For product-based businesses, there is nothing more important than a single source of truth. With siloed data, you run the risk of inventory, financial liabilities, or growth opportunities slipping through the cracks between different departments, all of which can hamper your scalability.

 

To break down the walls between these internal operations, many companies opt to implement an Enterprise Resource Planning (ERP) system. For importers, distributors, and retailers, this type of system is particularly revolutionary because it consolidates your internal and external operations into a single, manageable platform with no data silos.

 

However, the question is not whether to install an ERP system, but rather which one to install. There is no empirical best option, so it’s important to investigate your needs closely before making the call. Today, we are exploring what is included in an ERP system and determining whether a cloud ERP or an on-premise ERP is right for you.

 

What Can Be Included in an ERP System?

Financial Management/Accounting

Automated invoicing, expense tracking, and tax compliance; a financial module handles it all. This either reduces the need for third-party accounting altogether or simply ensures better financial visibility across all areas of the business.

eCommerce Management

ERP systems designed for the modern marketplace must include eCommerce management options, enabling the system to track inventory, sales, and issues across multiple online sales platforms.

Inventory Management

Inventory management is crucial here, ensuring you never experience a down period. ERP software provides real-time updates on stock levels, reorder thresholds, supplier performance, and delivery tracking.

Repairs and Manufacturing Oversight

Some ERP solutions custom-built for product-based businesses can include a repairs and manufacturing model, designed to maintain constant oversight of ongoing maintenance and repair needs. This is especially helpful for logistics and warehousing.

Customer/Vendor Relationship Management

Built-in CRM modules allow teams to manage external relationships with customers and vendors, folding quotes, orders, and sales performance into a single platform.

 

Note that not all of these features are present in every ERP system, and some may be found in those designed for other verticals, such as SaaS or real estate. But for product-based businesses, the above features are essential. Now, onto our core question: cloud ERP or on-premise ERP?

 

Cloud ERP vs. On-Premise ERP: Key Differences

While both cloud ERP and on-premise ERP solutions fundamentally accomplish similar needs, the key difference lies in their implementation and day-to-day functionality.

 

On-Premise ERP

An on-premise ERP solution requires your business to install an in-house server and hire team members responsible for monitoring and maintaining that server, as well as the software it hosts. This typically comes with a much higher cost (upfront for the hardware installation and ongoing staffing costs), but the trade-off is total data governance. If you are in an industry with a strict regulatory environment, an on-premise ERP might be the solution for you.

 

An on-premise ERP:

•         Is installed locally and usually accessed locally.
•         Uses a one-off licence run on installed infrastructure
•         Requires manual updates or expansion
•         Generally costs significantly more than a cloud-based option

Cloud ERP

On the other hand, a cloud ERP system is hosted on external servers, rather than in-house. You subscribe to the server space and provide a software license, typically on a monthly basis, receiving a system that is hosted, managed, debugged, and updated by the vendor rather than an in-house team. This significantly reduces setup costs and grants you and your team remote access to the system from anywhere in the world.

 

A cloud ERP:

•         Is run remotely from a vendor’s infrastructure via the Internet.
•         Uses a subscription-based model
•         Is accessible from anywhere by team log-ins
•         Offers instant scalability and updates as your business grows
•         Costs significantly less than an on-premise option

 

While businesses requiring strict data governance or an in-house network might choose an on-premise solution, cloud ERP systems are generally the go-to for fast-scaling retailers, importers, and distributors who want flexibility and accessibility.

 

How to Choose Between Systems

To make the final call on which system is right for you, we recommend considering four very important things:

1.     Growth trajectory: What plans do you have for the expansion of your business? How quickly will you need to grow?
2.     Budget: What kind of upfront and ongoing costs can you realistically manage? Is ongoing staffing to manage an in-house bank realistic, or is a cheaper SaaS model more appropriate?
3.     Data Management: Are you required to manage all data in-house or on local networks, or is the flexibility of an online connection available to you?
4.     Customisation: Do you require niche or deeply integrated workflows?

 

As you can see, the fundamental differences between an on-premise or cloud ERP lie in how they function, not how well they function. Consider your ongoing costs, the level of flexibility you require, and the specific modules you need to be installed to determine the right ERP system for you.

 

Find out if a cloud ERP system is right for you.

At First Software, we have developed the n2 cloud ERP system specifically for importers, distributors, and retailers across Aotearoa. With built-in eCommerce integrations and baked-in scalability, this is the system for product-based businesses who are ready to optimise and expand.

 

Find out the possibilities of a cloud ERP with one of First Software’s in-house tech experts on your side. Complete this questionnaire to get in touch with us about your options today.