Choosing an ERP system is about more than selecting the software your company will use. You also need to decide how it will run, where its infrastructure will be hosted, and who will manage updates, backups, and support.
When comparing cloud ERP and on-premises ERP, asking “Which one is better?” is not enough. The more useful question is: Which setup fits your workflows, branches, IT capabilities, data requirements, and budget?
This guide explains the differences between cloud and on-premises ERP, and what to review when comparing access, updates, backups, integrations, and total cost—so you can make a decision based on your company’s actual needs.
First, What Is the Difference Between the Deployment Model and the Software?
The word cloud describes where a system runs or how it is hosted. It does not always mean the software is a fully managed SaaS product. An ERP system might run on cloud infrastructure while the company remains responsible for server configuration, updates, and part of its maintenance. With SaaS, the provider delivers the software through a subscription and manages certain parts of the infrastructure and application, depending on the service and agreement.
An on-premises ERP is typically installed on servers managed by the company at its own site or in a data center it chooses. The company—or a provider acting on its behalf—then assumes the operating responsibilities defined in their agreement.
Before comparing options, clarify the deployment model:
On-premises ERP: Servers and operating environment managed by the company or its provider.
Cloud-hosted ERP: The system runs on cloud infrastructure, but the level of management handled by the company or provider varies.
SaaS ERP: The software is provided as a service, usually through a subscription, with responsibilities divided according to the provider’s service and contract.
The word “cloud” in a proposal does not, by itself, tell you who manages the system, who applies updates, or where the data is stored. Ask for a clear description of the operating model.
Access, Branches, and Connectivity
A cloud ERP system may suit a company whose employees or branches need to access the system from different locations. However, this depends on connectivity and how the system is configured. An on-premises system may fit an environment that relies on an internal network or requires direct control over its servers. Remote access still needs to be assessed if employees need to use the system outside the company network.
Before choosing, ask:
Where do employees need to access the system?
Will they use it from one office or multiple branches?
Do they need access outside the company network?
How would an internet outage affect operations?
Are there alternative procedures if the system is unavailable?
Does the system require specific devices or configurations?
Do not assume that an on-premises system supports every function without an internet connection, or that a cloud system is unaffected by connectivity problems. Test real usage scenarios, including branch access and remote work.
Who Manages the Servers and Updates?
With an on-premises ERP, the company usually has greater responsibility for servers, operating systems, updates, and maintenance, either directly or through a service provider. In a cloud setup, some responsibilities shift to the infrastructure or software provider, but the company’s responsibilities do not disappear.
Responsibilities vary across cloud infrastructure, IaaS, PaaS, and SaaS. Microsoft, for example, explains that responsibility is divided between the provider and the customer according to the deployment model, while customer data, identities, and settings remain within the customer’s responsibilities across different models.
Ask for written clarification on:
Who monitors the servers and application?
Who applies system and software updates?
Can the company choose when updates are installed?
How are updates tested before deployment?
Who manages user permissions and accounts?
What support is included, and what is charged separately?
The key question is not only who owns the server. It is also who responds when an issue occurs and who follows it through to resolution.
Backups and Data Recovery
Having backups is not enough. Your company needs to know what is backed up, how often, where the backup is stored, who can restore it, and how long recovery may take. Restoring backups should also be tested periodically: creating a backup does not, by itself, prove that the system and data can be recovered as expected.
Discuss the following with your provider or IT team:
Which data and files are included in backups?
How often are backups created, and how long are they retained?
Is a separate backup stored outside the primary operating environment?
Who has access to the backups?
How is the recovery process tested?
How much data loss would be acceptable if an incident occurs?
What is the target time for restoring the system?
Define these requirements based on the impact system downtime would have on your business. Do not assume backup or recovery services are included in a cloud subscription unless the proposal states so clearly.
Permissions, Data, and Hosting Location
Whether you choose cloud ERP or on-premises ERP, you need to define user permissions, account management, and how company data can be exported and retained. For a cloud system, ask the provider which hosting regions are available, which parties may access the data, and how the data will be transferred or deleted if the contract ends.
Do not assume that data will be hosted in Saudi Arabia or that a particular deployment automatically meets a regulatory requirement unless the provider’s documentation and contract confirm it and the requirements applicable to your business have been reviewed. Request verifiable information about the hosting location, data processing terms, and each party’s responsibilities.
It is also useful to review:
User roles and permission levels.
Authentication and account management.
Login and change logs, if required.
Ownership and export of company data.
Data retention or deletion terms at the end of the service.
Each party’s responsibility for protecting accounts and data.
Scalability and Integrations
Your company’s needs may change as you add branches, users, or modules. Do not compare deployment models only against today’s requirements. Review what future expansion would involve and whether the ERP can integrate with accounting software, online stores, HR systems, or other tools.
Ask about:
The cost of adding users, modules, or environments.
Limits on storage or capacity increases.
Available APIs and integrations.
Requirements for connecting existing systems.
Who maintains integrations when one of the systems is updated.
How data can be migrated if you change providers.
The availability of an API does not mean every integration is ready-made or included. Define the data flows, permissions, testing, and responsibilities before approving the scope.
How Do You Compare Cloud ERP and On-Premises ERP Costs?
Do not compare a cloud subscription fee only with the purchase price of a server. Compare the total cost of ownership over a period that makes sense for your company, including direct and operating expenses.
The cost of a cloud ERP system may include:
Subscription and licensing fees.
Fees for additional users or modules.
Additional storage or usage charges, if applicable.
Customization and integration work.
Support and training.
Data migration or exit costs if you change services.
An on-premises system may involve:
Purchasing and preparing servers.
Software and licensing costs.
Maintenance and updates.
An IT team or managed service contract.
Backup and disaster recovery.
Power and facilities for hosting the servers.
Expansion costs as usage grows.
One model may reduce certain upfront expenses while introducing recurring fees or other operating responsibilities. Estimate costs based on expected usage, number of users, support, updates, integrations, and your exit or data-transfer plan.
Data Migration and a Trial Plan
If your company is already using a system, review and clean the data before migration, and decide what should be retained. Test core workflows in a trial environment, train users, and define a fallback plan in case a significant issue appears after the transition.
A migration plan may include:
Listing current systems, files, and data.
Deciding what to migrate and what to archive.
Cleaning records and standardizing formats and codes.
Testing migration with a sample of the data.
Reviewing user permissions and system settings.
Testing key workflows, reports, and integrations.
Training users and assigning a support contact.
Approving the transition date and incident-response plan.
Do not treat successfully opening the new system as sufficient. Test that important data, workflows, and reports work as expected.
Criteria for Choosing the Right Setup
A cloud deployment may suit your company if employees need access from multiple locations, you prefer to reduce responsibility for managing internal infrastructure, and the available controls and service terms meet your needs.
An on-premises ERP may suit your company if you need direct control over the operating environment and have a team or provider capable of managing servers, maintenance, updates, and backups.
In either case, base the decision on:
Where users work and how they access the system.
Your IT team’s capabilities.
Integration and scalability requirements.
Update and support responsibilities.
Data, backup, and recovery requirements.
Total cost over the expected period of use.
Contract terms and data portability.
A Quantum Technology Example: Asas, a Multi-Company SaaS Platform
Quantum Technology developed Asas as a multi-company SaaS platform for managing processes related to projects, resources, and financial operations. The platform separates company data and manages users and subscriptions within its structure.
This example demonstrates Quantum Technology’s experience in developing SaaS solutions. It does not specify where Asas’s servers are hosted or what SLA applies, and it does not mean that SaaS is automatically right for every company. Hosting choices and operating responsibilities should be assessed separately according to the project requirements, provider, and agreement.
Share your access and operating requirements, number of branches and users, and systems you need to connect with Quantum Technology to discuss the ERP setup and implementation scope that may suit your company.
Frequently Asked Questions About Cloud and On-Premises ERP
Does cloud ERP require an internet connection?
Accessing a cloud service generally requires a network connection, but the impact of an outage and available workarounds depend on how the system is designed and used. Assess branch requirements and business-critical processes before choosing.
Where is cloud ERP data stored?
That depends on the provider, infrastructure, selected region, and contract terms. Ask for the hosting location and data-processing details in the provider’s documentation. Do not assume a specific location or regulatory commitment without verification.
Who updates a cloud ERP system?
Responsibilities vary depending on whether the service is SaaS or a system hosted on cloud infrastructure managed by the company or another party. Check the contract to see who updates the application, operating system, and servers, and who tests those updates.
Are backups included in a cloud ERP subscription?
Not necessarily. Confirm what is backed up, how often, how long backups are retained, how recovery works, and who tests it. The fact that a system runs in the cloud does not, by itself, clarify its backup and recovery terms.
How do I compare the cost of cloud ERP with on-premises ERP?
Include subscriptions, licenses, integrations, support, training, and expansion. Compare them with the costs of purchasing, operating, maintaining, and updating servers, as well as managing backups. Use a period that fits your company’s plans, rather than comparing subscription fees with the initial server purchase alone.
Choose a Deployment Model That Fits Your Company’s Responsibilities
Choosing between cloud ERP and on-premises ERP depends on more than where the system is hosted. Review how users access it, your team’s ability to manage it, update and backup responsibilities, data location and terms, total cost, and required integrations.
Share your access and operating requirements and current systems with Quantum Technology. The team can review your company’s needs and discuss a suitable implementation model before defining the project scope.