ERP Migration:
Beyond the Cloud vs On-Premise Debate
In 2021, Gartner analysts predicted that more than 85% of organizations would embrace a cloud-first principle by 2025 and would not be able to fully execute their digital strategies without the use of cloud-native architectures and technologies. Now, in 2025, that prediction is becoming a reality. Yet for small and medium-sized businesses (SMBs), this overwhelming trend toward cloud adoption shouldn’t overshadow a critical question: What deployment model will best serve your unique business needs and strategic goals?
The answer isn’t found in following the crowd, but in understanding how each option aligns with your company’s specific circumstances, growth trajectory, and operational requirements. While the cloud revolution has transformed enterprise software accessibility, the decision between cloud and on-premise ERP deployment requires careful consideration of multiple factors that go far beyond current market trends.
The Cloud Migration Wave: Understanding the Numbers
The statistics paint a compelling picture of cloud adoption momentum. Small and medium-sized businesses (SMBs) are projected to allocate more than half of their technology budgets to cloud services in 2025, representing a fundamental shift in how businesses approach technology infrastructure, according to CloudZero’s analysis of current market trends. This isn’t just about following trends but reflects real business drivers.
Supporting this trend, Gartner’s research shows that by 2025, 51% of IT spending across application software, infrastructure software, business process services and system infrastructure markets will have shifted from traditional solutions to the public cloud, compared to 41% in 2022. In 2022, more than $1.3 trillion in enterprise IT spending was at stake from the shift to cloud, growing to almost $1.8 trillion in 2025.
For SMBs specifically, the cloud represents accessibility. In 2022, 57% of SMB workloads and 56% of SMB data resided in public clouds, with a further 6% of each planned to move into the cloud in the next 12 months, according to AAG IT Support’s analysis of cloud computing trends. This means that by 2023, approximately 63% of SMB workloads were hosted in the cloud.
Why SMBs Are Choosing Cloud ERP Solutions
Cost-Effectiveness and Predictable Expenses
Cloud ERP solutions fundamentally change the financial equation for SMBs. Traditional on-premise systems require substantial upfront capital investments in hardware, software licenses, and IT infrastructure. Cloud solutions operate on subscription models, converting capital expenses to operational expenses and providing more predictable monthly costs.
Cloud ERPs offer a cost-effective alternative with lower initial investment, often operating on a subscription-based model. This allows SMBs to access advanced ERP features without a significant financial burden. For growing businesses with limited capital, this accessibility can be transformational.
Scalability That Grows with Your Business
Cloud ERPs are inherently scalable, allowing SMBs to seamlessly adjust their operations as they grow. This flexibility ensures that the ERP system evolves in harmony with the business, accommodating increased data, users, and complexity. This scalability advantage becomes particularly valuable for SMBs experiencing rapid growth or seasonal fluctuations.
Enhanced Collaboration and Real-Time Access
Modern business demands real-time collaboration across locations and devices. Cloud ERPs facilitate seamless collaboration by providing a centralized platform accessible to stakeholders across the supply chain. This fosters improved communication, transparency, and agility in responding to market demands.
The remote work revolution has only amplified these benefits. Cloud-based systems enable your team to access critical business data from anywhere with an internet connection, supporting hybrid work models and improving overall operational flexibility.
Reduced IT Overhead and Automatic Updates
For SMBs with limited IT resources, cloud ERP solutions eliminate many traditional infrastructure management burdens. Software updates, security patches, and system maintenance become the vendor’s responsibility, allowing your team to focus on core business activities rather than technical administration.
for IT resources to execute data redundancy, data replication and disaster recovery procedures for additional cost savings.
The Continued Case for On-Premise Solutions
Despite the cloud momentum, on-premise ERP systems remain the right choice for certain SMBs, particularly those with specific requirements that cloud solutions may not adequately address.
Enhanced Security and Control
For businesses in highly regulated industries or those handling sensitive data, on-premise solutions can provide greater control over security protocols. Private cloud deployment provides enhanced security features, as the infrastructure is dedicated to a single organization. It allows for greater control over security protocols, data access, and compliance with industry regulations.
Some SMBs prefer maintaining physical control over their data and systems, especially when dealing with proprietary processes or intellectual property that they consider too sensitive for cloud storage.
Customization and Integration Flexibility
On-premise solutions often offer greater customization possibilities for businesses with unique operational requirements. Companies with complex, industry-specific processes may find it easier to modify on-premise systems to match their exact workflows.
Network Independence and Performance
Businesses in areas with unreliable internet connectivity or those requiring consistent high-performance access may benefit from on-premise solutions. These systems don’t depend on internet connectivity for core operations, ensuring business continuity regardless of network issues.
Making the Right Decision: Key Considerations
1. Focus on Business Fit First
Application fit and implementation partner choice are the most important decisions you will make to ensure ERP system success. Technology deployment is secondary. This perspective from Net at Work emphasizes that your deployment decision should follow, not lead, your ERP selection process.
Before choosing between cloud and on-premise, clearly define your business requirements, growth projections, and operational priorities. The best ERP system is the one that aligns with your business processes and strategic goals, regardless of its deployment model.
2. Evaluate Total Cost of Ownership
Compare the cost of ownership over a reasonable period of time – 5 to 7 years, for example – to see the true comparison of your total costs. Consider not just subscription fees or licensing costs, but also implementation expenses, training costs, ongoing support, and potential productivity impacts during transition.
3. Assess Your IT Capabilities
Honestly evaluate your organization’s IT expertise and resources. If you have limited technical staff, cloud solutions may provide better long-term value. However, if you have strong IT capabilities and prefer maintaining direct control, on-premise solutions might align better with your operational model.
4. Consider Your Growth Trajectory
Fast-growing SMBs often benefit from cloud solutions’ scalability, while stable businesses with predictable needs might find on-premise solutions more cost-effective over time. Consider where your business will be in three to five years, not just your current state.
Function-Specific Solutions: Tailoring Deployment to Business Needs
Many SMBs are discovering that hybrid solutions offer optimal flexibility. 89% of businesses report using multi-cloud solutions, and this approach is increasingly extending to ERP deployments.
Hybrid ERP approaches might involve cloud-based financial modules for accessibility and collaboration, while maintaining on-premise inventory or manufacturing modules for performance or security reasons. This strategy allows businesses to optimize each function according to its specific requirements.
Implementation Success: The Partner Advantage
Regardless of your deployment choice, implementation success depends heavily on your partner selection. A 2023 survey of 1,500 retailers, manufacturers and distributors by StackPlan found businesses that hired a software consultant to implement their new ERP or business system achieved a success rate of 85%.
ERP migration can be a complex process, but partnering with experienced specialists can significantly improve outcomes. Organizations like Cloud at Work, which specializes in hosting Sage applications, demonstrate how deep application expertise combined with cloud infrastructure knowledge creates superior results. Cloud at Work’s approach exemplifies the value of collaborating with partners who understand both the technical and business aspects of ERP systems. Success stories like Midway Industrial Supply, which achieved significant efficiency gains, with a 25% increase in operational efficiency across all processes after migrating to Acumatica Cloud ERP, demonstrate the transformative potential of well-executed implementations.
Current Market Innovations Driving Change
The ERP landscape continues evolving rapidly, with artificial intelligence and machine learning integration becoming standard features. According to IDC research, AI technology will be inserted into the processes and products of at least 90% of new enterprise apps by 2025.
More than 65% of organizations believe AI is critical to their ERP systems, according to NetSuite’s analysis of current market trends, and these advanced capabilities are increasingly available in both cloud and on-premise deployments. Modern ERP systems offer predictive analytics, automated workflows, and intelligent insights that can transform business operations regardless of deployment model.
Looking Forward: Preparing for Tomorrow’s Needs
As SMBs scale and take on complexity, they begin to understand that their current technology and overall approach may not be well-suited to support their next steps and strategic vision. The key is selecting an ERP solution and deployment model that not only meets today’s needs but positions your business for future growth and innovation.
Consider emerging technologies like IoT integration, advanced analytics, and mobile-first interfaces when evaluating your options. Both cloud and on-premise solutions are evolving to support these capabilities, but their implementation approaches and timelines may differ.
Making Your Decision with Confidence
The choice between cloud and on-premise ERP isn’t about picking the “right” or “wrong” option, it’s about selecting the approach that best serves your business goals, operational requirements, and growth strategy. When done right, the system being deployed in the cloud is invisible to the system users, meaning your deployment choice should enhance, not complicate, your business operations.
Whether you choose cloud’s accessibility and scalability or on-premise’s control and customization, success depends on thorough planning, careful vendor selection, and expert implementation support. The most important decision isn’t where your ERP runs, but how well it integrates with and enhances your business processes.
The future belongs to businesses that make informed, strategic technology decisions aligned with their unique needs and goals. Your ERP migration—whether to cloud or on-premise—represents an opportunity to transform operations, improve efficiency, and position your business for sustainable growth.
Ready to explore how you can transform your business operations?
Contact us today for a complimentary Business Health Assessment. Our experienced consultants will help you evaluate your options, understand your requirements, and develop a strategic roadmap for ERP and hosting success that aligns with your business goals.
