Enterprise resource planning (ERP) systems are a vital component of business today. Yet, determining which ERP system will best support your organization’s needs can be challenging, especially if you aren’t currently using one.
The ERP marketplace has changed significantly in the past few years, making it an ideal time to brush up on your knowledge and explore what vendors have to offer. Before searching for a specific solution, it’s essential to understand the pros and cons of each type of ERP system and their ideal use case. This blog can be used as a guide to help you make the best decision for your business.
Key takeaways
- Cloud-based ERP systems offer greater scalability and lower startup costs than on-premise solutions but may not meet industry-specific regulatory requirements.
- On-premise ERP systems offer greater control over data storage at greater risk and higher startup costs but may be more cost-effective in some instances.
- Each of the major mid-market cloud ERP providers has a particular area of focus. MineralTree offers simplified integration and data syncing for each.
What does an ERP system do?
An ERP system, or enterprise resource planning system, is a tool that allows businesses to more effectively manage their processes. These systems help companies facilitate the day-to-day operations of their business, including procurement, payments, inventory, and more.
Why is an ERP system important?
ERP systems give companies a centralized location to manage their processes and operations. It serves as a single source of truth for accurate information, since it compiles data into one platform. These systems also make it easier for companies to scale, while providing visibility into the core business functions.
Examples of ERPs in different industries
The needs of an ERP tool vary across industry. Below are examples of how different industries use ERP systems.
Healthcare
Healthcare companies use ERP systems to manage costs, so their doctors and teams can focus on high-quality care. Additionally, since supplier relationships are particularly important for these organizations, ERP tools help them manage vendors and payments.
Due to the Health Insurance Portability and Accountability Act (HIPAA), healthcare companies also have strict requirements on how they handle sensitive data. Healthcare organizations need an ERP tool that can handle personal identifiable information (PII), so they can ensure they are complying with federal and state laws.
Non-profits
Non-profits use ERP tools to meticulously track the money received from grants and funding. Non-profit organizations typically experience high staff turnover rates (21%), so these systems are used to ensure business operations continue to run smoothly, despite these challenges.
Education
Many colleges and universities have been dealing with lower enrollment rates over the past few years. A lot of schools have not returned to their pre-pandemic numbers and are struggling with inflation. ERP tools can help these organizations better manage their costs, while providing visibility into financial processes to better track spending.
Retail and eCommerce
ERP systems help retailers and eCommerce businesses manage supplier invoices, inventory costs, and cash flow while streamlining efficiencies to improve their margins.
Professional services
Professional service organizations (e.g., consulting and legal firms) typically only get paid for billable hours, so it’s important for these companies to reduce non-billable work as much as possible. By providing a single source of truth, these systems streamline business operations so teams can focus on ways to grow the business.
Food and beverage
Food and beverage companies often operate on thin margins. As a result, these companies use ERP systems to manage costs, while increasing overall efficiency.
Financial services and insurance
Financial services firms and insurance agencies use ERP tools to handle the vast amounts of data they have, including finance data, vendor information, and claim details.
Common types of ERP systems
Understanding the distinctions between cloud-based, on-premise, and hybrid ERP solutions is the foundation for determining which type of system best meets your business needs. Each offers distinct advantages and challenges, influencing factors such as scalability, cost management, and integration capabilities.
Cloud
Cloud-based ERP systems are hosted on remote servers and accessed via the internet. They offer the same functionality as traditional ERP systems but with the added benefits of scalability, accessibility and reduced IT overhead. They also enable users to work from anywhere, enhance collaboration and ensure automatic updates and robust security.
On-premise
On-premise ERP systems run on a company’s own servers and infrastructure. They offer complete control over the system and customization. However, they require significant upfront investment in software, systems and integration, ongoing maintenance, and dedicated IT resources. On-premise ERPs are most commonly used to meet specific regulatory requirements.
Hybrid
Hybrid ERP systems combine cloud-based and on-premises ERP solutions, offering the flexibility to leverage cloud benefits while retaining certain on-premises functionalities. Hybrid ERPs enable companies to gradually transition to the cloud, tailor solutions to specific needs and optimize resource management across different environments.
The pros and cons of various ERP systems
Understanding the strengths and weaknesses of each ERP deployment model is essential for any organization seeking to optimize its operations. To better understand which option is right for your business’s needs, let’s examine the advantages and drawbacks of each type of ERP system.
Cloud ERPs
Advantages of cloud ERPs
- Easy to scale: Cloud ERPs offer seamless scalability, allowing businesses to easily adjust resources and capabilities as they grow.
- Lower cost of ownership: Cloud ERPs are significantly less expensive to deploy than on-premise solutions, which require their own hardware and maintenance.
- Security patches deployed automatically: Cloud ERPs can patch security vulnerabilities automatically with little or no downtime.
- Accessible from anywhere: Cloud ERPs can be accessed from anywhere with Internet access, making them well-suited to a work-from-anywhere (WFA) environment.
Challenges of cloud ERPs
- Ongoing costs: Cloud ERPs reduce upfront expenses but require ongoing subscription fees that can add up over time.
- Dependence on internet connectivity: Cloud ERPs require a reliable Internet connection, which can be a challenge in areas with unstable network access.
On-premise ERPs
Advantages of on-premise ERPs
- More control: On-premise ERPs provide greater control over data storage and management, ensuring compliance with specific security and regulatory requirements. This control may also convey a greater responsibility for data security.
Challenges of on-premise ERPs
- More maintenance required: On-premise ERPs demand significant IT resources for regular maintenance, security updates, and troubleshooting.
- Difficult to scale: On-premise ERP systems involve substantial investments in hardware and infrastructure, making it less flexible and scalable.
- More challenging to integrate solutions: Integrating on-premise ERPs with other platforms can be complex and time-consuming, especially if the systems need to operate offline.
- Damage: If there is damage to an office building which houses the on-premise system (e.g., flooding), the ERP system could be at risk.
Did you know? There are still ways to integrate on-premise solutions with important tools. MineralTree offers offline syncing via a connector that resides in the same server as your QuickBooks Desktop platform. This allows QuickBooks and MineralTree to seamlessly sync, even with QuickBooks is offline. Learn more here.
Hybrid ERPs
Advantages of hybrid ERPs
- Control: Hybrid ERPs offer a balanced approach, providing control over critical data and processes while leveraging cloud benefits for other functions.
- Flexibility: Hybrid ERPs allow organizations to optimize resource use and adapt quickly to changing business needs by utilizing both on-premise and cloud environments.
The challenges of hybrid ERPs
- IT resources: Although hybrid ERPs require fewer IT resources than fully on-premise solutions, they still need dedicated IT support for maintenance and integration tasks.
| Cloud | On-premise | Hybrid | |
| Scalability | Cloud based systems are easy to scale. | On-premise systems can’t be scaled easily. | Hybrid systems are easier to scale than an on-premise solution. However, they offer more challenges in scalability than a cloud-based system. |
| Security | Cloud-based systems regularly deploy security patches. Companies benefit from having a team of experts dedicated to the security of a particular system without needing to expand their IT resources. | IT staff is required to manage security patches and vulnerabilities, which can lead to challenges, particularly if IT is understaffed. | IT staff and automatic security patches are needed to ensure systems remain secure. |
| Flexibility | Cloud based systems can be accessed from anywhere, enabling companies to better embrace hybrid and remote workforces. | On-premise systems can only be accessed at the company premises. | Specific features of a hybrid system can be accessed via a remote workforce. However, some features can only be accessed at the company premises. |
| IT resources | Little to no IT resources are required. | IT resources are required to ensure systems remain secure. | IT resources are required to ensure systems remain secure. Hybrid systems typically don’t require the same amount of IT staff as on-premise solutions. |
| Costs | Cloud-based systems usually leverage a subscription model but have lower upfront costs. | On-premise solutions usually have higher upfront costs and will require more internal resources. | Hybrid solutions will leverage a subscription model, but will have lower IT needs than an on-premise solution. |
Key considerations for choosing an ERP system
While each type of ERP system has its appeals and drawbacks, the best choice for your business depends on your needs. Below are three key considerations to keep in mind when choosing an ERP solution:
Scalability versus ease of use
Some ERP systems are better suited for larger companies. Because many of these solutions come with a higher price tag to deploy, it’s essential to balance scalability with user-friendliness to ensure the system meets current and future needs.
Features
Each type of ERP system offers capabilities and features that may be more beneficial to particular industries. Assessing these features against your specific business requirements will help you select the most suitable ERP system.
Integrations
If you’re scaling up to a new ERP, it’s critical to determine whether your current systems can integrate with the new ERP provider, ensuring a seamless transition and maintaining the efficiency of your existing workflows.
4 common ERP systems
Now that you know what to look for in an ERP solution, it’s time to consider what each vendor has to offer. Let’s examine some of the most common ERP systems on the market today, their advantages, and whether their solution is cloud-based, on-premise, or hybrid.
NetSuite
Oracle NetSuite is one of the first ERP systems specifically built for the cloud while also supporting hybrid capabilities. It’s best known for its scalability and integration capabilities for accounts payable (AP) automation tools and various other business functions.
Sage Intacct
Sage Intacct is a fully online cloud-based ERP system specializing in financial management. It offers robust, AI-assisted financial reporting and analytics features that scale with your needs.
Microsoft Dynamics GP
Microsoft Dynamics GP (Great Plains) is a primarily cloud-based ERP system suitable for small to mid-sized businesses. It’s known for its strong financial and supply chain management functionalities. Microsoft Dynamics GP currently offers on-premise solutions, but the company plans to sunset these offerings in 2025.
QuickBooks
QuickBooks is not a true ERP solution. It’s primarily accounting software for small businesses, offering basic ERP features for cloud and hybrid systems. The QuickBooks AP workflow gives this tool some scalability and flexibility, making it suitable for medium-sized businesses and even small enterprises.
Final thoughts
Each ERP system offers businesses a range of choices tailored to their specific needs and operational scale. Cloud-based ERPs and hybrid ERPs provide scalability and flexibility, enabling seamless integration across various departments and locations. On-premise solutions offer robust control over data security and customization, making them suitable for industries with stringent compliance requirements.
Choosing the best ERP system for your business requires a careful consideration of factors like scalability, cost-effectiveness, and integration capabilities. QuickBooks Online, for instance, serves as a foundational accounting tool for small businesses with its accessible cloud-based platform but may lack the depth needed for comprehensive enterprise resource planning.
As businesses grow, ERP migration may be necessary to improve operational efficiency and adaptability. AP automation can provide some efficiency gains with existing accounting systems, but eventually an ERP upgrade may be required. If AP automation has already been implemented, however, be sure to verify that the solution will continue to work with the new ERP. MineralTree’s professional services team offers specialized expertise to ensure a seamless migration to modern, cloud-based ERP systems like NetSuite or Sage Intacct. Dedicated implementation managers can help plan the migration with minimal impact to your current systems, while ensuring that you can continue to use MineralTree’s AP automation software while making switchover as seamless as possible. .
No matter the type of ERP system you choose, MineralTree’s integration capabilities provide a critical link that optimizes operations, supports growth, and ensures compliance across diverse business environments. This adaptability underscores the importance of choosing an ERP system that not only meets current needs but also evolves with your organization’s goals.
ERP FAQs
1. What is an ERP system?
An enterprise resource planning (ERP) system is a software platform used to manage and integrate various business processes. An ERP system combines functions such as accounting, human resources, supply chain management, inventory management, customer relationship management (CRM), and more into a single unified system. By integrating these systems, businesses are able to streamline processes, improve information flow, and enhance overall efficiency.
2. What are ERPs used for?
ERP systems are used to integrate and streamline various business functions into a unified system, enhancing efficiency and accuracy across departments and areas of the business such as accounting, HR, supply chain, and CRM. They centralize data, automate routine tasks, reduce errors, ensure compliance, and optimize resource use.
3. What is the best ERP system?
There is no single best ERP. The best ERP system depends on a variety of factors specific to your company’s needs, including industry, organization size, and budget.
4. What are examples of ERP systems?
Examples of ERP systems include Sage Intacct, Oracle Netsuite, and Microsoft Dynamics GP.
5. Is QuickBooks an ERP system?
QuickBooks is primarily an accounting solution designed for small to medium-sized businesses. While QuickBooks offers some features that overlap with ERP functionalities such as invoicing, expense tracking, and payroll management, it lacks the comprehensive integration and broad scope of modules found in traditional ERP systems.
