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Difference between Hosted and Cloud-based Enterprise Software System


When organizations decide to adopt ERP systems to carry out their business function effectively, they are often confused between hosted ERP and cloud-based ERP. And they seem to have their definition for these two types of ERP systems. Both these are quite similar as a hosted enterprise software system is off-premise and one can get its access through an Internet connection. And the cloud apps are also hosted off-premise and can be accessed through an Internet connection. However, many different variables depend while a business is choosing one of these ERP systems, as they offer unique and effective features for different industries. Therefore, in this blog, we will understand the concept of both hosted and cloud-based ERP and see where they differ.

What is Hosted ERP?

Hosted ERP software apps are off-site and are known as an asset for any business owner. The applications of Hosted ERP software can be purchased and installed on any remote server. Besides, it is also accessible through a Virtual Private Network (VPN) and terminal services or remote desktop. Businesses from various industries have applications that are server and client-based. So, if they install hosted ERP software applications on a workstation, then the client can access the app through workstation links. The workstation/client installation can be easily on the hosted server. Besides, a hosted ERP software application is not web-enable, therefore, to run it, a terminal server is required.

Advantages of Hosted ERP

  • Less vendor dependency
  • Data control
  • Limit on-going costs
  • Easier customization
  • Institution for future hybrid cloud expansion

Disadvantages of Hosted ERP

  • Longer Implementation Process
  • Hardware & IT Costs
  • Less Mobile-Friendly

What is Cloud ERP?

Cloud ERP apps are web-enabled and they don’t need the client/workstation installation. It only needs a server installation and a device that has internet connectivity for the end-user. The developers don’t need to log into a program or don’t have to go through the client installation process.

According to experts from TatvaSoft, A lot of work and usage of technologies is required to make an app rely on any workstation but a true web-based ERP software only requires an internet browser. This is the reason why many business owners are adopting this functionality.

Besides this, the word “Cloud” comes with a wide range of apps and deployment software models like Software-as-a-Service (SaaS). Cloud ERP is nothing but simple software that is available on a platform through the internet. The concept of cloud computing is a simple way to access hardware, software, and other required resources through the internet to accomplish a task for your business. So, the perfect definition of Cloud ERP is – Enterprise Resource Planning (ERP) is a concept that uses cloud computing services and platforms to offer a business with more flexible transformation. And both hosted ERP & cloud ERP profits their customers as this concept cuts down hardware costs and provides apps scalability features. In addition to this, the cloud comes with multiple options like Public, Private, or Hybrid.

  • Public Cloud

A public cloud is a cloud computing type in which a service provider offers resources like data storage, availability, and applications to the general public via the internet.

  • Private Cloud

A private cloud is a cloud computing type that offers similar advantages as the public cloud but is dedicated to a single organization. And to operate it, you need experts who have proper knowledge about cloud architecture and also know-how to patch, upgrade, monitor, and secure it.

  • Hybrid Cloud

A hybrid cloud is a cloud computing type that is a combination of both public cloud and private cloud.

Advantages of Cloud-based ERP

  • Easy to Maintain
  • Remote Access
  • Accessibility of Features
  • Low Initial Costs
  • Non-Physical Servers

Disadvantages of Cloud-based ERP

  • Fewer Customization Options
  • Fear of Data Security
  • Rely on Vendor for Changes

Difference – Hosted ERP vs Cloud-based ERP

Let’s have a look at the difference between the hosted and the cloud-based ERP systems.

1.   Ease of Upgrades

When it comes to easy upgrades, Cloud ERP has a clear benefit over Hosted ERP. In hosted ERP, one needs to ask the vendors how to upgrade the system and install maintenance as it releases. But, with cloud ERP, the business owner has to do nothing as the software vendor handles everything regarding the upgrades automatically. On the other hand, the hosted ERP systems do not automatically receive updates, new features, or capabilities. The business owner has to schedule and test the upgrades.

2.   Functionality

The hosted ERP has the functionalities that come with its legacy ERP lineage. But the cloud ERP can serve many different industries with amazing functionalities and many cloud ERP vendors are already doing it.

3.   Compliance

When it comes to serving highly regulated industries like medical device manufacturing, one has to face compliance needs that are not present in any other industrial environment. So, if you operate in such industries, you must thoroughly compare the compliance and quality support of both cloud and hosted ERP systems to get better results.

4.   Integration and Customization

The majority of the cloud ERP vendors get the advantage of the multi-tenant capabilities that their cloud platform provides to allow customers to add their own business logic and also add applications that integrate with an out-of-the-box idea. On the other hand, with a hosted ERP system, complex integration and customizations with third-party services or legacy systems require the vendor’s source code. And the source code modifications can make it very difficult for business owners to upgrade their ERP systems to new versions.

5.   Pricing

When big executives choose Cloud or Hosted ERP, they often look at the total cost of ownership. Always estimates the total cost for a few upcoming years, by including all costs like labor, support staff, and upgrade, especially when they are thinking of a Hosted ERP. The reason for doing this is that hosted ERP can be very costly. While with cloud ERP, the businesses only have to find the right vendor. Then the vendor handles all the other factors.


When you are planning to choose between the cloud-based ERP and hosted ERP, be aware of the vendors that call their product “cloud”, but it does not offer the true cloud solutions. While going for a hosted ERP system is choosing a legacy ERP system that is hosted on the vendor’s servers. So before making a decision, one must compare both these ERP systems and must see to it which system can be the perfect option for his business. The business owners must choose one as per their requirements.

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