How to Choose Between On-Premise, Cloud & Hybrid ERP: A Business Leader’s Guide

Overview

Investing in ERP is a big bet. There are high stakes; there are risks, but the ROI makes the gamble worthwhile. Nowadays, ERP isn’t just infrastructure; it’s an engine for growth, agility, and intelligent decision-making. Modern ERPs are no longer “systems of record” but “systems of innovation”.

In fact, high-growth and ambitious businesses rely on enterprise resource planning (ERP) software to automate almost all aspects of their processes, from inventory, warehousing management to procurement, supply chain, risk management, and accounting.

Moreover, the global ERP market is expected to reach $239.2 billion by 2032 (Statista), which means that this is the digital transformation era and keeping up is no longer a choice; it is vital to thrive.

We understand that finalizing the decision to move to ERP is a win in itself. But getting to this level of automation requires stakeholders to make critical decisions.

Standing at the crossroads? To go the on-premises ERP route, take the cloud path or go hybrid? Most CEOs and CFOs would agree that it’s a complicated question. At first glance, all options seem confusing.

Of course, in the AI age, your ERP strategy would drift towards cloud ERP. But, learning the pros and cons of on-premise, cloud and hybrid ERP can make you certain of your investment and give you more confidence. Let’s begin.

Understanding ERP Deployment Models

ERP deployment models determine how the ERP software is hosted and accessed by users. Broadly, the three main deployment models are:

• On-Premise ERP
• Cloud ERP
  • Public Cloud
  • Private Cloud
• Hybrid ERP

Each model offers unique advantages and trade-offs in terms of cost, scalability, control, and customization. This isn’t a one-size-fits-all answer. What works for a high-growth D2C brand may be wrong for a legacy manufacturing giant. What suits a lean startup may hinder a regulated enterprise.

So, remember: this decision between on-premise, cloud and hybrid ERP is not just about technology; it’s about strategic survival in a lightning-paced market landscape. It is not about what other competitors are doing, but what is best for YOUR niche, industry, and business. Keep exploring ERP deployment models as we break down each one in-depth.

On-Premise ERP – What Is It?

On-premise ERP systems are deployed in your company’s data center, run on its server, and installed in your business facility. They do not need the internet; they can be accessed via the internal web. The installation and maintenance of the hardware and software is done internally by your company, and all data, infrastructure, and apps are hosted on-site. In other words, on-prem ERP is the one where you own the system, hardware, and data management.

While today’s generation is all about the flexibility, scalability and innovative power of cloud ERP, some companies in highly controlled industries which require heavy security and have more stringent compliances still opt for on-premise as their go-to ERP deployment approach.

• Advantages of On-Premise ERP

  Fully Customizable: On-premise ERP systems can be easily tailored to the unique workflows of a business. Cloud ERP may have customization limitations or require extensive customization capabilities and heavy investment, but on-prem ERP systems can be tailored and adapted to business-specific processes.

  Complete Control: Some businesses operate in highly regulated industries (e.g., defense, finance, healthcare, pharmaceuticals). On-premise ERP assures greater control over the data, apps, and systems infrastructure. All hardware and software can be internally managed and integrated with existing systems, which makes the ERP advantageous for organizations with stringent security requirements.

• Drawbacks of On-Premise ERP

  High Upfront Investment: On-premise ERP is CapEx-heavy, which means servers, infra, hardware, licenses and skilled IT personnel to manage and maintain the system require a substantial initial financial commitment. This proves disadvantageous for smaller enterprises with limited or growing capital.

  Slow to Scale: Expanding geographically or across business units is hard.

  In-house Maintenance Overload: On-premise ERP systems require dedicated IT teams for updates, patches, system maintenance, and data security. The dependency on human capital can hamper the speed of work and ROI of ERP adoption.

  Thus, on-prem ERP systems are ideal for businesses that seek complete oversight over their ops and have strict regulations. For example, a large ammunitions manufacturer producing explosives for the nation’s Armed Forces would have to keep specifications a secret, highly customized processes and equipment tightly integrated, vendor and customer information confidential, records in-house, as well as data as per government rules. They may not be allowed to use cloud storage in the first place. Such a company would need highly tailored on-prem ERP to help them automate every process – while still keeping classified data secure.

Cloud ERP – What Is It?

Cloud ERP is offered as software-as-a-service (SaaS); meaning this enterprise resource planning software can be accessed via internet and installed by a software provider who handles the end-to-end implementation, support, maintenance, upgrades and innovations, data storage, and security of the business management solution. In simpler words, cloud ERP helps manage mission-critical operations and is hosted in a shared cloud computing environment by a vendor. That is why Cloud ERP is also referred to as SaaS ERP. All apps within a Cloud ERP can scale up or down automatically to meet evolving business needs.

Customers are not owners of the software; they can lease cloud ERP based on their requirements via yearly or monthly subscriptions. There are no upfront hardware costs – and the software provider takes care of the working of the application.

• Why Is Cloud ERP Preferred by Most Modern Businesses?

  Be it public or private, Cloud ERP is now the go-to backbone for fast-scaling, future-focused businesses. Why are businesses adopting cloud ERP?

  • Because when ERP was introduced in 1990s, it was on-prem, legacy. It was only a means to manage business processes using companies’ data and servers. But in the 2000s, came the cloud ERP disruption – and the narrative changed completely since.

    Many companies resisted change, stuck to their age-old on-prem systems and perception of cloud ERP being unsafe for data security. However, dismissing cloud ERP added the hidden ‘tech debt’ to such companies. Ultimately, they ended up paying more for outdated ERP with limited scalability, customizability, or innovation.

    Today, the reasons to switch to cloud-based ERP are far more compelling. In fact, this is no longer the generation of tech installation; it is the generation of tech strategy and tech adoption to stay abreast and innovate in a digital future.

  • The transition to cloud ERP powers digital transformation, disrupts old business models and radically elevates the role of CIOs, CTOs and CEOs in leading IT departments.
  • And, importantly, now cloud ERP systems deliver advanced technologies like artificial intelligence (AI) and machine learning to enhance productivity and service, tailored user experiences to drive adoption; and wide-ranging functionality and embedded analytics to provide a complete view of the business, ultimately supporting business innovation and growth.
  • Cloud ERP is agile; it supports your business as it expands into new locations, launches new products and services, or adds new workflows. This flexibility and expandability assure that businesses never need to change their backbone ERP; only add-on new features as they grow – and at the pace of their growth!
  • With OCR and intelligent automation, cloud ERP reduces transactional clutter and frees teams to focus on analysis, performance, and growth-driven decisions.
  • From CFOs to front-line managers, users can access live performance dashboards across devices, transforming how decisions are made on-the-go, not just at month-end.
  • With automated journal entries, integrated data sources, and prebuilt financial reports, cloud ERP dramatically shortens the month-end close, giving finance teams time back for strategic insights.
  • Cloud ERP evolves with changing regulations: from global revenue recognition standards (IFRS 15, ASC 606) to local tax laws, helping ensure compliance is proactive, not reactive.
  • Cloud ERP comes pre-configured with audit-ready templates, enabling smarter risk management, tighter role controls, and reduced fraud exposure, without drowning in spreadsheets.
  • Cloud ERP simplifies multi-country operations, with prebuilt localizations for tax, legal, and financial requirements, cutting down setup time and compliance risks.

  Today, business leaders need to interpret what’s happening in their business and act on that insight in real-time to succeed. Cloud enables such action. In the AI times, the winners will be those organizations that leverage cloud-based ERP digitization to scale profits and multiply ROI.

Public Cloud ERP

Public cloud ERP is hosted, owned, handled and operated by third-party cloud service vendors, and the server/storage is delivered via the internet. It is a shared setup with multiple organizations, where all software, hardware, network devices and storage are used by customers like a cloud tenant.

• Advantages of Public Cloud ERP

  Standardized services: Solutions are not custom-made, but you always have the option of certain add-ons at additional cost.

  Quick setup: Public ERP helps businesses automate operations and streamline enterprise-management fast, as it is quick to launch. This means lower TCO and higher ROI!

  Pay-as-you-go pricing: When you do not need in-house infrastructure or maintenance, your ERP becomes cost-effective. You pay for what you use!

• Drawbacks of Public Cloud ERP

  Limited customization: Complete tailoring of the ERP workflows as per your niche is not possible. Only add-on modules can be configured. However, even add-ons cannot be fully personalized for your unique requirements.

  Less control: Shared cloud means reduced visibility of your hosting setup, data storage and cloud security measures employed by your vendor.

  Software provider lock-in: Migrating to a new cloud vendor can prove to be significantly complex as well as costly.

  Compromised security: In case of data breach or infra corruption, it affects every organization sharing the database.

Private Cloud ERP

In a private cloud ERP, the infrastructure, storage, and services are maintained and deployed to a single organization. The software provider offers dedicated application hosting via the internet. Now, you may be wondering about the difference between on-premises and private cloud ERP. While on-prem ERP is deployed internally in a company’s infra, private cloud ERP can be hosted internally or through a third-party provider, but the environment is not shared with other organizations.

Private cloud ERP can be accessed by users using a remote app and an optional VPN for security.

This setup allows flexibility in licensing; you can either purchase perpetual licenses and own the software outright or opt for a subscription model like public cloud services.

It’s an ideal choice for businesses that require high-performance infrastructure with enhanced security and data privacy, offering strong adaptability and flexibility to meet evolving operational needs.

• Advantages of Private Cloud ERP

  Standardized services: Solutions are not custom-made, but you always have the option of certain add-ons at additional cost.

  Quick setup: Public ERP helps businesses automate operations and streamline enterprise-management fast, as it is quick to launch. This means lower TCO and higher ROI!

  Pay-as-you-go pricing: When you do not need in-house infrastructure or maintenance, your ERP becomes cost-effective. You pay for what you use!

• Drawbacks of Public Cloud ERP

  Higher costs: More expensive than public cloud due to dedicated hardware, setup, and ongoing maintenance.

  Limited scalability: Scaling up infrastructure can take more time and planning versus the elasticity of public cloud.

  Maintenance responsibility: You (or your MSP) are responsible for ongoing updates, patches, backups, and security.

How to Decide Between Private and Public Cloud ERP?

Usually, private cloud has a higher setup cost and large enterprises with many data centers, in-house infra and systems in place opt for private cloud ERP. Private clouds help them enhance their current resource utilization. Such large organizations also have the option to opt for multi-cloud ERP, which is a blend of public and private cloud ERP to easily move workloads and data between public and private cloud computing resources as required.

The infographic below shows how to choose between public and private cloud ERP. Keep asking yourself these questions to tick off the best option:

In conclusion, public cloud ERP (SAP S/4HANA Public Cloud) is preferred by:

• Startups, mid-market SMEs and growth-hungry businesses looking for an adaptable ERP to grow with the business.
• Customers planning to switch from on-premises ERP system to cloud-based ERP systems with minimal disruption.
• Businesses looking for state-of-the-art automation intelligence in a budget-friendly cloud ERP without heavy upfront investments or upkeep costs.

Use Caes of SAP S/4HANA Cloud ERP Deployment

Uneecops implemented SAP S/4HANA Cloud – Private Cloud for IndianOil Adani Ventures in record time. (Gone live in 155 days for 15 LEGAL entities)

IndianOil Adani Ventures Limited (IAVL), a midstream and leading infrastructure service and solution provider to the Oil, Gas, and Chemical Industry has domain expertise in Terminalling Services, Build Capabilities, and Renewable Energy. The company transformed their business operations with the most modern ERP today: SAP S/4HANA Cloud, implemented by Uneecops.

This is a real example of a milestone digital transformation journey which involved embracing change, streamlining processes, and driving growth across 15 legal entities in an astonishing 155 days.

The challenge: With multiple legal entities to manage, SAP S/4HANA Cloud enables seamless monthly and quarterly consolidations. It looked to reduce the manual effort traditionally required for compiling and reconciling data.

The solution provided: SAP S/4HANA private cloud’s deep insights and advanced data analytics helped IAVL support more informed decision-making across multiple stages of the oil and gas value chain.

Role of PRIVATE CLOUD: Dedicated private cloud architecture offered advanced cybersecurity, seamless management and a single ecosystem with a cost-effective SLA.


The outcome:

• IAVL has set a new benchmark for closing financial books within the first week of each month, a significant improvement from earlier practices.
• Automation through SAP S/4HANA Cloud private cloud ensured the timely availability of critical reports.
• With real-time benefits, deeper analytics, seamless integration and customizable features, SAP S/4HANA revolutionized how IAVL operates.

This classic use case showcases how private cloud ERP can also be deployed in record time with a trusted and leading SAP partner. Watch this video to discover IAVL’s SAP S/4HANA Cloud adoption journey:

Uneecops Deployed SAP S/4HANA Private Cloud for Swara Baby Products Pvt. Ltd.: The 3rd Largest Diaper Producer in India.

SAP S/4HANA Public Cloud helped Swara Baby Products unlock better demand forecasting, faster order fulfillment, and complete production visibility.

The challenges they faced:

• Inaccurate inventory data due to lack of live tracking.
• Month-end closing delays and late MIS reporting.
• High risk of manual errors.
• Needed a robust, integrated system to streamline processes across plants.

Role of PUBLIC CLOUD: Public cloud helped increase agility, lower TCO and uptime, and enjoy cloud ERP with better flexibility.

Uneecops Installed SAP S/4HANA - Public Cloud for Listed Company Netweb Technologies India Ltd.

India’s HPC powerhouse with 300+ installations seeked innovation in the competitive HPC landscape. Uneecops implemented SAP S/4HANA Public Cloud ERP to enable:

– Streamlined finance, supply chain, and operations in one platform

– Enhanced decision-making with AI-driven analytics and automation

Role of Public Cloud. It helped with real-time data processing for complex computing workflows. Proved to be a scalable cloud ERP to accommodate dynamic business expansion.