On Premise vs. Cloud: Key Differences, Benefits and Risks

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Deciding between on premise and cloud environment is a complex process, whereby a number of factors come into play. For starters, the business requirements need to be properly analyzed to tip the scale toward one approach or another. Once decided, then there is the need to choose a reliable technology partner, which can be troublesome as there are multiple vendors offering services of varying levels.

On premise meaning

With on premise software, from implementation to running of the solution, everything is done internally; whereby maintenance, safety and updates also need to be taken care of in-house. Once the software is purchased, it is then installed on your servers; requiring additional power servers, database software and operating systems to be purchased. With no third-party involvement, you assume complete ownership.

Cloud computing meaning

Cloud computing is the delivery of on demand computer system resources, requiring no active management and usually includes applications such as storage and processing power. With a Cloud-based subscription model, there is no need to purchase any additional infrastructure or licenses. In exchange for an annual fee, a cloud provider maintains servers, network and software for you. The information hosted by the vendor can be accessed through a web portal. The dedicated private cloud allows customers to use the platform completely, with no shared resources. They can request additional customization, backup controls and upgrades. With a shared cloud, complete privacy of the client’s data is observed, however multiple tenants share the cloud service. It is a more economical option but offers limited customization.

What is Cloud ERP?

Enterprise Resource Planning (ERP) software can handle different products such from accounting to systems that analyze to those that control inventory or the supply chain. Cloud ERP offers cloud computing platforms and services, whereby facilitating flexible business process transformations. Cloud ERP enables companies to access the software via the Internet. Since computing resources are licensed and not purchased, the cost is lower. Companies also benefit from business-critical applications that the cloud ERP vendor has on offer. Regardless of the size your business, cloud ERP solutions powered with intelligent technologies can take your business to new heights.

What is On Premise ERP?

On premise ERP software on the other hand is deployed and maintained in-house at a physical office as opposed to being hosted on a vendor-supplied cloud. It runs under company supervision, while the ERP systems and data remain under the company’s control. On premise  ERP allows specialized integration with other existing business systems.

On Premise Vs Cloud

There are two key differences between Cloud and On premise software; the cost for each differs and so does the level of ownership.

Cloud: For smaller firms, the cloud is particularly more useful as it provides full functionality at a reasonable price as there is no upfront investment required. Plus cloud software is usually priced under a monthly or annual subscription package, covering training, support and updates. The right cloud provider would offer enhanced scalability and  agility. Therefore with cloud computing you get greater flexibility, time and money savings.

On premise: On premise on the other hand is mostly priced under an upfront perpetual license fee. In addition to that, the company remains responsible and bears the cost for training, support and updates. However, On premise applications are presumed to be more reliable, secure; offering complete ownership and control.

Key differences between on premise and cloud

There are companies that still opt for on premise solutions as opposed to the cloud. Both approaches bring something unique to the table but only after proper consideration can you determine which type of solution would be a perfect fit for your organization. Below are some of the key things that you need to consider when choosing between an on premise and cloud solution:

On Premise Vs Cloud Difference #1: Deployment

On premise: With on premise software,  the company remains responsible for maintaining the solution and related processes. The deployment is done in house using the company’s infrastructure.

Cloud: In a hosted cloud, the service provider maintenance the systems on their server, accessible by the enterprise at any given time with related processes taken care of by the host-cloud service provider.

On Premise Vs Cloud Difference #2: Control

On premise: In an on premises environment, enterprises enjoy complete control over their systems and maintain 100 percent privacy. These are two reasons why most big organizations choose to stay away from the cloud.

Cloud: In a cloud computing environment, even though the data and encryption keys are shared with the third-party provider, there is shared  ownership and accessibility remains an issue if there is to be any downtime.

On Premise Vs Cloud Difference #3: Security

On premise: Security is an essential requirement of any organization when it comes to financial account, customer and employee details.  Even though traditional on premise seems more secure as it is in-house, there are multiple measures that need to be taken to fully maintain the security of the data.

Cloud: With Cloud ERP systems there are very less chances of any hardware, software of infrastructure malfunction that can hinder the entire operation and result in hefty losses. The ERP vendor is more likely to have multiple disaster and redundancy protocols for data security. For both platforms, reliable network connectivity plays a very important role when it comes to remote areas.

On Premise Vs Cloud Difference #4: Compliance

On premise: There are regulatory controls that most companies need to abide by. To meet these government and industry regulations, it is imperative that companies remain complaint and have their data in place. This can easily be if all the data is maintained in-house.

Cloud: When opting for a cloud computing model, companies need to ensure that the service provider is meeting the regulatory mandates within their specific industry. It is important that the data of customers, employees and partners is secure, whereby ensuring privacy.

On Premise Vs Cloud Difference #5: Cloud vs on premise cost comparison

On Premise Cost: A system from the ground up requires a lot of effort and comes at a hefty cost. Not just the initial investment, along with the purchase of additional infrastructure and processes but also, the maintenance and operating costs that the company will have to incur on an ongoing basis.

Cloud Computing Cost: Comparatively, a cloud service is a lot more cost-effective, especially those that are small in size. The setting up and run time is cheaper and faster. Companies have to pay a nominal subscription fee, whereby the updates and maintenance by the cloud host.

Is cloud computing cheaper than on premise?

Cloud computing is cheaper when it comes to setting-up, running, maintenance and overall support costs. On premise, even though costs more initially but when the investment is spread across the entire lifecycle of the system, it may just amount to the same as Cloud computing.  However, it depends on the services and space required and the plans vendor has to offer. There is cut-and-dried answer to this as the cost effectiveness ultimately depends on the needs of individual organizations.

On Premise Vs Cloud Difference #6: Mobility

On premise: On premise ERP systems can be accessed remotely but often requires third-party support to access the solution and a mobile device. This increases the risk of security and communication failures. Requiring several security measures need to be in place if employees to access files on personal devices.

Cloud: With cloud systems, you need to have internet connection to access your data using a mobile device.    Mobility and flexibility thereof is one of the strongest features of this solution. This enables your employees to work from anywhere at anytime, resulting in higher rates of engagement.

On premise software Vs Cloud Software

The fundamental difference between a cloud and on premise software is where it is installed, locally on the servers of the company or hosted on the vendors server. Software ownership, privacy, cost updates and additional services are also things that differ. When compared to cloud software, on premise is more flexibility, reliability and security. Hosted cloud software on the other hand removes the pressure of maintaining and updating systems, allowing you focus your time, effort and money into fulfilling your core business strategies. Even though you have real time access to systems via the internet, a cloud software requires reliable internet. With higher adoption rates, the more popular of the two today is the cloud.

Cloud Software Advantages

Accessibility: With cloud software, applications can be accessed from anywhere at anytime via any device or a web browser.

Affordability: With cloud hosting, there is no upfront cost, whereby reasonable payments have to be made on a regular basis like any other operating expense. This includes payment for maintenance, support services, daily backup chargers and licensing.

Maintenance: since it is a hosted software, there is no need to worry or invest time in the maintenance of the software or the hardware it is installed on. Cloud service provider is responsible for compatibility and any upgrades.

Security: Cloud service provider employs security measures that the company would find extremely high if it were to be done inhouse. Hence the better the measures, the better security it offers.

Deployment: Cloud software can be deployed in a matter of hours or days as it is done via the internet, whereby there is no need for a physical server to be in place.

Scalability: Cloud technologies offer greater flexibility as these can be scaled up on demand as per the companies requirements.

Costs: Since the need to maintain on premise servers is eliminated, the cost of power and other resources are not present.

Cloud software disadvantages

Connectivity: In order to remain productive, there is a need to have access to reliable internet at all times.

Costs: The total ownership cost might be higher compared to an upfront cost if spread over the systems entire life cycle.

Customisable: Complex development needs may be sometimes not match a cloud solution.

On premise Advantages

Cost: The total cost of ownership is lower as compared to the recurring payments if spread over the systems entire lifecycle.

Control: Since it is your hardware, data and software platform, you have complete ownership and control;. Any changes, configurations and upgrades are done on your discretion.

Connectivity: There is no reliance on external factors such as the internet to access your servers

On premise disadvantages

Cost: There is a large upfront capital cost that has to be incurred, along with support and functional costs.

Maintenance: Any hardware and software, storage, data backups and disaster recovery has to be maintained on premise. With limited technical resources and budget, this can become an issue, especially for smaller firms.

Deployment: As the software has to be installed on servers and individual computers, the deployment takes longer.

3 Best On-premise ERPs

Microsoft Dynamics AX

Microsoft Dynamics AX is the flagship ERP software of Microsoft. It offers out-of-the-box functionality that enables mid to large size companies manage their administrative and operational business functions with ease. Equipped with advanced security and capabilities to meet deployment and development needs of global structures; It offers functionality across business processes, allows scalability and enables seamless integration with existing systems. Microsoft Dynamics AX offers core strengths in manufacturing and ecommerce, making it the best ERP solution for the service and wholesale industries.

Microsoft Dynamic GP

Dynamics GP is an on premise ERP solution that enables small to medium sized businesses exercise more control over different functions such as inventory, financials and operations. It is a flexible solution, allowing greater configurability and scalability. It is quicker to set up and run, whereby serving as a faster and smarter solution. It is well-versed in Microsoft products, making it easier to use. Smart analytics and reporting facilitate smarter data-driven decision making. It is a secure solution that delivers consistent experiences across platforms and devices.


SAP has one of the highest adoption rates. It is a complete business process management software, making it a perfect fit for global businesses. This on premise software enables process automation and seamless integration, whereby HR and finance modules are its core features. It has a user-friendly interface,  accessible from any device via the cloud. It is the preferred software for many pharmaceutical firms to insurance companies, wholesale distributors and education institutes amongst many others.         

5 Best Cloud ERPs       

Microsoft Dynamics 365

Microsoft Dynamics 365 is a cloud-enabled product by Microsoft that combines Dynamics CRM and ERP solutions into one to cover functions such as sales, customer service, project service automation, operations, marketing, and financials. Equipped with PowerApps and Flow, it offers enhanced customization and flexibility. PowerApps facilitate in building apps offering specific functionality with a  no-code approach. Whereas Flow is a workflow engine that can work across Dynamics 365 apps and also third-party software.  A single, unified solution, that offers data that can be shared across the organization in no time, enabling them to make more informed decisions. With business running in the cloud, changes can easily be made according to your business needs.

Oracle Netsuite

It is one of the original cloud-based ERP solutions, allowing its creators to release new updates using agile development methodologies rapidly for enhanced competitiveness. This tips the scale in Oracle Netsuite favors mostly or at least makes decision makers to take an integrated approach by adopting a two-tier ERP strategy. It has an excellent user interface and allows for greater customization. It is highly responsive, making it available for any web-enabled device, whereby it easily integrates with most ecommerce platforms.

SAP business all-in-one

SAP Business All-In-One ERP is a manufacturing software, offering industry-specific functionalities designed to facilitate medium sized businesses boost performance, enhance customer relationship and improve their business processes.  The scalability of the software allows it to meet the growing needs of any manufacturing or distribution company. This All-In-One ERP software gives an integrated view of the business processes for better management of the different functions within the organization. Equipped with business intelligence capabilities, it allows implementation of reporting and analytics tools to meet the accounting needs of the business in the best possible manner. Fast and reliable deployment helps save time, whereby reducing cost and risk of the project.


Brightpearl is a cloud ERP solution, perfect for retailers and wholesalers, allowing them to automate back-end operations. This results in time and money savings that can be utilized to grow the business further. This back-office solution covers inventory, financial sales order, purchasing and supplier management, in addition to serving as a full-fledged CRM and warehouse management solution. It allows for an omnichannel business to be managed from a single system. Furthermore, Brightpearl easily integrates with major ecommerce solutions such as Shopify, BigCommerce and Magento.


Workday is a SaaS platform that has been adopted by companies across the globe, as it allows businesses to unify functions across finances, payroll and human management. An out-the-box solution that offers a refreshing alternative to legacy ERP systems. There are hundreds of customers that are capitalizing on accessibility and low capital outlay it offers. With a plethora of features and scalability options, it facilitates businesses to carry out their day-to-day operations with ease. Especially for medium-sized businesses, it makes for an excellent technology solution that can be built on as the business grows.

One premise solutions Vs Off premise solutions

When deciding between a cloud or on premise solution, here are the three main factors that need to be considered for you to make the right decision for your business:


on premise offers a dedicated system that you have full control over, even the hardware. It is therefore suited for organizations that have many applications and complex workloads to run and are perhaps larger in size. The capacity to make changes and updates remain limited, requiring additional and latest technology purchases to be made based on storage and workload requirements.

A cloud system allows for unlimited capacity, depending on the vendor’s offerings and service plans. However, the control can only be exercised only remotely over the hardware that resides within the third-party. The vendor manages and many cases the hardware resources will be shared with other users, unless you opt for a private cloud.


When opting for cloud services, you will have to ensure that the vendor has the required and up-to-date security certifications. Scrutinizing security measures at all locations maintained by the vendor is essential before entrusting your data to them. Proper credentials and data transmission security across access points is another aspect that needs to be considered.

When physically residing within the enterprise and connected to the company’s   local network, it is easier to observe company-approved credentials, since the company is solely responsible for their security. However, extra measures need to be taken if the systems and data are being accessed from remote locations.


With on premise your company remains responsible for incurring all the costs, from the initial upfront investment to maintenance and operating expenditure. Operating large systems or data centers usually reach millions.

Especially for smaller firms, a cloud service servers as a far more economical option. It’s cost-effective, can be accessed from anywhere at any time, plus deployment and run time are shorter.  As the enterprise’s needs change over time, service can be scaled to meet the current needs and subscription plan adjusted accordingly.

Moving from on premise to cloud: On-Premise to Cloud Migration

More companies are now migrating their systems and services to the cloud because of their traditional environment limitations. It is a strategic move that needs to be aligned with the rest of your business processes and comes with a set of its own challenges. Migration on a hosted server can bring enormous benefits to your business, Consider it: Seamlessly migrate to the cloud with our expert cloud migration services.

It is a speedy process, whereby new additions like storage space can be taken care of in a matter of hours. This enhances the agility to respond to changing needs of your business.

Team and overall performance improves with the simplicity and removal of region-specific dependencies offered by cloud solutions.

Some cloud hosts offer robust built-in security systems, offering visibility and security analytics across the entire cloud environment.

Cloud providers package several useful features such as disaster recovery, automatic logging, monitoring, continuous deployment, and others as part of their solution.

With a cloud environment, the chances of downtime are very less, enabling you to utilize assets to the fullest and thus keep your customers satisfied.

Pay-as-you-use model provides flexibility for you to scale up and down as required at a reasonable price.

Folio3: Best Company for On Premise ERP and Cloud ERP

Implementations and migration

Folio3 is a leading technology solutions provider, whereby ensuring it exceeds industry-specific compliance standards and offering ERP solutions that consistently meet our clients’ requirements. We boast a huge list of customer references and a team of highly skilled and technical professionals. We understand the unique needs of our customers and choose to offer them flexible solutions, be it shared private cloud and shared cloud solutions.  From migration to implementation, we can capability help your business reach its full potential. We offer scalable solutions, giving your organization the option to pay only for the resources that are utilized.

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