Cloud ERP versus Hosted ERP Software

October 18, 2010
By djohnson

hosted-vs-cloudIn a previous post (April 8, ERP for Distributors: SaaS versus Traditional), we addressed different delivery methods for ERP software. Although the article was directed at distributors, the ideas can be applied more broadly to the concept of hosted ERP software versus cloud/on-demand ERP software.

“Fake” ERP Clouds

As noted in our prior article, there are on-demand solutions and on-premise solutions. Some providers are using hosting services to create on-demand solutions from on-premise software. Here is how that happens:

  1. A hosting provider using virtualization software declares that it is a “cloud provider” of services
  2. Said ‘cloud provider’ deploys on-premise software on a hosted server
  3. The ‘cloud provider’ deploys remote access software so users can access the hosted on-premise software
  4. The ‘cloud provider’ sells an all-inclusive package with bandwidth, storage, backup, updates, upgrades, monitoring, and disaster recovery as cloud-based solution

In a recent CRN interview with Zack Nelson, the CEO of NetSuite is quoted as saying “There are real clouds and fake clouds. The fake clouds are people who are taking existing technology and saying, ‘We can host it for you and that’s the cloud’.”

So what differentiates a fake cloud from a real cloud? Nelson goes on to say …

“If the application is not web-native it’s not going to give you any of the benefits of the cloud. You’re not going to get any of this cost reduction, customization migration, or anytime, anywhere access because you are still using intermediary technology to access a hosted application.

The key point here is that native web-based technology differentiates true cloud offerings from hosted offerings.

Name calling or true ERP differentiation?

There is a difference between a hosted software application that is bundled with services and a web-based software application run on a cloud infrastructure. The real question is whether or not this difference impacts users of the service.

To answer this, let’s look at features supported by web-based software, that are not supported by a hosted application. These include:

  • Rapid deployment – if you have to deploy client software, it’s not rapid, so hosted ERP software will not be as efficient as web-based software
  • Optimal remote access – the amount of network traffic generated by a well formed web-application passing bits of data will be much less than the traffic passed by a client-server application over terminal emulation or VPN software
  • Easy to maintain – a web-application will be much easier to maintain because there is no software to update or upgrade, this is especially true in deployments with multiple users

The benefits covered above include both cost savings and operational benefits. Thus, even if hosted ERP software is offered for a lower price (which would be doubtful due to the inefficiencies), users will not see the same performance.

Despite the inefficiencies, you might consider deploying non-web-based ERP software in a hosted model if your business requires features that not available in a web-based solution. In this case, you can gain some of the benefits our IT outsourcing.

Web-based ERP software on-premise

Web-based applications developed for the cloud are more efficient, but as we mentioned in our April article, there are some advantages to an on-premise deployment. These include integration with other on-premise systems and the fact that you can still work when your internet access fails. When hosted on-premise, the benefits of outsourced IT are lost, but depending on your business, it might be more important to have your data stored locally.

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3 Responses to “ Cloud ERP versus Hosted ERP Software ”

  1. LeightonJ on October 21, 2010 at 6:13 pm

    I would assume therefore that ‘most’ apps that call themselves ‘Cloud’ today are therefore really hosted? But with a roadmap to true Web-based setups. This is especially true for the companies with large installed customer bases?


  2. Michael Wolfinger on October 26, 2010 at 2:14 am

    Thank you for the article. As of today, many companies play and loose with the terms ‘cloud computing’, ‘cloud hosting’ or simply ‘cloud-ready hosting’. As such, there is demand for standardization of the cloud nomenclature.

  3. Dusty on February 6, 2013 at 1:41 pm

    This article is absolutely nonsense. I build cloud architectures and there is no actual definition of what a cloud is or isn’t other then virtualization and a cloud management suite.

    Web applications are no different to manage then any other server applications, the only difference you have is if there is desktop client software or not (web apps use a browser).

    There are many downsides to using web technologies as well (security being the #1).

    Apps have better performance and usability
    Web applications are easier to upgrade to the end user as they don’t see any change other than a new website.

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