Is it better to host Enterprise Resource Planning (ERP) on-site or go through a Cloud service? Like so many other questions in life, there is no black or white answer, and the amount of information on the topic can be overwhelming. After some extensive reading and discussion with my co-workers, I am splitting this topic into a two part blog. Much like my previous blog series, I will start with a basic overview of on-site ERP and Cloud ERP, as well as some advantages and disadvantages to each, so that we are all at the same jumping off point. The follow up will go into more detail about common concerns and recent issues raised by the existence of Cloud ERP. I will also discuss what Amadeus uses (spoiler alert: we are a hybrid) and why. I don’t plan on telling you which one you should choose for your business, I just want you to have the information to make the best decision since there is a chance that you could be stuck with that decision for quite some time.
To start, what is ERP? Short answer: ERP encompasses all the financial and HR aspects of your business including asset management, financial planning, resource management, and personnel management. You can see why having an excellent tool to manage all this is essential for any business. Historically, all ERP was hosted on-site, but with the evolution of Cloud computing, this is changing.
On-site ERP means that you, as a business, purchase an ERP software program. You purchase the software and all the infrastructure that may be needed to support the system. Once it is set up, you and your IT team take over full management of the system and the infrastructure, overseeing customization, integration, and maintenance. In contrast, a Cloud ERP system is hosted and managed by the system provider as SaaS (software as a service). Your business pays a monthly, or yearly, subscription fee and the Cloud service takes care of the software and infrastructure storing all your data.
You can probably see issues with both just based on the above descriptions. For small to medium sized business (SMEs), the up-front cost of the software and the infrastructure can be overwhelming and even cost prohibitive. Many SMEs also lack the internal IT department necessary to manage the ERP and its infrastructure. A Cloud based ERP does not have the same up-front costs, so getting started may seem more feasible for SMEs. Additionally, either having an internal IT team or having to devote that resource to the ERP is no longer necessary. However, one commentator did notice that the subscription fees do not depreciate over time like a capital investment in infrastructure so tax considerations may also come into play. For large businesses, these considerations may not play as large a role, but customization is probably a consideration across all businesses.
With an on-site ERP, you can customize every aspect of the software to gear it specifically to your business needs. Not true for a Cloud ERP provider. You take the system the way it is provided and make it work for your business. There are some providers offering Cloud ERP systems for specific types of business such as schools and universities, but they are still broadly focused. In this same vein, integration can be an issue. With an on-site system, you have full control over integrating the ERP with all your other management systems. With a Cloud system, this is not the case. I am not saying that it is impossible to integrate, just much more difficult.
I feel like this is enough for an introduction to on-site versus Cloud ERP systems. You have the information you need to move on to understanding some of the more in depth issues such as security and data ownership, both of which I will address in my follow up. Stay tuned.