Hosted or On-Premise ERP: Which is Right for Your Business

Updated: October 21, 2010

  1. Features: It is very important to identify what are the key pain points will the ERP address and the necessary features that are necessary for successful implementation.

    On-premise ERPs, have been around for a long time, and have a much wider and mature feature set. Most hosted solutions, on the other hand, are fresh designs. Though they may provide a much simpler way of managing the system, they may not have as many features.

  2. Cost: In terms of cost, hosted solutions win hands down. You have solutions starting from free - like Zoho, Outright and many more to the more expensive Netsuite or SAP ByDesign.

    (Many will say that they do not compete and the feature set and target users are very different. I agree but the new solutions are adding features by the very quickly and will soon be more and more complete.)

    On premise ERPs require an IT Administrator to maintain the servers, take backups and secure the server from virus threats. In the hosted model, this headache is outsourced and in case help is needed, online support is usually available. The hosting provider takes care when the server crashes and data has to be recovered.

    Licenses are another big cost. On premise solutions require a database license either form Oracle or MS SQL, a server edition Operating System and other softwares that may be required for client-server access. Hosted solutions on the other hand are web-based and have no licensed costs attached.

  3. Security: Security and privacy of data is one of the first concerns people have when they are seriously looking at a hosted solution. In reality, more than 70% of data leaks are insider jobs.

    Most hosting providers are very protective of their client's data. Even if anyone raises a stink that their data has been stolen, it can have a bad impact on their credibility

    No security is perfect, whether in premise or at the data host. But the data host is much more prepared and the security is setup for many clients not just one.

    Counter intuitive as it seems, the data is actually more safer in the hosting model as compared to the on-premise model.
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