Chapter 6

What is On-Premise ERP?

An On-Premise ERP system, as the name suggests, is an enterprise resource planning (ERP) system that is installed and runs on servers physically located within the premises of an organization. On-Premise ERP gives an organization complete control over its data and the ERP system itself.

on-premise ERP

In this article, we explore everything you need to know about on-premise ERP systems. We deep dive into the advantages and disadvantages of on-premise ERP, discover the key factors to consider when choosing between on-premise and cloud ERP solutions, and gain insights into the future trends shaping the world of on-premise ERP.

Read more to navigate through the realm of on-premise ERP, providing valuable knowledge and guidance to empower your business decision-making process. Let’s embark on this enlightening journey together.

What is On-Premise ERP?

An On-Premise ERP system, as the name suggests, is an enterprise resource planning (ERP) system that is installed and runs on servers physically located within the premises of an organization. On-Premise ERP gives an organization complete control over its data and the ERP system itself.

The company is responsible for managing the system, including data security, system upgrades, and maintenance. This type of ERP system is often favored by organizations that have strict data security requirements or a high level of customization needs.

In summary, an On-Premise ERP is a robust, customizable system that is hosted and maintained within a company’s own infrastructure, providing full control and potentially enhanced or reduced security.

Benefits of On-Premise ERP

On-Premise ERP systems provide businesses with complete control, robust customization, and potential cost savings in the long run.

These systems offer significant benefits, particularly for organizations with specific operational needs, stringent compliance requirements, or those seeking to avoid recurring costs associated with cloud-based solutions.

With that, let’s have a look at a deeper level at the advantages of on-premise ERP software:

Complete Ownership

One of the primary benefits of an On-Premise ERP system is the sense of complete ownership it provides. Since the software is installed directly on the company’s own servers, businesses have full control over it.

This control extends to all aspects of the system, including data management, customization, and security measures. This level of control can be a significant advantage for businesses that have specific operational needs or who operate in industries with stringent compliance requirements.

One-time Purchase

Although the initial costs of acquiring and implementing an On-Premise ERP system can be high, it is a one-time investment. This contrasts with cloud ERP systems, which typically require ongoing, recurring subscription fees.

For businesses that plan to use their ERP system for a long duration, the one-time purchase model can potentially result in cost savings over time.

Robust Customization

On-Premise ERP systems typically offer more robust customization options compared to their cloud-based counterparts. They can be tailored to align closely with a business’s specific processes and workflows, improving operational efficiency and productivity.

Customization can also extend to the user interface, allowing businesses to create a user experience that best fits their employees’ needs.

High Level of Control over Updates and Upgrades

With On-Premise ERP, businesses have the freedom to decide when and how to implement system updates or upgrades.

This can be a significant advantage as it allows for adequate preparation and training, ensuring that these changes cause minimal disruption to the ongoing operations.

Furthermore, it enables businesses to test new features or updates in a controlled environment before rolling them out company-wide.

Additionally, it’s less disruptive in terms of customization and integration as new updates and upgrades may require companies to redo their customization and integrations, resulting in higher costs.

Especially, when cloud ERP software is updated regularly (like most are), this means that having a high level of customization and integration might not be an option for cloud ERP software, just because it might need to be redone every year or even six months.

System Stability

An On-Premise ERP system can offer greater stability compared to a cloud-based system. Since it’s not reliant on internet connectivity, operations can continue uninterrupted even in the event of an internet outage.

This can be particularly beneficial for businesses located in areas with unreliable internet connectivity.

Less Dependency on the Vendor

A significant benefit of On-Premise ERP systems is the reduced dependency on the software vendor. As the system is hosted and maintained in-house, businesses have the autonomy to manage, modify, and troubleshoot the system as they see fit.

This contrasts with cloud-based ERP solutions, where businesses often rely on the vendor for system updates, customizations, and resolving technical issues. This greater control can lead to faster resolution times for issues and the flexibility to adapt the system to the evolving needs of the business without waiting for the vendor’s approval or assistance.

Remember, the specific benefits a business might experience can depend on various factors, including the nature of its operations, industry-specific requirements, and its long-term strategic goals.

Disadvantages of On-Premise ERP

While On-Premise ERP systems have their advantages, they also come with certain challenges. These include a lack of flexibility, high upfront costs, responsibility for data security, and longer implementation times.

Furthermore, they may lack the mobility and easy integration offered by cloud-based systems, which can hinder certain business operations.

In order to better understand ERP software that is on-premise, let’s have a look at the exact disadvantages of an ERP system on-premises:

Hard to Quickly Adapt

Unlike cloud-based ERP solutions that can be easily scaled up or down based on business needs, On-Premise ERP systems might not offer the same level of flexibility. Any change or upgrade often requires a more complex and time-consuming process, making it harder for businesses to quickly adapt to changing market conditions or business growth.

High Upfront Investment

On-Premise ERP systems typically require a substantial initial investment. This includes costs related to hardware, software licenses, server space, and installation. These costs can be prohibitive, particularly for small to medium-sized businesses with limited budgets.

Data Security

With an On-Premise ERP system, data security becomes entirely the responsibility of the business. This means implementing sufficient security measures, ensuring regular system updates, and managing data backups.

While this gives the business complete control over its data, it also requires the necessary resources, expertise, and diligence to ensure data protection.

If these elements are not effectively managed, it could potentially expose the business to risks, including data breaches.

Conversely, cloud-based ERP providers typically have extensive resources dedicated to data security, often surpassing what a singular company could afford or manage. Therefore, businesses must carefully assess their ability to safeguard their data effectively when considering an On-Premise solution.

Longer Implementation Time

The installation and setup of an On-Premise ERP system can be a complex process that takes a considerable amount of time. This can disrupt regular business operations and delay the time it takes to start reaping the benefits of the system.

Less Integrable

While On-Premise ERP systems can often integrate well with other on-premise solutions, they might not offer the same level of compatibility with third-party or cloud-based systems. This can limit a business’s ability to build a comprehensive and cohesive technology ecosystem.

Less Mobile

On-Premise ERP systems are typically accessed via a local network, which can limit the ability of employees to access the system when they are not on the company premises. This contrasts with cloud-based ERP solutions, which can be accessed from anywhere with an internet connection, providing greater flexibility for remote work and travel.

Remember, these disadvantages are not inherent to all On-Premise ERP systems and can often be mitigated with careful planning and effective management. The impact of these disadvantages will also vary based on the specific circumstances of each business.

Infographic On-Premise ERP

Explore our infographic below which provides a clear, concise overview of the key benefits and disadvantages of On-Premise ERP systems. It serves as a visual guide to help you understand the unique value proposition and potential challenges associated with these systems at a glance. Dive in to discover more!

on premise erp advantages and disadvantages infographic

(Download the infographic)

5 Best On-Premise ERP Software

When choosing an On-Premise ERP solution, it’s crucial to consider various factors like features, scalability, customization capabilities, and the vendor’s industry experience.

Here, we highlight five of the top On-Premise ERP software options that have been well-received in the industry:

1. Microsoft Dynamics 365 Business Central

Best on-premise ERP Microsoft Dynamics 365 Business Central

Microsoft Dynamics 365 Business Central is a comprehensive all-in-one business management solution designed for small to medium-sized businesses with options to implement it on-premise, cloud, or hybrid.

Business Central seamlessly integrates with other Microsoft services, such as Microsoft 365, and provides robust capabilities across finance, operations, sales, and customer service. This makes it an excellent choice for businesses looking for a complete solution that can help streamline processes, make smarter decisions, and accelerate growth.

The software offers a user-friendly interface that users of other Microsoft products will find familiar. It provides real-time insights into business performance and comes with advanced analytics and reporting capabilities. These features, coupled with the flexibility and security offered by the on-Premise option, make Microsoft Dynamics 365 Business Central a compelling choice for businesses seeking an effective ERP solution.

To learn more check out: Dynamics 365 Business Central vs SAP Business One in Malaysia: What are the Main Differences.

2. SAP Business One

best on premise ERP SAP Business One

SAP Business One is an On-Premise ERP system specifically designed to meet the needs of small to medium-sized businesses. It offers a comprehensive suite of tools to streamline key business functions, including financials, sales, customer relations, and inventory.

Known for its scalability, SAP Business One is an excellent option for growing businesses, allowing them to add functionality as their needs evolve.

It provides real-time analytics and reporting capabilities, offering businesses the insights needed to make informed decisions. With its robust feature set and the reputation of SAP behind it, Business One is a reliable choice for SMBs seeking an On-Premise ERP solution.

To learn more, read SAP business one alternatives.

3. Infor

best on premise ERP Infor

Infor in Malaysia provides specialized On-Premise ERP for Manufacturing and ERP for Distribution solutions.

These industry-focused solutions are designed to meet the unique needs of businesses within these sectors, helping to streamline operations, optimize supply chains, and enhance productivity.

Known for its modern, user-friendly interface, Infor’s ERP software allows for robust customization, enabling businesses to adapt the system to their specific needs.

With its advanced capabilities and a keen understanding of the manufacturing and distribution industries, Infor stands out as an excellent choice for businesses in these sectors seeking a comprehensive, tailored ERP solution.

4. Epicor

epicor erp on-premise

Epicor offers a robust On-Premise ERP solution designed to support business growth, particularly within the manufacturing, retail, and distribution sectors.

The software provides modules for a variety of functions, including Customer Relationship Management (CRM), Supply Chain Management (SCM), and Human Capital Management (HCM). Its strength lies in its ability to provide industry-specific solutions, offering tools and features that directly address the operational needs of manufacturing and distribution businesses.

Epicor’s ERP solution also provides real-time analytics and reporting capabilities, enabling businesses to make data-driven decisions. With its comprehensive feature set and industry-focused approach, Epicor is a reliable choice for businesses seeking to optimize their operations and drive growth.

5. Acumatica

Acumatica on-premise ERP

Acumatica specializes in providing an On-Premise ERP solution, particularly suited for the manufacturing sector.

Its software is designed to streamline manufacturing operations, from production planning to shop floor management, providing real-time visibility into all aspects of the manufacturing process.

Acumatica’s strength lies in its simplicity, provides flexibility, and is relatively easy to configure, and Very affordable ERP system.

Additionally, its user-friendly interface and comprehensive analytics and reporting tools enable businesses to make data-driven decisions. With its deep focus on manufacturing, Acumatica stands out as an excellent choice for businesses in this sector looking for a tailored ERP solution.

ERP On-Premise vs ERP Cloud

Our infographic provides a visual comparison between On-Premise and cloud ERP systems.

We’ve color-coded the pros and cons of each system, making it easy for you to compare and contrast them at a glance.

This infographic serves as a useful reference tool for decision-makers who are trying to determine which type of ERP system would best suit their business needs. Whether your priority is cost efficiency, data control, or system scalability, this infographic can help guide your ERP selection process.

on premise ERP vs cloud ERP infographic

(Download the Infographic)

Choosing Between On-Premise and Cloud ERP

When choosing an ERP solution, businesses often grapple with the decision between On-Premise and cloud-based systems. Each type of system has its own unique advantages and challenges, and the best choice depends on several factors.

Factors to Consider

When deciding between on-premise e and cloud-based ERP systems, several key factors should be considered:

  • Business Size: Large businesses may require the comprehensive and customizable features offered by on-premise ERP, while smaller companies might benefit from the scalability and cost-effectiveness of cloud-based solutions.
  • Industry: Certain industries with strict data regulation and compliance requirements may favor on-premise ERP due to increased control over data security.
  • Budget: on-premise ERP systems require significant upfront investment and ongoing maintenance costs. In contrast, cloud-based ERP solutions are typically subscription-based, requiring lower initial costs but ongoing monthly fees.
  • IT Resources: Implementing and maintaining an on-premise ERP system requires a substantial in-house IT team. Businesses with limited IT resources may be better suited for a cloud-based ERP, which is maintained by the software provider.
  • Future Growth and Scalability: If a business anticipates rapid growth or expansion, a cloud-based ERP’s scalability might be more beneficial.
  • Data Control and Security: on-premise ERP offers more control over data, whereas Cloud ERP software provides a higher level of data security.
  • Customization Needs: Businesses requiring deep customization may find on-premise ERP systems more fitting, given their flexibility to be tailored to exact business needs.

Analyzing Business Requirements and Future Goals

It’s important to consider not just your current business needs, but also your future goals. If you anticipate significant growth or changes in your business operations, a scalable cloud ERP system might be a better fit.

However, if you require a high level of control over your system and data, an On-Premise solution could be the right choice.

Pros and Cons: Cloud vs On-Premise ERP

On-Premise ERP


  • Control: Businesses have complete control over their ERP system, including data, customization, and when updates are implemented.
  • Predictable Costs: While the initial cost is high, the ongoing expenses of an On-Premise ERP system are relatively predictable after implementation, as they mainly involve maintenance and occasional upgrades.
  • Customization: On-Premise ERP allows for extensive customization to meet specific business needs.


  • Cost: On-Premise ERP systems typically require a significant upfront investment for software licenses, hardware, and implementation. They also incur ongoing costs for system maintenance and upgrades.
  • Resource Intensive: These systems require a substantial in-house IT team to manage and maintain the system.
  • Scalability: Scaling up an On-Premise ERP system can be a complex process requiring additional hardware and software, and potentially causing system downtime.

Cloud ERP


  • Cost-effective: Cloud-based ERP solutions generally have lower upfront costs and are typically subscription-based, which can be more manageable for small and medium businesses.
  • Scalability: Cloud ERP systems are easily scalable, allowing businesses to adjust resources as their needs change.
  • Accessibility: These systems can be accessed from anywhere with an internet connection, enabling remote work.


  • Dependency on the Internet: Cloud ERP systems rely on Internet connectivity. Any internet downtime can disrupt access to the ERP system.
  • Limited Customization: While cloud ERP systems do offer customization options, they may not be as extensive as those of On-Premise systems.
  • Data Control: While data security in the cloud is robust, some businesses might have concerns over sensitive data being stored off-site.

Preparing for an On-Premise ERP Implementation

Implementing an On-Premise ERP system is a significant project that requires careful planning and preparation. Here are some key steps in the process:

Evaluating Vendor Options and Software Capabilities

Before settling on an ERP solution, it’s important to thoroughly evaluate various vendors and their software capabilities. Consider factors such as the software’s ability to meet your specific business needs, the vendor’s reputation and customer service, and the software’s scalability and ability to grow with your business.

To learn more check out our guides:

Aligning ERP Capabilities with Business Processes

An ERP system should enhance and streamline your existing business processes, not complicate them. Therefore, it’s critical to align the capabilities of the ERP system with your business processes.

This might involve customizing the ERP software to fit your operations or adjusting your processes to leverage the ERP system’s capabilities.

To learn more check out our articles:

Planning for Training and Change Management

Implementing a new ERP system will bring significant changes to your business operations. It’s important to plan for these changes and prepare your team for them.

This includes providing comprehensive training on the new system and managing the change process to ensure a smooth transition. A well-planned and executed training and change management strategy can significantly increase the success of your ERP implementation.

To learn more read our guides:

Future Trends in On-Premise ERP

The world of ERP is constantly evolving, and staying ahead of emerging trends is crucial. Here are some future trends to consider for On-Premise ERP:

Influence of Emerging Technologies (AI, IoT, etc.)

As technologies like Artificial Intelligence (AI) and the Internet of Things (IoT) continue to advance, they are increasingly being integrated into ERP systems. On-Premise ERP solutions are also leveraging these technologies to enhance automation, predictive analytics, and real-time decision-making capabilities.

However, often on-premise ERP solutions are having fewer of these capabilities compared to Cloud ERP solutions due to their dependency on local infrastructure and limited resources for implementing and integrating emerging technologies. Cloud ERP solutions, on the other hand, benefit from the scalability and flexibility of cloud platforms, allowing for easier adoption and integration of AI, IoT, and other advanced technologies.

While on-premise ERP systems may face some challenges in keeping up with the pace of emerging technologies, ERP vendors are continuously working to bridge this gap. They are investing in research and development to provide on-premise solutions with enhanced capabilities and compatibility with emerging technologies.

Hybrid ERP Systems: Blending cloud and On-Premise

Hybrid ERP systems are gaining popularity, offering the best of both worlds by combining the flexibility of cloud-based solutions with the control and customization of On-Premise ERP. This approach allows businesses to leverage cloud services for specific functionalities while maintaining critical data and processes on-premise.

The Future of On-Premise ERP

While vendors are shifting towards cloud-based ERP solutions, the demand for on-premise ERP remains high. ERP giants like Microsoft, Oracle, SAP, and others continue to provide on-premise options to cater to businesses’ specific needs for control, customization, and data security.

The future lies in a balanced approach, with the emergence of hybrid solutions that combine the benefits of cloud and on-premise ERP. This ensures businesses can leverage scalability and accessibility while maintaining ownership and control over critical data and processes.


In conclusion, on-premise ERP solutions continue to play a vital role in meeting the unique needs of businesses. They offer complete ownership, customization, and control over updates and upgrades.

While cloud-based ERP solutions gain popularity, the demand for on-premise ERP remains high, with vendors like Microsoft, Oracle, and SAP continuing to provide robust on-premise options.

Businesses opting for on-premise ERP must consider factors such as their size, industry, budget, and IT resources.

Despite challenges in keeping up with emerging technologies, on-premise ERP vendors are working to enhance capabilities and compatibility.

By evaluating their specific requirements and aligning with future goals, businesses can make informed decisions to maximize the benefits of on-premise ERP.

Frequently Asked Questions (FAQs) about On-Premise ERP

In this section, we will answer some of the most commonly asked questions related to on-premise ERP.

On-premise ERP refers to software installed and maintained on local servers, while cloud ERP operates on remote servers accessed through the Internet. On-premise ERP offers control, customization, and predictable cost, but requires hardware and IT resources.

Cloud ERP provides scalability, strong data protection, accessibility, and automatic updates, but relies on third-party servers. Consider factors like data control, maintenance, and budget to choose between on-premise and cloud ERP. Ultimately, it depends on your specific needs and preferences for ownership, control, and flexibility.

Cloud ERP offers several advantages over on-premise ERP. Firstly, cloud ERP eliminates the need for on-site hardware and infrastructure, reducing upfront costs and IT maintenance. It provides scalability, allowing businesses to easily adjust resources based on their needs. Cloud ERP also offers enhanced accessibility and stronger data protection allowing users to access data and systems from anywhere with an internet connection. Additionally, cloud ERP solutions often provide regular updates and patches, ensuring users have the latest features and security enhancements.

Overall, cloud ERP provides flexibility, cost-effectiveness, and streamlined maintenance, making it a preferred choice for many businesses.

On-premise ERP has its advantages compared to cloud ERP. It offers complete ownership and control over the infrastructure and data, which can be crucial for businesses with specific security or compliance requirements.

On-premise ERP allows for greater customization to align with unique business processes. It also provides better control over updates and upgrades, as businesses can manage the timing and implementation themselves.

Moreover, on-premise ERP offers long-term cost savings for organizations that plan to use the software for an extended period. However, it requires upfront investment, dedicated IT resources, and maintenance responsibilities, making it more suitable for businesses with the necessary infrastructure and expertise.

The disadvantages of on-premise ERP include high upfront investment costs for hardware, software licenses, and infrastructure setup. It requires dedicated IT resources and ongoing maintenance responsibilities.

Upgrades and updates can be time-consuming and may disrupt business operations. On-premise ERP may have limited scalability, making it challenging to accommodate business growth.

Additionally, while businesses have control over data security, it also means they bear the sole responsibility for implementing robust security measures.

Compared to cloud ERP, on-premise solutions may have a higher risk of data breaches if security practices are not effectively managed.

Cloud ERP is generally considered safer than on-premise ERP. ERP vendors, like Microsoft, invest heavily in data security measures to protect cloud infrastructure.

For example, Microsoft is investing over $1 billion in data security every year and its cloud infrastructure is trusted by 95% of Fortune 500 companies.

Cloud ERP providers have dedicated teams that ensure security measures are up to date, including encryption, access controls, and regular security audits.

They also offer robust disaster recovery plans and data backup solutions. With these resources and expertise, cloud ERP can often provide higher levels of security compared to on-premise ERP solutions.

Learn more about Microsoft Dynamics 365 ERP Applications

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Microsoft Dynamics 365 Project Operations for project management

Dynamics 365 Project Operations get the visibility, collaboration, and agility needed for your project-centric business. Empower your teams to win more contracts, optimize resource utilization, accelerate project delivery, and get business insights from sales to project financials.

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