What is the definition of Premise-Based ERP?
Premise ERP systems are ERP programs hosted in servers at the company site. On-premise ERP systems have been the standard for decades. Usually, the company purchasing the ERP software is responsible for installing, maintaining, and updating the ERP system. Until recently, companies in security-sensitive industries, such as medical and government work, may have had no choice but premise ERP. Other companies have on-premise ERP for one of the reasons below. New ERP implementations today are much more likely to be Cloud ERP than Premise ERP.
Premise ERP Benefits
- Capital Expense vs. Operational Expense
Some companies prefer the capital expense write-off of purchasing the server, IT hardware, and software licenses instead of the ongoing operational expense of Cloud ERP SaaS. (A tax accountant would have input into this benefit.)
- Potentially Lower Cost-of-Ownership
Depending on the specific costs associated with installing and maintaining an ERP system, On-Premise ERP may cost less in the long run. It’s essential to include all software licenses (ERP, database, server, etc.), on-going support fees, tech support costs, and hardware costs year-over-year, going out at least five years when you compare Saas Cloud ERP and Premise ERP.
- More Control Over Updates and Changes
ERP systems require maintenance in the form of updates, patches, and version changes. Some IT people prefer on-premise ERP systems since they have more control over updates. Most Cloud ERP providers automatically do updates, and those updates may break customizations or integrations. If the ERP is on-premise, the IT department can test before going live with changes and reducing disruptions.
- Security at Site
Premise ERP systems can be secured to prevent anyone who is physically outside the organization’s boundaries from accessing critical company data. As noted above, some industries still have requirements for this kind of data isolation. You can set up premise ERP security and backup systems directly with your IT department or IT service company.
Please note, these “benefits” do not apply in all cases. Many Cloud ERP solutions effectively overcome the above objections with their unique offerings. Often the break-even points depend on the number of users. If you are unsure which solution, Premise, or Cloud ERP is best for you, make a complete comparison of the ERP systems which meet your functional needs.
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