What Are the Key Differences Between Cloud-Based and On-Premise General Ledger Software?

Introduction: The Fundamental Architectural Choice

In the digital age, one of a company's most important decisions is where it keeps its financial heart — the general ledger. This decision between cloud and on-prem is not just an arbitrary check box as you might believe; Instead, it’s a strategic decision that can have serious implications for your cash flow, your IT resources, your security posture – even the speed at which the business can bring new products to market.

The traditional way of purchasing on-premise software is becoming increasingly outdated – as the cloud comes to the ascendancy – but it still serves a role in some cases. It is important to know what separates these two models so that you can make an informed decision, one that fits your company’s style, available resources and long-term vision. Let's dissect the key differentiators.

Defining the Two Models

Cloud-Based General Ledger (Software as a Service): The vendor hosts software for users who access the system using a web browser and an internet connection. You pay a subscription fee (usually on a per-user, per-month basis).

Client-Server GL: This product is hosted on your company's own in house servers and PCs. And you pay a large, one-time perpetual license fee plus annual maintenance support fees.

Key Features Compared in Detail

Cost Structure and Financial Impact

Cloud-Based (OpEx - Operational Expenditure):

Pros: Fixed monthly or annual subscription fees. Low monetary investment needed as high-priced server hardware or software licenses are not required to be bought. Usually the subscription includes support, updates and security fixes.

Cons: It's a recurring cost. Over time (say 7-10 years) the sum total of annual subscription fees may surpass those for an once at a time purchase of an on-premises license.

On-Premise (CapEx - Capital Expenditure):

Pros: One-time license fee can be capitalised as an asset. Thereafter, you are looking at much reduced recurring costs (maintenance and free water after a few months).

Cons: Very expensive up front cost for licensing, servers, networking and implementation. You pay the full cost of IT infrastructure such as power, cooling and physical security.

IT Infrastructure and Maintenance

Cloud-Based:

Pros: The vendor takes care of all server maintenance, hardware upgrades, security patches and backups. This relieves your IT staff of mundane upkeep so they can concentrate on strategic priorities.

Cons: You can't control the timing of maintenance (updates) as they're pushed out by the vendor.

On-Premise:

Pros: Enjoy full control of the IT environment, including when updates will take place and the exact server configuration.

Cons: Your internal IT staff must install updates, troubleshoot server problems, manage backups and security. This calls for a highly specialised IT team.

Accessibility and Mobility

Cloud-Based:

Pros: Can be accessed anywhere with an Internet connection on any device (computer, tablet, phone). This is great for distributed teams, multiple offices, and executives who want to dive into financial data on the go.

Cons: Speaking multimedia performance is based on a reliable internet connection.

On-Premise:

Pros: It may charge faster since the software is operating on your local network.

Cons: Can usually only be accessed on the office network. Access is also remote, meaning users need to establish and secure a Virtual Private Network (VPN), which can be more cumbersome and not as user-friendly.

Security and Data Control

Cloud-Based:

Pros: Cloud vendors that are well respected need to invest in enterprise-level security, something most SMBs could never afford on their own. That includes options for encrypting data (both in transit and at rest), SOC 2 compliance and locked-down physical data centres.

Cons: Your data is on servers located somewhere outside your direct physical control, which can be an issue, especially for businesses in heavily regulated industries that have unique data sovereignty requirements.

On-Premise:

Pros: Full physical control of your own servers and data. You dictate all security protocols.

Cons: Your IT department assumes the full responsibility of security, ranging from setting up firewalls to detection and prevention. A shortage of internal knowledge can lead to dangerous security holes and deficiencies.

Updates, Upgrades, and Scalability

Cloud-Based:

Pros: The vendor is continuously updating adding new features and updates without you having to lift a plank via automatic deployment. The system is naturally scalable (add users or process more data without needing new hardware).

Cons: You can’t control when you get new updates and will need to adjust to changes in the user interface or functionality.

On-Premise:

Pros: You decide if and when to apply updates and upgrades.

Cons: Upgrades are typically costly, infrequent and need to be installed manually. There is no way of horizontally scaling the system without getting more servers in there.

Intersoft ERP The Modern Cloud Advantage:

Intersoft ERP is a cloud-native solution and we truly believe this model delivers the most power, security, and value to the great majority of today's businesses. We manage all operations including IT infrastructure, security, and updates - so you can get up & running with a system that can be:

Easily available: Your squad can get hold of vital financial information from anywhere, increasing agility and intelligent choices.

Safe and Sound: We use military-grade protection for your data at the same level you would expect from a bank.

Up-to-date: You gain from ongoing innovation and further developments without interruptions or expensive upgrading projects.

Scalable: Our platform can support your business as it grows, giving you a base to build on over the long term without an unnecessary platform overhaul.

Conclusion

The decision between cloud and on-premises general ledger software is the choice of agility vs full control. While on-premise solutions provide ultimate control for those with the IT resources to sustain such service offerings, cloud options allow superior access with reduced upfront costs and freedom from IT upkeep. And for those businesses looking to simplify operations, enable a modern workforce, and concentrate on growing instead of IT efforts – a cloud general ledger such as Intersoft ERP is the strategic route forward.