Enterprise Resource Planning (ERP) software is a difficult product to evaluate for and implement. It requires a lot of hours to research and work on from the decision-making process, evaluating fit, implementing the different modules in with the business, and upgrading and continually learning as the ERP system grows. In the evaluation process, you can save yourself a lot of time if you make step one setting a budget. From there, you can immediately eliminate solutions that are too costly, which should save you invaluable time given there are thousands of ERPs in the marketplace for you to peruse.

Every ERP vendor should be able to give you a ballpark or average implementation cost. If they refuse to give you any numbers without demoing or coming on site, they probably are not the best partner to work with. The last thing they should want to do for you and for themselves is spent time preparing and demoing, only to find out they are out of your price range.

Once the price is set, the next item to consider is how you want the software to operate: on-premise or in the cloud. These two types of ERP models are vastly unique, so determining which fits your company best is important before you start the process of evaluating individual vendors. Let’s take a closer look at the two most common enterprise resource planning models, how they function, and their differences in pricing.

Cloud ERP

Data Management: In the cloud model, companies host the data remotely in a hosted environment, without any hardware or IT demands. This method of deployment can actually save your company capital as you do not need to be concerned with purchasing expensive hardware or hiring and supporting a full-time, comprehensive IT staff. Instead, you simply access the solution through the internet and use it from there.

Pricing: Generally, the cloud is a smaller, short-term fee. In the long run, costs can add up and become the more expensive option. However, it does give you a more flexible option as far as wanting to change or take data in and out of the cloud. In many cases, utilizing a cloud-based ERP solution can provide companies with a quicker and less expensive implementation initially.

This model is usually ideal for smaller companies that do not have a robust, in-house IT infrastructure capable of hosting and maintaining an ERP system. There are a few subsets of the cloud, and you may find providers offer them all or only one. That will be part of the evaluation as you sort through vendors. You may also find vendors who provide a mixed deployment, which combines aspects of a hosted solution and an on-premise offering.

On-Premise ERP

Data Management: The on-premise deployment model offers the option for you to purchase the software and pay for maintenance and support the system in-house. You own it, you have it on your server, and you are in control of any and all upgrades, maintenance, etc. There’s no questioning data security when you’re in control of your own database and software solution.

Pricing: An on-premise deployment comes in at a significantly higher upfront cost, but licenses and implementation are usually a one-time-only fee, with the maintenance and support being a small percentage ongoing, sometimes optional. Going on-premise is a long-term investment that will certainly pay off if you stick with the same ERP provider for an extended period of time.

A key reason why companies want their enterprise resource planning system on-premise is because they can arrange for the security to meet regulations from HIPAA, the government, or any other organization. Larger companies with bigger bank accounts are more likely to pick this model, given the cost benefits long-term. However, anyone that can afford it can find it a worthy investment in the long-run.