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Cloud Based ERP vs On-Premise ERP for Small & Medium Businesses

Businesses who implement customized ERP programs do so with the goal of improving overall performance. But all ERPs are not created equal, so how is a business to know which one is best for them? This article compares the system performance, deployment speed, required resources, and costs of cloud-based ERP vs on-premise ERP systems.


For small- and medium-sized businesses, a cloud-based ERP program will generally perform better than on-site. Even though the software programs themselves may both be equally well written and suited for your processes, SMBs rarely have the resources needed to ensure maximum performance.

Only companies that have large IT departments and extensive resources are able to obtain similar results through an on-site ERP program. Comparable performance would require an IT staff that is on duty around the clock and multiple server locations. For small- and medium-sized companies, these resources could easily bankrupt the company. In a number of cases, in-house IT departments are not able to provide management with uptime statistics due to lack of time and, therefore, are not focused on overall strategy.

Deployment Speed

The deployment speed of an ERP program often determines how quickly companies begin to see a return on their initial investment. Naturally, businesses want to deploy a program as quickly as possible. There are three main factors that influence how long it takes to deploy an ERP program: 1) setting up hardware, 2) installing, configuring, and testing and 3) end-user training.

While training employees is, in many cases, the most time-consuming and important step, migrating to a cloud-based ERP program eliminates any hardware setup or configuration which oftentimes leads to a quicker deployment.

Required Resources

While set-up and configuration of the software are about equal for both on-premise and cloud-based solutions, the hardware required differs significantly.

For an on-site program, companies must have high-end servers that are stored in secure locations and a well-developed network. Depending on a company’s size and the number of locations it has, this can take several weeks or several months. Conversely, when implementing a cloud-based program, companies do not need to set up new hardware because it is fully run and managed by the vendor.


Upfront Costs of an ERP Solution

As one might expect, the upfront costs associated with an on-premise ERP solution are much more than those of a cloud-based solution. When installing an on-premise solution, companies must already have or purchase servers to run the system from. These servers must be housed in a secure location, protected from power outages, theft, and fluctuating temperatures. With all of the required resources, on-premise solutions are usually suited for larger and more well-established companies.

Cloud-based ERP solutions, in contrast, are affordable enough for small- to medium-sized businesses. All a company needs to run a cloud-based solution is a high-speed internet connection. Another advantage of a cloud-based solution is that companies can budget a specific monthly fee; they do not need to worry about IT personnel needing overtime or servers crashing.

Upgrading an ERP System

On-site ERP solutions are often customized to meet a specific company’s needs. When an upgrade is available, though, those customizations will often be lost in the upgrading process. Therefore, many companies with on-site ERP are running outdated solutions because of the time, money, and resources it would take to keep those customizations.

Cloud ERP solutions are continually being upgraded by the vendor. Companies that select this option will know they always have the latest version and will not lose their customizations.

Cloud-Based ERP vs On-Premise ERP: Advantage Cloud

When considering performance, deployment speed, required resources, and cost of cloud-based ERP vs on-premise ERP, cloud has the advantage. Of course, these are not the only factors a company should consider, but they are often the ones that take front and center stage when time and resources are in short supply.



NetSuite is the most deployed cloud ERP solution in the world, and it’s easy to see why. (After all, 16,000+ customers across 200 countries can’t be wrong.) From financials to supply chain management to omnichannel commerce and beyond, NetSuite gives companies of every size, and in every industry, the tools they need to accelerate growth and drive innovation.


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