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A Brief History of ERP Solutions: From In-House To Cloud-Hosted, Part 2

Posted by Samantha Merrill

Aug 14, 2014

hosted erp solutionsTraditional on-premise ERP solutions, as discussed in our previous post, are fast becoming obsolete. They're still being used by many small and mid-sized companies, but it's unrealistic for smart, strategic business executives to continue overlooking the huge functionality gaps in the on-premise model.

The next stage in the evolution of ERP is the hosted approach. Hosted ERP software is a popular and attractive option: Young SMBs build new business management solutions from scratch, and well-developed businesses overhaul their current systems to be more flexible, functional and accessible. Here's what a hosted ERP system looks like:


Unlike on-premise delivery of ERP software, the hosted approach eliminates the need to purchase hardware. Your software provider is responsible for buying all of the equipment needed to build a strong infrastructure.

Equipment Maintenance

Hosted ERP software takes the responsibility of equipment repair and maintenance off of your already-full plate. You're not shackled by break/fix solutions, and you're not hindered by the cost of emergency repair. You simply reap the benefits of a consistently updated, diligently maintained infrastructure.


Like on-premise enterprise software, hosted ERP requires that you purchase a license upfront.

Upgrades, Updates And Maintenance

Since you're paying for the license, you essentially own the software. That means the cost and installation of all necessary updates, upgrades and fixes is your responsibility. The continuing functionality, security and efficacy of your business management system rely on consistent upgrading.

Like traditional ERP software, hosted ERP maintenance is part of an annual enhancement fee. You pay your software vendor to keep the ERP system bug-free and to make sure you're working with the most up-to-date versions of the software.


Aside from location, hosted ERP implementation is similar to that of on-premise models. You pay for an implementation package upfront, and are billed for out-of-scope services as they're rendered. It costs much less time and money to set up a hosted ERP system, and the productivity downtime you endure is significantly reduced. Still, it's a cost that fluctuates too wildly to be accurately predicted for budgeting purposes; this unpredictability makes hosted ERP implementation worrisome for businesses with tight budgets.


Since you're not housing the servers, you don't have to worry much about the security of hosted ERP software. As part of your subscription fee, you're given the peace of mind of a secure, protected business management system. Datacenters have access to better security measures than average office buildings do, and the impacts of natural disasters, power outages and break-ins are minimal.

Data And Server Backup

Hosted ERP servers are maintained by your software vendor, so you don't need to worry about server backups. Data backup, on the other hand, is entirely your responsibility. The onus is on you to keep your critical business information private.


While hosted ERP software gives you the freedom of a provider-maintained system, you're still charged for customer support. Configuration, training and troubleshooting are all available, but for extra charges. Like traditional on-premise models, the complexity and frequency of your support needs determines the impact customer service has on your budget.

Hosted ERP software is indeed a more functional approach than traditional on-premise solutions. But even hosted ERP is a difficult and often unpredictable cost for most businesses. Stay tuned for Part 3 of this series, where we explore the last phase in the evolution of enterprise software: SaaS ERP.

Want to learn more about the advantages of hosted ERP software solutions?  Download our free guide, An Insider’s Guide To The Best Cloud-Based ERP Software.

Download: An Insider's Guide to The Best Cloud-Based ERP Software

Topics: business software, business management solutions, erp software