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April 19, 2015

Cloud–ERP vs In–House ERP

Cloud is evolving and expanding to include more intelligent systems. As they continue to develop they will eventually gain the ability to perform as good as in-house ERP systems. With current development level, Cloud ERPs are most suitable for SMS who are sensitive to cost and can make the trade off between cost and security regarding data management issues. A more detailed comparison between cloud ERP and in-house ERP systems are as follows.


Cloud systems are maintained by 3rd party providers. This helps to reducte the implementation costs drastically. On the other hand, traditional ERP systems require servers, extra module costs, operating systems, database management systems and further training and consultant costs to maintain the system. On the other hand, maintenance for cloud systems are automatically done by the provider and updates come with no cost. However, cloud systems have subscription fees and sometimes they may become more costly than traditional ERP systems on the long run.

2- Time

Cloud systems are genarally more agile systems. They minimize the time needed to deploy and implement systems. Traditional ERP systems require significantly more time for implementation plus employee training and change management issues.

3- Processing Speed

For this factor, the ByDesign(cloud ERP) of SAP and ECC 6.0 are compared. Cloud ERP is significantly more faster than traditional ERP. The actual results can be seen from the table below.processing speed- cloud vs traditional

All in all, cloud systems outperform traditional ERPs nearly in all criteria(implementation cost, implementation time, processing time and flexibility to work in different areas). Cloud ERPs lack the desired security in traditional ERPs as the data storage system is outsourced to 3rd party providers. However, implementing an ERP system is an objective decision making process, as long as companies objectives do not contradict with security issues, it is highly advised to make the tradeoff between cost, time, processing speed, flexibility and security.

Reference article:

Elragal, A., & Malak, K. E. (2012). In-House versus In-Cloud ERP Systems: A Comparative Study. Journal of Enterprise Resource Planning Studies , 1-13.

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