accessibility makes it ideal for the brave new world of remote work.

 

That said, if you are concerned about data residency – a.k.a. having your data on-site – then this might not be the solution for you. Most providers and vendors (including First Software) have strict and careful in-house data privacy protocols of their own. However, for companies or governmental agencies seeking full control, an on-premise ERP might be a better solution.

 

Which ERP System is Right for Me?

Deciding between an on-premise or cloud ERP system is not a one-size-fits-all game. The right choice will depend on the size of your business, your data governance requirements, your industry, and your level of enthusiasm for potential expansion. To summarise the differences between these two systems, we’ve put together a quick table:

 

Feature	On-Premise ERP	Cloud ERP
Initial Cost	High	Low (subscription-based)
Maintenance	In-house team	Vendor-managed
Customisation	Extensive	Extensive
Deployment Time	Longer	Quicker
Scalability	More complex	Simple and automated
Access	Can have limitations	Anywhere with Internet

 

While the choice is entirely up to you, most of Aotearoa’s growing importers, distributors, and retailers choose cloud ERP systems to benefit from the baked-in agility and cost-efficiency. Scaling becomes simple, and there is no need to invest in complex IT infrastructure.

 

If you are still unsure about which system is right for you, the best thing to do is to get in touch with an expert who can walk you through the benefits of both cloud ERP and on-premise ERP to help you find what suits your business best.

 

Get in touch with us now.

We’re First Software, providers of the n2 cloud ERP for medium to large importers, distributors, and retailers. Bridge the divide between your eCommerce operations and your in-house resource planning with our revolutionary system, so nothing gets lost in translation.

 

Are you curious if your business would be a suitable fit for the n2 ERP? Complete this 10-minute questionnaire, and we will be in touch!