When it comes to implementing or upgrading your ERP system, one of the biggest decisions you’ll face is where to host it. Whether you’re investing in an entirely new system or modernising an ageing setup, choosing between on-premise, cloud, or hybrid hosting can have a major impact on performance, costs, scalability, and long-term flexibility.

We’ve seen clients across manufacturing, print, retail, and distribution sectors grapple with this exact decision, so here’s a balanced look at the pros and cons of each approach.

On-Premise ERP Hosting

Overview:
With an on-premise ERP, all software and data are hosted on servers physically located within your business. You own and manage the hardware, software licences, security, and maintenance.

Pros:

• Full control: You maintain complete control over your infrastructure, configurations, and data security policies.
• Performance: No reliance on internet connection speeds or cloud provider uptime.
• Data security compliance: For businesses with strict data residency or compliance requirements, on-premise can simplify regulation adherence.

Cons:

• High upfront costs: Purchasing and setting up physical servers, networking equipment, and backup systems can be expensive.
• Ongoing maintenance: IT staff must manage updates, backups, and hardware replacements.
• Technology obsolescence: Servers and infrastructure typically need upgrading every 3/5 years to stay reliable and compatible with modern ERP software.
• Scalability limits: Scaling up often means purchasing more hardware — a slow and costly process.

Long-term consideration:
While on-premise can feel like a one-time investment, ongoing support contracts, electricity, cooling, and replacement hardware add up. Over a 5/10 year period, total cost of ownership (TCO) is often higher than initially expected.

Cloud ERP Hosting

Overview:
With a cloud-based ERP, your system runs on infrastructure hosted by a cloud provider (e.g., AWS, Azure). You access it via the internet, and the provider handles hardware, uptime, and security.

Pros:

• Lower upfront costs: No hardware purchases or data centre setup.
• Scalable: Add users or storage on demand, with no major capital expenditure.
• Automatic updates: Your ERP software and hosting environment stay current without internal IT intervention.
• Managed backups: Data backups, redundancy, and disaster recovery are handled automatically by your software provider, reducing risk and workload for your internal IT team.
• Accessibility: Teams can access the system securely from anywhere.

Cons:

• Recurring costs: Subscription and storage fees can grow significantly over time.
• Performance bottlenecks: If storage or bandwidth limits are reached, performance can degrade until your plan is upgraded.
• Limited customisation: Cloud ERP systems, particularly those on shared or multi-tenant servers, often restrict access to deeper technical configurations or third-party integrations.
• Less control: You rely on the provider’s uptime, data policies, and upgrade schedules.
• Data location: You may have less visibility over where your data is physically stored.

Long-term consideration:
Cloud hosting offers predictability and low maintenance, but businesses needing advanced customisation or integrations may find shared environments restrictive. It’s important to confirm what level of access your ERP provider allows before committing to a cloud-only model.

Hybrid ERP Hosting

Overview:
Hybrid ERP systems combine on-premise and cloud elements. For example, core ERP modules might run on your local servers, while reporting, e-commerce, or mobile apps are hosted in the cloud.

Pros:

• Flexibility: You can balance control and scalability by hosting sensitive or performance-critical modules locally and others in the cloud.
• Gradual transition: Ideal for companies migrating from on-premise to cloud at a manageable pace.
• Disaster recovery: Cloud backup and redundancy options can complement local servers.

Cons:

• Complexity: Integration and synchronisation between environments can be challenging.
• Higher management overhead: Requires monitoring and maintaining both local and cloud systems.
• Cost tracking: Managing two different cost structures (CAPEX and OPEX) can be tricky.

Long-term consideration:
Hybrid systems can be a sensible middle ground, particularly for businesses with bespoke modules or regulatory needs, but they demand careful design and ongoing technical management.

At-a-Glance: ERP Hosting Comparison

Hosting Type	Key Benefits	Drawbacks	Best For
On-Premise	Full control over data and infrastructure. High performance without internet dependency. Ideal for strict compliance environments.	High upfront cost and ongoing maintenance. Requires in-house IT expertise. Hardware upgrades every few years.	Businesses with strong IT teams and strict data governance requirements.
Cloud	Low initial investment. Automatic updates and managed backups handled by your provider. Scalable and accessible from anywhere.	Limited customisation and integration options on shared servers. Recurring subscription costs. Possible storage or bandwidth bottlenecks.	Businesses prioritising flexibility, remote access, and minimal IT overhead.
Hybrid	Mix of control and scalability. Supports phased cloud migration. Built-in redundancy and disaster recovery options.	More complex to manage. Dual cost model (CAPEX + OPEX). Requires careful system integration.	Organisations needing a balance of control, flexibility, and gradual transition to cloud.

Final Thoughts

Choosing where to host your ERP system is about more than just where your data sits, it’s about how your business will grow, scale, and adapt in the years ahead.

• On-premise hosting offers complete control but demands ongoing investment and technical upkeep.
• Cloud hosting removes the IT burden, but long-term costs and limited customisation can be a factor.
• Hybrid models provide a flexible middle ground, blending control with scalability for businesses planning gradual change.

Ultimately, the right solution depends on your infrastructure, compliance needs, and strategic direction.

We help businesses evaluate these options based on real-world needs, not vendor bias. Whether you’re upgrading an aging server setup or exploring a move to the cloud, we’ll help you design a hosting strategy that supports your long-term goals.

Book a discovery call to discuss your ERP hosting options and get tailored advice for your business.

For more information, here are some helpful links:

Cloud ERP Hosting

• SAP – Top 10 Benefits of Cloud ERP Systems
  SAP outlines key advantages of cloud ERP, including continuous innovation, lower costs, simplicity, and real-time insights. SAP
• Oracle – 15 Cloud ERP Benefits
  Oracle provides a comprehensive list of benefits for cloud ERP systems, such as faster implementation, enhanced flexibility, and reduced IT overhead. Oracle

On-Premise ERP Hosting

• Axxis Consulting – 10 Reasons to Choose On-Premise ERP
  Axxis Consulting discusses the benefits of on-premise ERP systems, including greater flexibility, independence, and control over data. Axxis Consulting
• Global Shop Solutions – Advantages of On-Premise ERP for Manufacturers
  This article highlights how on-premise ERP systems provide complete control for manufacturing enterprises, offering benefits like better integration with existing systems and enhanced data security. globalshopsolutions.com

Hybrid ERP Hosting

• NetSuite – What Is Hybrid ERP and What Are Its Advantages?
  NetSuite explains the concept of hybrid ERP, detailing how it offers a balance between cloud scalability and on-premise control. NetSuite
• TechTarget – What is Hybrid ERP? Benefits and Use Cases
  TechTarget provides insights into the benefits and drawbacks of hybrid ERP systems, helping businesses understand when this model is appropriate. TechTarget