Hosted ERP or Cloud ERP?

By Neil Zawacki
Updated: September 28, 2011

One question that many small businesses face is whether to adopt a hosted ERP solution or a cloud ERP solution. The two choices are quite similar, so it’s easy to get confused. This article will describe the advantages and disadvantages of each.


Hosted ERP requires you to purchase the software from either the publisher or Value Added Reseller and have it installed at a data center. That company then hosts the solution and performs important tasks like upgrades, maintenance and support.


  • Your information is kept safe in a secure data center that performs regular backups. You can also set up redundant servers in different locations so as to ensure continuity of service should an emergency occur.
  • You own the software through an indefinite license. This means the ERP solution will continue to work even if you stop paying maintenance fees. You will simply be stuck on the last version you used.
  • You can switch the ERP solution to premise-based without too much trouble.


  • Hosted ERP tends to be the better deal at first, but tends to cost more in the long run due to the monthly hosting costs.
  • You will need to set up redundant internet lines if you want to make sure you’ll still have access to the information if your connection goes down.
  • Local applications may have difficulty integrating with the hosted ERP solution. You can potentially circumvent this by installing them at the hosting center.


Cloud ERP is similar to Hosted ERP, but the servers are virtual. This means the ERP solution is being shuttled around the huge number of servers that make up the cloud. You essentially rent things like servers, data storage and message capacity.


  • Cloud ERP tends to be quite affordable. There are no hardware setup or acquisition costs to take into account with your budget.
  • You have unlimited scalability with the system. If you want the ERP solution to handle a hundred users, you can easily do so.
  • The software can be sold or rented. This provides a bit of financial flexibility that hosted ERP lacks.


  • Existing applications may need to be reworked in order to properly work with the system. This takes time and money.
  • If you run a large number of applications inside the cloud, you may incur heavy costs since you are paying per unit of data instead of paying per server.
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