When it comes to an ERP, there are a variety of choices, and while on-site ERP used to be the go-to for most companies, that has changed with the increase in availability of cloud computing and Software as a Service (SaaS) options. But how do you decide which one is right for your business? It is about more than just your preference. It’s about the things that matter most to your company.
Here is the breakdown of each type of ERP, and a few tips on choosing between them.
SaaS, Cloud-Hosted, and On-Site ERP Defined
So, what are the differences between these types of ERP? Here is a really simple definition of each:
- SaaS ERP: This is a multi-tenant ERP hosted and controlled by the software company. This is designed for small to medium-sized companies that don’t need a lot of customization options (more on that in a moment).
- Single Tenant, Cloud Hosted ERP: In this case, the business has its own virtual application and servers. Instead of an out of the box solution, this app can be customized to an industry and a business.
- On-Site ERP: An on-site ERP means that you have servers on the premises of the business that can handle your ERP computing needs. No internet connection is needed, but performance is directly related to your own hardware, as is security (more on that in a moment as well).
SaaS and cloud-hosted ERPs are very similar in that they are both hosted off-site in a cloud server, so for many of the following points, they will be treated nearly identically. However, there are some primary differences when it comes to customization.
Make it Yours
One of the biggest advantages of on-site ERPs is that they are easily customizable, meaning that everything from hardware to software can be tailored to meet your company needs and the things you specifically are looking for. The company has absolute control over everything about the ERP system.
The downside is that the more you customize your system, the more difficulties you will encounter with hardware and software updates, and the more potential for downtime you have.
Cloud-hosted ERPs are similar. The company has the same control over the application and the customization of the software, but they do not have control over the hardware of the servers. This can have its own pros and cons which we will discuss shortly. However, this type of ERP can be set up to meet your business needs precisely.
The advantage is that since your ERP is in the cloud, software updates can go to several branches at once, and be implemented in off hours in a relatively simple manner.
SaaS suffers the most in this category. The software and applications are controlled by the vendor. While some customization is possible, the options are limited. There are advantages: updates often happen automatically and apply across the board, and with less individualization, those updates are less likely to impact your business.
Here is the big drawback of on-site servers, and the reason they are best for larger companies: while you have control of every aspect of the ERP, you are also responsible for all of it too. If hardware fails, you have to fix it, and scaling your ERP often means hefty hardware upgrades in addition to software ones.
When it comes to cloud-hosted ERP’s, typically your company is using someone for Infrastructure as a Service (IaaS) like Amazon Web Services, Oracle, or IBM. This means they manage the hardware, and scaling is simply a matter of obtaining more server space on the cloud, infrastructure that already exists.
This is the other area where Software as a Service struggles to keep up. If you want to scale your business, sometimes that will mean switching ERPs altogether, especially if you need functions you previously did not. Since the vendor has ultimate control, they are also ultimately responsible for keeping things working, but that has limits.
Part of control is responsibility. The question for you will be if you have and want to control the infrastructure necessary to efficiently run your ERP.
Keeping Things Secure
An on-site ERP might seem like the most secure option, and it can be. The key is that the company deploying it needs to have those in the IT department with the proper experience and skills needed to establish and handle the security of your ERP.
Considering all the data in the system, everything from company financial records to sensitive customer personal identifying information (PII), security and encryption are vital. If you are going to handle things on site and be responsible, you need to have personnel in place to ensure the proper precautions are in place.
With cloud-hosted ERPs, the same security concerns exist but are often managed by the cloud services vendor, taking some of the heat away from the company itself. While ultimately the company is still responsible, they have a lot of assistance and tools available from their IaaS and ERP vendors.
When it comes to SaaS options, the responsibility of security is squarely on the shoulders of the vendor, as the company has little control in that area. However, it is often hard to trust another company with your security entirely, no matter what the vendor promises.
Which kind of ERP is right for you? That depends largely on the size of your company and the amount of customization you need. Confused by all of the options and want to talk to an expert? Contact us here at SixtySixTenand we’d be happy to talk to you about the process. We offer customized ERP systems that are designed to meet your needs exactly. Let’s talk about how we can help you make sense of all the noise out there about ERP.
About The Author: Troy Lambert
Troy is a freelance business and tech writer from the northwest where when not writing about being an entrepreneur he writes thrillers and mysteries. He's the owner of Unbound Media and loves business process automation, customer service, and all the benefits technology offers to today's businesses.
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