For manufacturing companies with 20–100 employees, both on-premise ERP and cloud ERP can meet compliance and security requirements but they differ significantly in control, cost, and risk management. On-premise ERP offers greater control over security and validation, while cloud ERP provides faster deployment and lower upfront costs, typically shifting investment into $125–$175 per user/month environments.
The best choice depends on your compliance requirements (FDA, ISO, GxP), system complexity, and your ability to manage security and infrastructure.
ERP vs Cloud ERP (Quick Comparison)
Side-by-Side Overview
| Factor | On-Premise ERP | Cloud ERP |
| Control | Full control over systems and data | Limited control (vendor-managed) |
| Security Responsibility | Your IT provider | Shared with cloud provider |
| Compliance Flexibility | Easier to customize and validate | Depends on provider capabilities |
| Upfront Cost | Higher (hardware + setup) | Lower upfront, subscription-based |
| Maintenance | Managed internally or by MSP | Managed by provider |
| Scalability | Limited by infrastructure | Easily scalable |
Key Insight:
There is no “one-size-fits-all”. The right choice depends on your compliance needs and operational complexity.
Compliance Considerations (FDA, ISO, GxP)
Compliance is where the decision becomes critical.
On-Premise ERP (Compliance Strengths)
- Full control over:
- Audit trails
- Data storage
- System validation
- Easier to:
- Customize compliance workflows
- Document validation processes
- Align with FDA 21 CFR Part 11 and GxP
Best for:
Highly regulated environments requiring strict control
Cloud ERP (Compliance Considerations)
- Vendor provides:
- Infrastructure security
- System availability
- But you are still responsible for:
- User access control
- Data integrity
- Compliance configuration
Risk:
Many companies assume cloud = compliant (this is not true)
Key Insight:
Compliance responsibility is never fully outsourced even in the cloud.
Security Differences Between On-Premise and Cloud ERP
On-Premise ERP Security
- Requires:
- Internal or MSP-managed security
- Network protection and monitoring
- Patch management
Risk:
Security depends heavily on your IT provider’s capabilities
Cloud ERP Security
- Benefits:
- Enterprise-grade infrastructure
- Built-in redundancy
- Vendor-managed updates
Risk:
- Misconfigured access controls
- Weak MFA enforcement
- Over-reliance on provider security
Reality:
Most breaches happen due to misconfiguration, not infrastructure failure.
When On-Premise ERP Is the Better Choice
On-premise ERP is typically better when:
- You have strict regulatory requirements (FDA, GxP)
- You need full control over data and validation
- Your systems are highly customized
- You require integration with on-site production systems
Common in:
- Medical device manufacturing
- Pharma and chemical environments
When Cloud ERP Makes More Sense
Cloud ERP is often better when:
- You need scalability and flexibility
- You want lower upfront costs
- You have limited internal IT resources
- Your compliance requirements are moderate
Common in:
- Growing manufacturers
- Less regulated environments
Hidden Risks Most Manufacturers Overlook
Common Mistakes
- Assuming cloud ERP is automatically compliant
- Not validating cloud systems properly
- Weak access control (no MFA)
- No backup strategy outside the provider
- Lack of visibility into data storage and retention
Insight:
Cloud reduces infrastructure burden but not compliance responsibility.
How to Choose the Right ERP Model (Step-by-Step)
Step 1: Assess Compliance Requirements
- FDA, ISO, GxP level of regulation
Step 2: Evaluate System Complexity
- ERP integrations, production systems, customization
Step 3: Review Security Capabilities
- Internal vs provider-managed security
Step 4: Compare Total Cost
- Upfront vs long-term operational cost
Step 5: Plan for Scalability
- Future growth and system expansion
Timeline: Most manufacturers can evaluate ERP direction within 2–4 weeks.
Illustrative Scenario: Choosing Between On-Premise and Cloud ERP
A 50-employee medical device manufacturer in Los Angeles was considering moving from an on-premise ERP system to a cloud-based solution.
After evaluation:
- Compliance requirements required strict audit trails and validation
- ERP system was tightly integrated with production equipment
- Security controls needed customization
Decision:
They remained on-premise but upgraded security, backup systems, and monitoring.
Result:
Improved compliance readiness and system stability without introducing cloud-related risks.
Why Work With an IT Provider That Understands ERP Strategy
Manufacturing companies benefit from IT providers who understand:
- ERP system dependencies and integrations
- Compliance requirements (FDA, ISO, GxP)
- Security risks in both cloud and on-premise environments
- How to align ERP strategy with business operations
A specialized provider helps you choose the right approach based on risk, compliance, and long-term scalability.
Trust Signals
Fothion supports manufacturing companies that require:
- Stable ERP and production system environments
- Secure and compliant IT infrastructure
- Reliable backup and recovery strategies
- IT strategies aligned with operational growth
With over 20 years of experience, Fothion helps manufacturers make informed technology decisions.
Decide the Right ERP Strategy for Your Manufacturing Business (30 Minutes)
If you’re unsure whether cloud or on-premise ERP is the right fit, the fastest step is a structured evaluation.
Book a 30-minute call with Fothion and we’ll:
- assess your compliance and system requirements
- compare risks and benefits for your environment
- outline the best ERP strategy for your business
Book here: https://www.fothion.com/schedule-a-phone-call/
FAQs (with answers):
1.What is the difference between ERP and cloud ERP?
On-premise ERP is hosted on local servers and managed internally or by an IT provider, while cloud ERP is hosted by a third-party provider and accessed over the internet. The main differences are control, cost structure, and responsibility for security.
2.Is cloud ERP more secure than on-premise ERP?
Cloud ERP can offer strong infrastructure security, but overall security depends on configuration. Companies are still responsible for access control, MFA, and data protection, regardless of where the system is hosted.
3.Which ERP option is better for compliance (FDA, ISO, GxP)?
On-premise ERP often provides more control for validation and compliance customization. However, cloud ERP can also meet compliance requirements if properly configured and documented.
4.Is cloud ERP cheaper than on-premise ERP?
Cloud ERP typically has lower upfront costs but ongoing subscription fees. On-premise ERP requires higher initial investment but may have lower long-term costs depending on usage and infrastructure.
5.Can manufacturing companies switch from on-premise ERP to cloud ERP easily?
Migration can be complex and typically takes 1–3 months or longer, depending on data volume, integrations, and system customization.
6.Do you still need backups with cloud ERP?
Yes. Even with cloud ERP, companies should maintain independent backups and recovery strategies. Relying solely on the provider can create risks during outages or data loss events.