What are the Major Differences Between SaaS ERP, Cloud ERP and On-premise ERP?

Mar 02, 2021
Nandinee Biswas
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It is a well-known fact that these days ERP or enterprise resource planning software has become a necessity for every company that wants to keep its business operations consistently under control and effective through-and-through.

The ERP software industry has flourished with more and more ventures joining the bandwagon of system providers, developing highly advanced business solutions. Therefore, leaving anyone looking for an ERP system with many different choices.

As you consider opting for an ERP application, the first and foremost options you would need to choose from are: SaaS, cloud-based or on-premise deployment models. What may not be so clear at this point is their impact on your business.

There are a number of factors that could help you glide through the complex selection process and make the right decision.

If you like to know the full breakdown of exactly what each of these systems offer, that is, on-premise ERP vs SaaS ERP vs cloud ERP, following is a detailed explanation.

What is SaaS ERP?

SaaS (Software as a Service) is a type of service-based ERP solution on the cloud. Being hosted remotely, it typically runs on a multi-tenant SaaS architecture.

It is currently the most preferred deployment model among the businesses since ERP providers set up and manage the software, and you do not have to worry about the technology stack.

In other words, the SaaS ERP solution doesn’t require you to hire an internal IT team for installation, updates, or maintenance, whatsoever. It can be owned by paying a subscription fee to your ERP provider and used as a service via the internet. Your employees can access and interact with the application, using the interface from any device having an internet connection.

Thus, considering the complexity and difficulty of ERP implementations, the SaaS platform offers ease of deployment yet offering you tremendous value to your business and a quick solution to track your business operations and support growth.

What is Cloud ERP?

A cloud-based ERP system offers a similar solution to the SaaS model but with a few key differences. Like SaaS, this type of ERP system is also hosted on the cloud and managed by your service provider.

However, unlike SaaS, this web-based ERP application is a customizable, flexible, and a more economical solution. Therefore, when you opt for cloud ERP software, you get a customizable system that offers complete flexibility to add or remove features as needed. However, unlike on-premise ERP, it is entirely outsourced, and you need to rely on your service provider to modify system features, fix bugs, install updates, and conduct regular maintenance based on what services you have paid for.

In terms of cost and functionality, you can get the benefits of the latest and most evolved technologies just by paying for the software update. Therefore, the cloud system fits as the most efficient solution spearheading the next generation of software.

What is On-premise ERP?

On-premise ERP system is installed locally on your company’s hardware and servers and is maintained by your IT staff. By opting for an on-premises ERP, you are required to bear the total costs of setting up the infrastructure on your shoulders plus human resources and other backup to support those servers.

Deploying an on-premise solution could also be a slow process compare to its cloud and SaaS variants. Also, it often requires multiple approvals on hardware selection and valuable time allocation of your internal IT team during and after the implementation.

ERP Software on Premise vs Cloud vs SaaS

To fully understand the value and benefits of each type of ERP system, you need to have a good understanding of their differences. In this section, we will provide you with a brief comparison between different software deployment options - ERP on-premise vs cloud vs SaaS.

Total cost of ownership (TCO)

On-premise ERP requires a significantly higher investment to purchase, set up, and manage the software. This also includes expenses incurred in buying a license, hosting, maintenance, software updates, training, and other general running costs. If your company does not have an in-house IT team, you need to hire additional skilled people to manage the system. All these are part of capital expenditure, making the ERP deployment quite a time-intensive and cost-intensive process.

On the contrary, the costs associated with SaaS and cloud systems are generally lower than the on-premises option in the long run. You normally pay a subscription fee to the SaaS or cloud ERP vendors against which you get complete hosting, server, implementation, software update, and maintenance services. This makes the costs of setting up significantly less and run-time much faster.

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Deployment speed

With the on-premise software, the organization needs to handle the entire implementation process, and it is done on the company’s infrastructure. Depending on the features you need, installation may take a little longer than usual.

Unlike on-premise ERP solutions, SaaS and cloud systems require no additional hardware. You could choose from the software features the vendor is offering and get the system implemented without wasting time in procuring and installing hardware or servers. Therefore, when you chose from SaaS and cloud-based ERP software solutions, it would add up to significant time savings.


On-premise ERP system supports all sorts of customization. You own all the software components, and they could be rearranged in a way that fits your business needs. However, it comes accompanied by additional spending and may lead to various operational setbacks such as misconfiguration or prolonged downtime if not set up appropriately.

Cloud-based ERP software supports partial customization. The system usually comes with a set of features, while service providers offer customization to a certain extent in exchange for additional fees.

Unlike the other two software solutions, SaaS ERP is the best fit for your organization when you can utilize the system with its readily available features and do not require customization.

Data security and ownership

In an on-premise ERP system, your organization has total control over your business data, and so its security is entirely your responsibility. Even though it seems safer to store information on in-house servers, you still need to follow adept data security protocols to protect your system from possible breaches and malicious attacks.

Cloud ERP systems offer safer data storage options. Reputable cloud ERP vendors follow strict security measures and are likely to have disaster recovery and backup protocols. These reduce the chance of data breaches. And, in case of any software malfunction, it saves your business from data losses that would have otherwise hindered your business operations and even lead to hefty losses.

Privacy and control

In an on-premise system, your data is handled entirely by your internal team. This offers you complete control over the system and maintains the privacy of your business data. In a cloud system, the data is stored on a third-party cloud server so it has shared ownership and accessibility.

SaaS ERP service providers rent out the application for your use. They manage the system and retain full control of the program.

Integration and scalability

For on-premise software, scalability is limited to its hardware. When you need to expand the storage capacity or the number of users, you need to deploy additional hardware infrastructure.

Whereas cloud-based and SaaS systems offer flexibility to support the growth of business operations and a software upgrade is sufficient to support scaling up of operations.

Choosing Between On-premise, Cloud, and SaaS ERP Systems

Whether you operate a supply chain management, manufacturing and distribution, inventory, or any other business, ERP software is an all-inclusive system that offers enough advanced features for your business needs. When chosen appropriately, it makes business process management easier.

The right choice of ERP software can bring significant benefits to your business. We offer the best ERP software in Saudi Arabia and MENA, and with the help of our team of experts, we ensure our clients get the system that fits their business goals.

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