Cloud-Based vs On-Premise Manufacturing Software: A Comparison

Cloud-based and on-premise manufacturing software each have their strengths and limitations, and choosing between them depends on your business needs. Cloud systems are hosted by vendors and accessed online, offering flexibility and reduced maintenance responsibilities. On-premise systems, installed on local servers, provide greater control and customisation but require significant upfront investment and in-house IT management.

Key Differences:

• Cost: Cloud solutions operate on a subscription model (OpEx), while on-premise systems involve higher upfront costs (CapEx) for hardware and licences.
• Implementation Time: Cloud systems deploy faster (3–6 months) compared to on-premise systems (6–12 months or more).
• Customisation: On-premise allows deeper customisation, while cloud systems focus on vendor-supported configurations.
• Scalability: Cloud systems scale quickly with subscription adjustments, while on-premise scaling requires new hardware and longer lead times.
• Data Control: On-premise systems offer full control over data, whereas cloud solutions rely on vendor-managed security and infrastructure.
• Connectivity: Cloud systems require stable internet, while on-premise systems can function offline but are limited to local networks.

Quick Comparison:

Cloud systems are ideal for businesses prioritising quick deployment, scalability, and reduced IT demands. On-premise systems suit organisations needing full control, customisation, or compliance with strict data regulations. Hybrid models, combining both, are also gaining traction for balancing flexibility with control.

Cost Structure and Financial Impact

Cloud and on-premise systems come with distinct cost structures. On-premise solutions demand substantial upfront investments, including one-time software licences, physical servers, networking equipment, cabling, and dedicated workstations [9][12]. These systems also require server rooms equipped with cooling systems and sufficient physical space for a data centre [13]. In comparison, cloud-based systems operate on a subscription model (OpEx), typically costing between £75 and £150 per user per month [13]. This turns software expenses into predictable monthly outgoings, requiring minimal initial investment. These contrasting approaches set the stage for a closer look at upfront costs versus ongoing subscription fees.

Upfront Investment vs Subscription Pricing

On-premise systems come with significant initial costs. These include hardware, licensing fees, disaster recovery setups for secondary locations, and expenses for hiring or training IT personnel [12][13]. For instance, SQL Enterprise for fully encrypted on-premise databases starts at around £10,500 [2], while professional penetration testing ranges from £15,000 to £22,500 [14]. Additionally, implementing on-premise installations typically takes 150–200 days, compared to the 3–6 months required for cloud deployments [9][13].

The UK Government’s “cloud-first” policy has encouraged many private sector manufacturers to explore cloud solutions, reflecting a shift from large capital expenditures to subscription-based models that help conserve cash flow [12]. However, before transitioning to the cloud, it’s crucial to ensure your broadband connection can handle peak data demands. If not, you may need to invest in costly dedicated lines [10].

Total Cost of Ownership

While cloud systems often have lower initial costs, it’s essential to consider the total cost of ownership (TCO) over the long term. Typically, costs level out within 5 to 10 years [5]. On-premise solutions require ongoing maintenance, which involves either an in-house IT team or outsourced support to handle servers, security updates, and bug fixes. Additionally, physical hardware needs replacing every 3 to 5 years, leading to recurring capital expenses [9].

“The cloud SaaS model not only helps you to predict your spending more accurately but also helps to keep initial costs down due to the implementation being cheaper.” – Syscom [9]

Long-term costs for on-premise systems can escalate due to complex upgrade processes. Around 66% of mid-size businesses still use outdated ERP versions because on-premise customisations need to be manually re-applied during upgrades [16]. In contrast, cloud upgrades are automatic and designed to retain customisations, eliminating additional expenses [15]. For UK manufacturers, moving from on-premise to cloud-based ERP can lead to savings of up to 40% [14]. However, on-premise investments may sometimes benefit from UK capital expenditure grants or specific tax advantages [10].

To determine which option aligns best with your financial goals, it’s advisable for your finance team to compare the annual cloud subscription costs against the combined expenses of hardware, energy, and IT staffing required for on-premise maintenance [12].

GoSmarter costs: we offer flat price access to capabilities of our cloud-based software. This makes it easy to work out your costs in relation to your number of sites, your volume processed, etc. and it doesn’t mean you have to worry about costs changing because of employee changes.

Implementation and Deployment Timeline

The time required to implement manufacturing software can vary significantly depending on whether you choose a cloud-based or on-premise model. Generally, cloud implementations are 40%–60% faster than their on-premise counterparts [17]. For mid-sized organisations, cloud systems can typically be operational within 3 to 6 months, whereas on-premise solutions often take 6 to 12 months or more [17]. This difference largely comes down to the infrastructure demands of each model, which directly impacts both deployment speed and associated costs.

Deployment Requirements and Resources

On-premise systems come with hefty infrastructure requirements. These include purchasing physical servers, configuring networking equipment, and securing dedicated facilities - all of which demand substantial IT resources [19][20]. Organisations need an in-house IT team to manage server setup, address technical issues, and handle ongoing maintenance [1][20]. Additionally, the upfront costs for hardware can significantly inflate the deployment budget.

Cloud systems, on the other hand, sidestep these infrastructure challenges. The hosting environment is managed by the vendor, enabling instant provisioning [1]. Once subscribed, the system is ready for configuration and use, as all technical groundwork has already been handled by the provider [1][20].

“Cloud ERP tends to deploy faster because the vendor’s infrastructure is already in place; you avoid hardware procurement, server configuration, and local IT setup.” – Sabre Limited [20]

Time to Implementation

Beyond the initial setup, the go-live phase reveals further contrasts between cloud and on-premise models. Cloud systems benefit from pre-built integrations and automated data migration, which streamline the implementation process. Typical costs for cloud implementations range from £7,500 to £112,500, while on-premise solutions can reach similar figures but also require manual upgrades over time [17]. Cloud systems, however, receive automatic updates, ensuring minimal disruption and reducing the strain on internal resources [18].

That said, the speed of cloud deployment can hinge on reliable internet connectivity. Organisations with limited high-speed internet may need to invest in dedicated fibre lines or 5G to ensure smooth operations. In contrast, on-premise systems rely on local networks, making them less dependent on external connectivity [4][2]. These distinctions in deployment not only affect the timeline but also influence how resources are allocated and how quickly businesses can adapt to operational demands in the manufacturing sector.

GoSmarter implementation: different capabilities take more or less time to get up and running with and that will also be based on what you want to achieve. For instance, with our compliant steel mill certificate AI solution, if we already handle your suppliers you have a zero-configuration, zero implementation time needed for uploading documents and getting the processed PDFs or data. At the other end, if you want to use our long product cutting plan feature with it based on data from different systems and sending to your MES, it will take longer to ensure the integrations of your data are robust and correct, whilst going through a test period of manually getting the draft schedules and reviewing them, before you move to automation.

Customisation and System Flexibility

When it comes to tailoring software to match your manufacturing processes, on-premise systems provide greater control. They grant direct access to the source code, enabling the creation of custom modules that cater to specialised workflows [18][25]. This level of access is particularly beneficial for manufacturers relying on proprietary production technologies or older equipment that needs precise integration with specific machinery sensors or custom PLCs [18][25].

In contrast, cloud-based systems lean towards configuration rather than deep customisation [18]. These systems use APIs, low-code tools, and modular extensions to meet business needs while maintaining system stability. While this limits the extent to which core software can be modified, it offers operational flexibility, especially when scaling quickly - whether it’s adding users, sites, or modules as demand shifts [18][2]. This difference in customisation approaches highlights the need to consider vendor restrictions and integration challenges.

Customisation Options and Vendor Limitations

Customisation plays a key role not just in optimising workflows but also in shaping how systems evolve and integrate over time. On-premise solutions allow full control over workflow adjustments, bespoke integrations, and unique solutions. However, these deep customisations can introduce risks during software updates [7]. Updates from the vendor can render modifications incompatible, potentially requiring expensive rework.

“If your requirements include a mandate for a custom, one-off solution, an on-premises solution is your best option.” – Sung Kim, iBase-t [6]

Cloud systems, on the other hand, restrict changes to vendor-approved configurations, ensuring smoother updates [7]. Because they avoid deep modifications, they are less prone to failures during version upgrades. However, the extent to which you can customise the system is entirely dependent on what the vendor allows.

“Cloud-hosted software can be less customisable than its on-premises counterpart.” – Richard Adams, ePC [12]

Vendors often keep cloud software streamlined to maintain performance across shared server infrastructures [7]. For manufacturers with highly specific workflow requirements, this trade-off can be a significant consideration.

“If you’re looking to customise the system to your specific needs, on-premise is likely to be the better choice.” – Adam Harling, Managing Director at Netitude [7]

Before embarking on extensive on-premise customisations, it’s crucial to confirm with your provider how these changes might affect future software updates [7].

GoSmarter customisation: we offer some simple customisations of the base capability but focus more on enabling you to enact your process your way. For instance, when it comes to scrap / offcuts of metal in your business, you might want to manage it by simply weighing it all up on a regular basis to keep track of the volume, in which case the Scrap Logger is the way to match your process. Alternatively, you might want to maintain provenance of your scrap or offcuts and later generate tags for them as your scrap might be high value, or be re-usable in some way, and in such a case, you can log scrap directly in the Inventory. At this time, however, we don’t offer full customisation of the product by default but speak to us if you want to explore this.

Integration with Existing Systems

Integration with legacy systems is another area where the two approaches differ significantly. On-premise software excels in connecting with older manufacturing tools and proprietary equipment that weren’t designed for cloud compatibility [12]. With direct access to local servers and data, it becomes easier to develop custom interfaces for decades-old MES systems or specialised production machinery [12].

Cloud platforms, by contrast, generally rely on web services and APIs to integrate with modern applications. However, they often struggle with older, in-house legacy tools [12]. Legacy systems frequently use outdated or proprietary data formats, creating compatibility issues that modern cloud platforms - built on JSON or Avro - cannot easily resolve without advanced transformation layers [22]. Moreover, many legacy tools are structured for traditional transactions, making them incompatible with the distributed workloads typical of cloud-based systems [23].

That said, cloud systems shine when connecting with other modern cloud applications. Their native architectures, equipped with embedded APIs, simplify ongoing maintenance of connections between ERP and PLM systems compared to the manual integrations often required for on-premise setups [6]. Additionally, tools like Microsoft Power Apps enable manufacturers to quickly develop applications in cloud environments to address specific workflow gaps [21].

GoSmarter integration: We offer a transparent API solution that enables manufacturers to connect with their different systems. This is great for businesses with in-house IT and modern systems. We know the reality can be much more difficult whether because of time or systems so we always offer manual and bulk upload/download capabilities - you can integrate using Excel and upload data with ease.

Scalability and Business Growth

When manufacturing operations grow - whether through new production lines, additional facilities, or seasonal surges - your software must keep up. Cloud-based systems make this easier by allowing you to adjust resources quickly through subscription changes. In contrast, on-premise setups involve purchasing, configuring, and installing physical servers, which can be time-consuming and costly [14].

The difference in scaling speed is striking. With cloud solutions, you can activate new modules or user licences almost instantly [1]. On-premise systems, however, often require weeks or even months to procure hardware, install it, and configure everything [27]. For manufacturers expanding internationally or adding production lines, cloud platforms can connect new sites in weeks instead of months [18].

“If you need server power, you can adjust to adding more. With an on-premises MES, you may be stuck with the systems that you have in place.” – Sung Kim, iBASEt [6]

From a financial perspective, scaling methods also differ significantly. Cloud scaling operates as an operational expense (OpEx), meaning costs adjust with usage. On the other hand, scaling an on-premise system requires upfront capital expenditure (CapEx) for hardware and licences [3]. For manufacturers dealing with seasonal demand spikes, the cloud offers the flexibility to increase capacity temporarily, avoiding the sunk costs of underused hardware during slower periods.

Scaling Infrastructure and Resources

Cloud platforms offer a level of flexibility that on-premise systems simply can’t match. Built on microservices, cloud systems allow individual components to scale independently, whereas traditional on-premise architectures are more rigid [6].

Modern manufacturing generates enormous amounts of data, especially in fully digitised plants. Before committing to on-premise infrastructure, it’s crucial to calculate long-term storage needs - spanning five to ten years - to ensure your hardware can handle the data growth [6]. Many manufacturers only realise later that their initial investment falls short of meeting the demands of IoT sensors and production monitoring systems.

The pace of innovation also leans heavily towards cloud solutions. Leading ERP and MES vendors now focus most of their development efforts - especially for AI and advanced analytics - on cloud-based platforms, leaving on-premise systems with fewer updates and features [3].

“Customers who are going to be focusing on an on-premises or managed cloud solution long-term will eventually run out of runway in terms of innovation support.” – Joshua Greenbaum, Principal, Enterprise Applications Consulting [3]

However, before fully relying on cloud scalability, ensure your site has reliable internet connectivity. Without a strong connection, scaling resources becomes impractical. For remote or poorly connected locations, investments in dedicated fibre lines or 5G backups may be necessary [5].

This scalability also plays a critical role in managing operations across multiple sites.

Multi-Site Operations

Cloud systems shine when it comes to multi-site operations. They offer native support for multiple locations and can be accessed from anywhere via a web browser. In contrast, on-premise systems often require complex setups like VPNs or remote desktop tools to connect different sites [14].

One of the standout advantages of cloud platforms is their ability to consolidate data from multiple facilities into a single, real-time dashboard [25]. This centralised visibility is essential for strategies like lean manufacturing and just-in-time (JIT) production, where decisions at one site depend on inventory or capacity at another. On-premise systems, by comparison, often create isolated data silos, requiring custom integrations to synchronise information across locations.

The trend is clear: many large manufacturers are moving away from fragmented on-premise ERP systems in favour of unified cloud platforms. This shift reduces IT overhead and eliminates data silos [25]. By 2027, over half of organisations are expected to adopt a cloud-first approach, making cloud-native architectures critical for executing digital strategies [18].

Reliability also becomes a key factor as businesses scale:

“If you’re a $100 million manufacturer and managing your own ERP environment and you have one server blow, you’re down. That’s not the case with a multi-tenant cloud provider.” – Craig Zampa, Partner, Plante Moran [3]

Cloud providers offer built-in redundancies and disaster recovery capabilities that scale with your business - features that are often too expensive for mid-sized manufacturers to replicate with on-premise systems [3].

GoSmarter scalability: our solution uses scalable cloud principles to match demand on our systems so you never have long load times or system memory issues.

Data Control and Security

When it comes to managing your data, the choice between on-premise systems and cloud platforms boils down to control. On-premise systems give you direct, physical oversight of your data, while cloud platforms store it remotely under the care of a vendor. This difference affects everything from how encryption keys are managed to how quickly security incidents are addressed.

With on-premise systems, your IT team handles every layer of security - from physical access controls to firewall configurations. Your data stays on-site, and you can completely restrict external access. However, this level of control comes with added responsibilities, including patching vulnerabilities and monitoring for threats. You also miss out on the built-in security features that cloud platforms provide.

Cloud platforms, on the other hand, operate under a shared responsibility model. Vendors secure the infrastructure, while you manage access and configurations. Top cloud providers offer advanced security measures like 24/7 monitoring, encryption, and multi-factor authentication. However, these services often come with hefty implementation costs, ranging from £20,000 to £30,000, which can be a significant challenge for smaller manufacturers [14].

“In an on-premises environment, enterprises retain all their data and are fully in control of what happens to it, for better or worse.” – Aaron Keeports, Content Marketing Manager, Cleo [1]

The stakes are high. In 2023, 41% of small businesses experienced cyberattacks [14]. For manufacturers in industries like defence, nuclear, or oil and gas, the risks are even greater. Many of these sectors face strict contractual requirements to host data on-premise to prevent leaks of sensitive technical drawings or specifications [5]. Always review your supply chain contracts for such clauses.

This key distinction between deployment models sets the stage for deeper discussions about data ownership and compliance.

Data Ownership and Management

Under UK law, even if you use cloud services, you retain full legal ownership of your data [2]. On-premise systems allow you to manage encryption keys internally, giving you direct control. In contrast, cloud vendors typically hold the keys to manage their systems [7].

A real-world example highlights the risks of relying on cloud providers. In March 2024, McDonald’s faced widespread order processing failures in the UK, Australia, and Japan due to a cloud configuration error [12]. While cloud providers offer contractual guarantees, you are ultimately dependent on their operational reliability.

For manufacturers handling proprietary formulas, custom tooling designs, or competitive production methods, data residency is a critical factor. On-premise systems ensure your data remains within a controlled environment [18]. In contrast, cloud platforms might store your data across multiple locations, often without your explicit knowledge [5]. Always confirm the physical server locations specified in your cloud contract to meet data sovereignty requirements.

Vendor lock-in is another concern. If your data is stored in proprietary formats, switching providers can be a complex process. Some vendors do offer data exports in standard formats when contracts end, but it’s essential to verify these terms beforehand [12]. Notably, 42% of organisations in the USA have moved at least half of their cloud workloads back on-premise, often citing issues like cost and control [12]. These factors highlight the operational implications of your deployment choice.

Compliance and Security Standards

Compliance responsibilities differ significantly between on-premise and cloud systems, especially under regulations like GDPR.

With on-premise systems, your organisation is fully responsible for meeting compliance requirements. This includes conducting data protection impact assessments and managing breach notifications [24][25]. Cloud systems, however, share the burden. Vendors secure the infrastructure, while you focus on managing access and meeting regulatory standards [26].

For UK manufacturers, it’s crucial to ensure that cloud providers meet GDPR standards, particularly regarding data processing locations. Some vendors process data in the USA, which may not meet the same protection levels as UK regulations require [24]. If your vendor processes data offshore, scrutinise their compliance documentation and data transfer mechanisms.

“Some of our customers who operate in the supply chain of sensitive industries, such as the oil and gas, defence and nuclear sectors, are contractually obliged to host any software on-premise to minimise the risk of leaks of sensitive data.” – E-Max Systems [5]

The UK Government’s updated cloud-first policy in 2023 encourages public sector organisations to prioritise cloud solutions [12]. While this reflects growing confidence in cloud security, due diligence remains essential. Use the National Cyber Security Centre’s 14 Cloud Security Principles to evaluate whether a provider’s security measures align with your risk profile [28]. Look for certifications like ISO 27001 or SOC 2 as indicators of a provider’s security standards.

On-premise systems are particularly strong in audit control, allowing for tailored security protocols and detailed internal audits. This is especially important for manufacturers dealing with classified information or operating under military-grade security requirements [26]. Cloud platforms, while offering robust security tools, often operate within standardised frameworks that may not meet the specialised needs of certain manufacturers. Additionally, cloud systems depend entirely on internet connectivity. If your connection is unstable, you risk losing access to critical compliance data [24]. For areas with unreliable internet, hybrid models can provide a practical solution by keeping essential data accessible offline.

GoSmarter data: At this time, we store data only in the UK. If you have other data residency requirements, you should speak to us. We provide bulk download options and APIs to help people always own their data so you are never locked in.

Remote Access and Distributed Operations

Just like deployment and customisation, remote access plays a pivotal role in streamlining modern manufacturing processes. With cloud-based systems, you can access operations from virtually any laptop or mobile device, as long as you have an internet connection and the right credentials [2]. On the other hand, on-premise systems rely on local servers and typically need a VPN or Remote Desktop for remote access [5].

These distinctions set the stage for exploring how connectivity impacts collaboration and efficiency.

Remote Access and Connectivity Requirements

Cloud systems are entirely dependent on a reliable internet connection - if your connection fails, so does your access to manufacturing data [5]. On-premise systems, however, can continue to operate on the local network even if the external internet goes down [11]. For manufacturers located in industrial estates, where high-speed broadband upgrades are often delayed, this can be a significant obstacle [2].

“A cloud-based MES makes it easy to access applications via the Internet. Provided your internet connection is reliable, others in your organization will have greater access and visibility to the data surrounding your operations performance.” – Sung Kim, iBase-t [6]

Performance is another factor to consider. On-premise systems generally offer lower latency, while cloud systems might experience delays over wireless networks, which could impact production output, particularly for operations managing large volumes [29]. Before transitioning to cloud software, it’s essential to assess your internet infrastructure. Check both speed and reliability, and evaluate whether you might need a dedicated line or mobile dongles to maintain consistent access [2].

Hybrid and Distributed Team Support

Connectivity is just the beginning - how these systems support hybrid and distributed teams is another key differentiator. Cloud platforms are particularly effective for geographically dispersed teams, allowing real-time collaboration where multiple users can simultaneously edit documents with full traceability [2]. In contrast, on-premise systems often rely on slower, manual workflows like emailing files back and forth, which can create delays [2].

Today, around 93% of enterprises use cloud-based software or system architecture [2], and hybrid cloud adoption has surged from 19% to 57% in recent years [2]. Many manufacturers are also embracing a “two-tier” approach. This involves keeping critical production management on-premise for stability, while administrative functions like HR or finance are moved to the cloud for easier remote access [18].

GoSmarter connectivity: your team can work from the back office to the factory floor with our online solution. Being able to grab data through bulk exports also enables offline processes and analytical activities.

Maintenance and System Reliability

When it comes to operational efficiency, maintenance plays a crucial role. It directly impacts both costs and performance. With cloud-based solutions, much of the upkeep - like hardware upgrades every 3–5 years and essential security patches - is handled by the vendor. On the other hand, on-premise systems demand in-house management [6].

Let’s take a closer look at how updates differ between cloud and on-premise systems.

Automatic Updates vs Manual Maintenance

Cloud systems benefit from frequent, automatic updates - often rolled out weekly or monthly. This ensures you’re always using the latest features and meeting compliance standards without lifting a finger [3]. However, the downside is the lack of control over when these updates occur. If they happen during production hours, they could cause unexpected downtime [5]. To mitigate this, it’s wise to review your vendor’s update schedule and plan around it.

On the flip side, on-premise systems give you full control over updates. Your team decides when to implement them, allowing you to avoid disruptions during critical operations. But this flexibility comes with a drawback: manual updates are complex and often delayed, especially when they risk interfering with custom integrations [5].

“Vendors are putting their innovation efforts towards their cloud-based solutions rather than on-prem. Some innovations will be added to the on-prem version, but it’s not feasible for things like generative AI to try and add capabilities locally” – Tim Crawford, President of Avoa [3]

The frequency and control of updates directly affect the reliability and performance of your system.

Downtime and System Stability

System stability varies significantly depending on whether you choose a cloud or on-premise model. For cloud systems, reliability hinges on your internet connection. If your connection fails, so does access to critical operations [5]. In contrast, on-premise systems remain functional on your local network, even during internet outages.

That said, on-premise systems come with their own risks. A single hardware failure, such as a server breakdown, can cause major disruptions.

“If you’re a £80 million manufacturer and managing your own ERP environment and you have one server blow, you’re down. That’s not the case with a multi-tenant cloud provider” – Craig Zampa, Partner in IT Advisory at Plante Moran [3]

Cloud providers offer built-in geographic redundancy, storing data across multiple data centres. Many also back this up with Service Level Agreements (SLAs) that guarantee 99.9% uptime or better [32]. Achieving similar redundancy for an on-premise system is often far too expensive for most manufacturers.

Before deciding on a system, it’s essential to evaluate your infrastructure. If you’re leaning towards a cloud solution, ensure your internet connectivity is robust. For on-premise systems, proactive hardware management is critical to avoid unexpected failures [32]. These considerations are key to aligning your software choice with your operational needs.

GoSmarter updates: we are regularly shipping updates and improvements to the system. When there are breaking changes that will impact how a customer can perform a process or if we need to, in rare cases, take the system offline for maintenance, we will send notices well in advance.

Choosing the Right Model for Your Manufacturing Operations

When it comes to selecting the best software for your manufacturing needs, it’s all about aligning the deployment model with your unique requirements. Factors like budget, IT resources, compliance demands, and future growth plans all play a role in making the right choice. Here’s how to break it down.

Key Considerations for Selection

Start by evaluating your budget structure. Cloud software usually operates on a subscription basis, offering predictable monthly costs. On the other hand, on-premise solutions require a significant upfront investment for hardware and licences. It’s essential to decide whether operating expenses (OpEx) or capital expenses (CapEx) better suit your financial setup [2][8].

Next, look at your IT resources. If your team is small or lacks technical expertise, cloud-based systems are a smart choice since updates and maintenance are handled by the vendor. On-premise systems, however, need a dedicated technical team to manage everything from updates to troubleshooting [8][1].

Compliance and data control are also major factors. Industries like defence, aerospace, or nuclear often have strict regulations requiring on-premise hosting to ensure data stays secure. However, modern cloud providers like AWS, Azure, and Google Cloud offer advanced encryption measures that can meet even the toughest security standards [5][29][6].

Don’t forget to assess your connectivity infrastructure. Cloud systems rely on fast and reliable internet connections, whereas on-premise systems can keep running locally during outages, though remote access may be limited [2][8].

Finally, think about your customisation needs. On-premise systems are more adaptable, allowing for deeper modifications compared to the generally standardised configurations of cloud platforms [2][8].

By weighing these factors - along with connectivity and customisation requirements - you can determine the deployment model that fits your operation best.

When to Choose Each Deployment Model

Understanding the specific scenarios where each model excels can help clarify which option is right for your business.

Cloud-Based Systems

Cloud solutions are ideal for small to medium-sized manufacturers, especially those with limited IT support or multi-site operations. These systems offer speed, scalability, and cost efficiency. Deployment is quick - often taking weeks instead of months - and the subscription model keeps upfront costs low while allowing your system to grow alongside your business [2][29][34].

Take the example of Wisconsin Plastics, a company specialising in plastic injection moulding. By adopting a real-time cloud ERP system, they streamlined their just-in-time replenishment programme, cutting raw material inventory by 17.5% [33].

On-Premise Systems

For large manufacturers with robust IT infrastructure and dedicated technical teams, on-premise systems are a better fit. These businesses can manage hardware, updates, and security internally, making the higher upfront investment worthwhile [4][1].

“For organisations with stringent security protocols, on-premise is worth the additional investment and maintenance. However, for small and mid-sized companies, cloud-based or dedicated cloud servers provide ample security and scalability at a fraction of the cost.” – 3YOURMIND [29]

On-premise systems are also a great choice for manufacturers with high data volumes or low-latency requirements, as local servers eliminate the lag often associated with wireless networks. This is particularly important for real-time production monitoring [29]. Additionally, industries like defence or government contracting, which demand strict data sovereignty, often require on-premise solutions to maintain full control over encryption keys and physical server access [29][1].

Hybrid Models

For those looking for a balance, hybrid models are becoming increasingly popular. This approach combines the security of on-premise systems for sensitive data with the flexibility and scalability of cloud operations. It’s a practical solution for manufacturers transitioning between deployment models or handling a mix of sensitive and general data [2].

Conclusion

Deciding between cloud-based and on-premise manufacturing software comes down to matching the deployment model to your specific operational needs. Cloud systems are known for their quick setup, scalability, and reduced IT demands, making them a strong choice for small to medium-sized manufacturers or businesses with multiple locations. On the other hand, on-premise solutions, while requiring a larger upfront investment, provide full control over data and offer customisation options that are particularly valuable for industries with strict regulations or unique processes.

The financial considerations differ significantly. With cloud systems, costs are shifted to predictable operational expenses, whereas on-premise systems require substantial capital outlay for licences and hardware. According to E-Max Systems [5], the long-term costs of both models tend to align, which makes evaluating Total Cost of Ownership over time more critical than focusing solely on initial expenses.

Cloud systems do rely heavily on stable internet connectivity, meaning outages can disrupt operations. In contrast, on-premise systems operate independently of internet access but require dedicated technical teams to handle maintenance, security updates, and upgrades manually [2][8]. While cloud solutions dominate the market, some sectors, such as defence and aerospace, still depend on on-premise systems to meet strict data hosting requirements [5].

This dynamic has led to the growing popularity of hybrid models. These combine the security of on-premise systems for sensitive data with the flexibility of cloud solutions for broader operations. In fact, hybrid cloud adoption has surged from 19% to 57% in recent years [2]. This approach enables manufacturers to safeguard critical intellectual property while leveraging cutting-edge cloud technologies, such as AI and IoT, which are increasingly prioritised by software vendors [3]. Striking the right balance between security and operational flexibility is key.

Ultimately, your choice should be guided by a detailed evaluation of factors like cost, deployment, security, and scalability. Whether you select a cloud-based, on-premise, or hybrid solution, the priority should always be software that aligns with your regulatory requirements, growth ambitions, IT capabilities, and customisation needs, ensuring it propels your manufacturing goals forward.

FAQs

What are the key cost differences between cloud-based and on-premise manufacturing software?

The key distinction between cloud-based and on-premise manufacturing software lies in how costs are structured.

Cloud-based solutions work on a subscription model, meaning businesses pay a recurring fee. This fee typically covers software access, hosting, updates, and basic support. One of the biggest advantages of this model is its flexibility. Companies can scale their licences up or down based on their needs without having to invest in extra hardware. Over time, this can lead to noticeable savings, especially for manufacturers aiming to keep upfront costs low.

On-premise solutions, on the other hand, demand a significant initial outlay. These costs include purchasing software licences, servers, and other necessary infrastructure. Additionally, there are ongoing expenses for maintenance, upgrades, and IT staff to consider. While this setup might be suitable for larger organisations with strong IT capabilities, it often ends up being more expensive in the long term. For smaller manufacturers, cloud-based options usually provide a more budget-friendly and adaptable alternative.

How does choosing between cloud-based and on-premise manufacturing software impact data security and control?

The choice between cloud-based and on-premise manufacturing software plays a crucial role in how your data is managed and protected.

Cloud-based systems depend on the provider’s security protocols, which often include encryption, continuous monitoring, and regular updates. This setup eliminates the need for a specialised in-house IT team and offers a scalable, cost-effective solution. However, it does require placing your trust in a third party to handle your data securely.

In contrast, on-premise systems allow businesses to maintain full control over their data. They enable tailored security measures and direct oversight, making them particularly suitable for industries with stringent regulatory demands. That said, they come with higher costs, requiring dedicated IT personnel, routine updates, and significant investment in cybersecurity.

Some manufacturers are turning to a hybrid model, where sensitive data is stored on-premise, while the cloud is used for less critical tasks. This setup combines the flexibility of cloud solutions with the control of on-premise systems, striking a balance between security and operational efficiency.

What should businesses consider when choosing between cloud-based and on-premise manufacturing software?

When choosing between cloud-based and on-premise manufacturing software, it’s essential to weigh your organisation’s financial, technical, and operational priorities.

Cloud-based software works on a subscription basis, which means lower upfront costs and the ability to scale as needed. It’s a great fit for businesses seeking flexibility - users can access it from anywhere with an internet connection, and there’s no need for heavy hardware investments to expand. On the flip side, on-premise systems demand a larger initial spend but give you complete control over customisation, data storage, and performance. This makes them a strong option for companies with strict regulatory compliance or specific data residency requirements.

A few other considerations include security, where cloud providers often deliver strong, regularly updated protections, and integration capabilities, as well as the availability of IT resources to handle ongoing maintenance and upgrades. The right decision will depend on your organisation’s budget, operational needs, and long-term goals.