The difference between cloud-based and on-premise WMS

In this post, you’ll learn about the difference between the two types of WMS, the benefits and drawbacks of each, and finally, you’ll get some guidelines to help you understand when one makes more sense than the other, so you can make the right decision for your business.

What is the difference between cloud-based and on-premise WMS?

The difference between a cloud-based and an on-premise warehouse management system (WMS) primarily lies in where and how the systems are hosted and maintained. A cloud-based WMS is hosted on external servers and accessed via the internet, providing flexibility, scalability, and lower startup costs. However, it requires a stable internet connection and involves ongoing subscription fees.

On the other hand, an on-premise WMS is installed locally on the company’s own servers, giving full control over data and systems as well as independence from the internet. However, it comes with higher startup costs, greater maintenance responsibilities, and scaling can be more expensive.

The difference between the two solutions might seem small and insignificant, as it can be boiled down to whether hosting is done via external or internal servers. However, this opens up significantly different advantages and disadvantages, which is why it’s important to consider these before deciding which direction your business should take.

Cloud-Based WMS

Advantages

• Scalability: Cloud-based systems are generally highly scalable. Companies can easily adjust the system according to growth or seasonal fluctuations without large investments in hardware or system updates.
• Flexibility and accessibility: With access to the system via the internet, employees can work from any location, offering great flexibility.
• Lower initial costs: Subscription-based models reduce the need for large capital investments upfront, so you’ll experience lower costs to get started with the system.
• Quick implementation: The implementation of a cloud-based WMS is often faster, as there is no need for extensive hardware installations.
• Automatic updates: The provider handles updates and maintenance, ensuring that the system is always up to date with the latest features and security measures without requiring an IT resource.

Disadvantages

• Dependence on internet connection: A stable and fast internet connection is necessary to ensure system performance and availability.
• Security concerns: For some, there may be a sense of insecurity associated with having data hosted externally, as it can feel like having less control over the data.
• Ongoing costs: While initial costs are low, ongoing subscription fees can become significant over time. This can depend on the subscription type offered by the provider, for example, whether the price is based on users or functionality.

On-Premise WMS

Advantages

• Control over data: Companies have full control over their data and systems, as everything is hosted on their own servers and not accessible elsewhere.
• No dependence on internet: On-premise systems don’t require a constant internet connection to function, so the system can operate fully even if offline.
• Customization: Companies can customize the system to their specific needs without waiting for the provider’s approval or schedule.

Disadvantages

• Higher initial costs: Installing hardware and software can require significant monetary investments for both the system provider and IT consultants.
• Maintenance and updates: The company is responsible for maintenance, updates, and security, which can require dedicated IT resources.
• Scalability: Scaling an on-premise system can be costly and time-consuming, often involving the purchase of additional hardware, software licenses, and IT resources.

It’s not always clear which solution to choose and when. Some advantages may weigh more heavily for certain companies, while some disadvantages may be deal-breakers for others. However, there are some general guidelines that can be drawn from the various advantages and disadvantages, helping to point you in a clearer direction toward either a cloud-based or on-premise WMS.

When does it make sense to choose a cloud-based vs. an on-premise WMS?

Cloud-based WMS

Small to medium-sized businesses:
Cloud solutions are ideal for companies with limited IT resources and capital for large initial investments. A cloud-based WMS usually doesn’t take much time to get up and running and doesn’t involve significant costs, as it often only requires a software license (subscription) and possibly a small one-time fee for training, system setup, or similar.

Companies needing flexibility:
If your employees work from different locations or need access to the system remotely, cloud solutions are optimal. With a cloud solution, the system is always available to any employee with access, whether they are on the go, in another country, or elsewhere.

Fast-growing companies:
Cloud-based WMS can easily scale as the company grows without significant additional costs. It’s not necessary to hire a resource to update the system as the company grows. A cloud-based WMS will be continuously updated by the provider and often offers the possibility of add-ons if the company has additional needs.

On-Premise WMS

Large companies:
Large companies with dedicated IT departments can benefit from the control and customization that on-premise solutions offer. The company will have the opportunity to design the system specifically to fit its workflows and needs.

Companies with strict security requirements:
If your company has strict security requirements or handles sensitive data, on-premise solutions may be preferable. Here, the company has full control over its data and the security measures in place.

Stable operations:
Companies in areas with unstable internet connections may experience better performance and reliability with an on-premise system. Companies that operate in locations where internet connectivity may be inconsistent can benefit from always being able to access the system offline with an on-premise system.

The choice between cloud-based and on-premise WMS depends on several factors, including the company’s size, budget, security requirements, and need for flexibility. By carefully considering these factors, you can make an informed decision that supports your company’s inventory management needs now and in the future.