ERP in 2025: Making sense of on-premises, cloud and hybrid solutions

When it comes to enterprise resource planning (ERP), choosing the right deployment model is a big deal. As you juggle performance, security, compliance and cost in your organization, the decision between on-premises, public cloud, private cloud and hybrid models can make or break your business agility and innovation efforts.

Let’s dive into some key considerations that can help you, as an IT leader, make the best choice for your ERP strategy.

The current state of ERP deployment

The ERP market is more diverse and sophisticated than ever. Cloud-based solutions are challenging the traditional on-premises model, which is still relevant. Each deployment model has pros and cons, and the right choice depends on factors that include your business goals, regulatory requirements and existing IT infrastructure.

On-premises deployment

• Control and customization: On-premises ERP systems offer the highest level of control and customization. You can tailor the system to align it closely with your business processes. This model is particularly appealing to industries with complex regulatory requirements, such as healthcare and financial services, where data sovereignty and security are paramount.
• Potential limitations: However, an on-premises deployment also comes with challenges. Your initial investment in hardware, software and IT staff can be substantial. In addition, maintaining and upgrading the system can be resource-intensive, often requiring frequent downtime. Scalability is another limitation, as expanding the system to accommodate growth can be costly and time-consuming.

Public-cloud deployment

• Scalability and cost-effectiveness: Public-cloud ERP solutions, such as SAP S/4HANA Cloud Public Edition, offer unparalleled scalability and cost-effectiveness. These solutions can be rapidly deployed and scaled up or down based on business needs, making them ideal for organizations dealing with fluctuating workloads. The pay-as-you-go pricing model limits upfront costs and helps you budget more accurately.
• Security concerns: Security remains a major concern for many organizations. While cloud providers like SAP invest heavily in security measures, the shared-responsibility model means you must also act to protect your organization’s data. Industries with strict data-protection regulations may be hesitant to adopt public-cloud solutions, opting instead for private or hybrid models.

Private-cloud deployment

• Control, security and customization: These ERP solutions offer a middle ground between on-premises and public-cloud models. They provide the security and control of on-premises systems with the flexibility and scalability of the cloud. Private clouds can be hosted on-premises or in a third-party data center, so you can choose the level of control that best suits your needs.
• Cost considerations: While private clouds offer stronger security and customization, they can be more expensive than public-cloud solutions. The initial investment in infrastructure and ongoing maintenance costs can be high. However, if your organization has specific regulatory requirements or a need for high levels of customization, the benefits often outweigh the costs.

Hybrid deployment

• Flexibility and complexity: Hybrid ERP solutions combine the best of on-premises and cloud models, offering you the flexibility to choose the right deployment for each application or workload. This model is gaining traction as organizations seek to balance control and flexibility. For example, critical applications with strict regulatory requirements can be hosted on-premises, while less sensitive applications can be moved to the cloud.
• Complexity: Hybrid deployments can be complex to manage. Integrating on-premises and cloud systems requires careful planning and coordination regarding data flow and system interoperability. Also consider the potential for increased security risks and the need for robust governance and compliance frameworks.

Pitfalls to avoid in ERP deployment

A common mistake is failing to align your ERP deployment strategy with your overall business goals. A deployment model that does not support your digital transformation objectives may result in inefficiencies and missed opportunities.

Also, ERP deployment is both a technical and a change-management challenge. Don’t underestimate the impact on your workforce — if you fail to provide adequate training and support, you’re likely to face resistance and low adoption rates. Equally, be careful not to underestimate the project duration and scope parameters.

While cloud solutions may offer lower upfront costs, the total cost of ownership (TCO) can vary significantly based on customization, integration and long-term scalability needs. Carefully evaluate all cost factors.

Then, data security and compliance are always critical considerations. Your chosen deployment model must meet all regulatory requirements and have appropriate security measures in place to protect your sensitive data.

3 strategic considerations to keep in mind

1. Digital transformation goals: ERP deployment is a key component of your organization’s digital transformation strategy. Your preferred deployment model should support your goals for process automation, data analytics and customer engagement.
2. The regulatory landscape: The regulatory environment can significantly influence your deployment decisions. Consider industry-specific regulations and data-protection laws when you’re choosing a deployment model.
3. Organizational readiness: Your organization’s readiness for change is a critical factor in ERP deployment. A thorough assessment of your IT infrastructure, workforce skills and cultural readiness can help to identify potential challenges and pave the way for a smooth implementation.

These considerations were top of mind when the Royal Eswatini Sugar Corporation, a major sugar producer in Southern Africa, partnered with SAP and NTT DATA to modernize their IT infrastructure with an SAP S/4HANA public-cloud migration.

Among other benefits, moving to the cloud environment has freed up capital by cutting down on the infrastructure they need for their ERP system. Implementing best practices and aligning with public-cloud standards have further reduced their long-term costs.

And, because regular updates and innovations are included in their managed cloud solution, they can now keep their system up to date without increasing TCO.

NTT DATA’s approach to ERP deployment

We understand the complexities of ERP deployment. Our PhaseCONVERT methodology provides a structured approach to assessing, planning, implementing and supporting these deployments.

• ALSO READ → NTTDATA’s PhaseCONVERT eases SAP S/4HANA Cloud migration

We work closely with you to understand your unique business requirements so we can recommend the deployment model that best aligns with your goals. We start with a comprehensive assessment of your business processes, IT infrastructure and regulatory requirements, which lays the foundation for a successful deployment.

Next, our planning phase involves developing a detailed roadmap for ERP deployment, including a timeline and strategies for resource allocation and risk management. We also provide guidance on change management and user adoption.

Then, we apply our SAP expertise to configure and customize the ERP system for your organization, and deploy it on time and within budget.

After implementation, our ongoing support services — including maintenance, training and performance optimization — ensure that the system continues to meet your changing business needs.

Make light work of the complexity

ERP deployment is not a one-size-fits-all exercise. Only by understanding the trade-offs and aligning your deployment choice with your business strategy can you unlock the full potential of your ERP system.

We’re committed to helping you navigate these complexities and make an informed decision. Whether you’re considering a new ERP deployment or reevaluating your current strategy, we are here to guide you every step of the way.

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