ERP Cloud vs. ERP: What’s the Difference?

ERP Cloud vs. ERP: What’s the Difference?

The main purpose of the best Enterprise Resource Planning (ERP) systems is to automate the link between team members and build a connection between functions, operational data, and financial data. However, choosing the right ERP software and successfully completing the steps of ERP implementation can be a daunting process to begin with. One of the first questions is whether you need an on-premise, software-as-a-service (SaaS), or ERP Cloud.

A technology architecture question that may urge you not to dwell on this choice is that if your ERP system is capable as a unified source of data and integrates production, distribution,  inventory, finance, human resources, orders, and procurement, then does it even matter whether you choose ERP Cloud or SaaS ERP?

Both the SaaS ERP projects and ERP Cloud have their specific advantages and setbacks. In this article, we will discuss what SaaS ERP and ERP Cloud are, compare the two, and share the reasons that make ERP Cloud the better choice for some organizations. 

What is On Cloud ERP?

ERP Cloud is an Enterprise Resource Planning solution remotely hosted in a commercial provider’s data center and delivered via the internet. Users access ERP cloud software through a web browser, just like other cloud services. ERP cloud implementations are either single-tenant, in which the business has its dedicated hardware and a distinct instance of the software, or a multi-tenant model, in which several companies share the infrastructure and the same example of the software. ERP has benefits and limitations to consider as you're choosing the best system and deployment method for your business. 

Companies using the single-tenant ERP cloud model have increased control over customization and upgrades, while users of the multi-tenant ERP cloud model share the same software functionalities and receive the same promotions and updates. In the single-tenant ERP cloud model, the expenses are higher since the owner is responsible for setup and maintenance. The multi-tenant ERP cloud model, however, is generally more affordable.

What is SaaS ERP?

SaaS ERP is an Enterprise Resource Planning (ERP) system hosted and runs in the ERP vendor’s data center. The client company’s end-users access SaaS ERP over the internet. Therefore, the company does not need to purchase the organization’s servers and infrastructure. While the terms ‘SaaS ERP’ and ‘ERP Cloud’ are used interchangeably, the former is a subset of the latter. ERP Cloud software products implemented as a multi-tenant model are called SaaS products. Understanding the difference in ERP vs CRM can also be helpful in planning for the proper integrations to ensure a smooth data transfer.

Since SaaS ERP uses the multi-tenant ERP cloud model, it shares the same instance of software and infrastructure as the vendor's other customers. As SaaS ERP is a subscription service, customers are billed monthly or annually. Technology spending is much less with SaaS ERP since no hardware purchase and maintenance costs are required. While some SaaS ERP vendors charge per user, others have tiered pricing based on the client’s company size and the necessary resources. 

What is the Difference Between ERP and Cloud ERP?

Typically, SaaS ERP can be deployed faster than ERP Cloud. Saas ERP for small business is a popular choice since it is also a more cost-effective option. However, the ERP cloud offers more customization to cater to your business’s unique needs in an improved manner. SaaS ERP is a subset of the more extensive ERP cloud offering. While ERP cloud offers two models: a single tenant model and a multi-tenant ERP cloud model, SaaS ERP is strictly the multi-tenant model only. More and more users are beginning to draw away from traditional ERP as the debate has mainly shifted to a choice between these two. 

Why is ERP Cloud Better?

ERP works to improve processes and automation. Organizations looking for an ERP solution with lower initial costs, faster implementation, and seamless scalability find a business use case for SaaS ERP instead of ERP cloud. However, while the advantages of SaaS ERP may distinctly outweigh the cons for most companies, it still may not be the best fit for certain businesses due to setbacks like lesser flexibility to customize and accommodate unique business processes, the insufficient capability of meeting some stringent organizations and regulated markets, and quickly growing costs that may surpass those of on-premise ERP as the client organization scales. ERP cloud, on the contrary, has earned the preference of many organizations over the last two decades.

The ERP implementation phases for cloud-based systems tend to be simpler and more straight-forward than those done for proprietary on-premise systems. The reason behind the growing popularity of ERP cloud is the pros associated with it. Some of these are: 

  • Faster and simpler implementation compared to on-premise ERP.
  • More convenient information sharing with both internal and external parties.
  • Greater flexibility for users to log in with any device as long as they have access to an internet connection.
  • Lower upfront costs as the client company do not need to invest in infrastructure such as servers. 
  • Better access to the system and critical business information.
  • More consistent upgrades and updated software.
  • Improved security and data storage resilience.
  • Enhanced business continuity capabilities.
  • Better elasticity as the organization only uses the resources needed. 

What is the Number 1 Cloud ERP?

The closely integrated processes of the ERP cloud usually compensate for the initial investment cost. In the long run, besides cost savings, despite all the ERP integration benefits and challenges, cloud ERP considerably increases efficiency and value and are thus considered assets. However, finding the right fit for your organization is time-consuming and somewhat daunting when you're looking at all the options available, from cloud ERP for B2B to ERP for manufacturing.

Here we have shortlisted some of the best ERP cloud options for you, ranking them based on their customizability, analytics, usability, and more. These are: 

Typically, for massive enterprises with unusual business models and rigid security requirements, a single-tenant ERP cloud is often the preferred option. This is primarily due to the more significant amount of software control, IT staff, and other necessary resources for securing patches and handling system improvements and upgrades. Besides the organizations that fit the previously mentioned criteria, others find a business case for SaaS ERP. Comparing the best ERP pricing and features can be highly beneficial, particularly for organizations are interested in a solution with lower initial costs, fast implementation, and seamless scalability.

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