Types of ERPs: How to choose the best fit for your business

As a business scales to serve customers, grow revenue, and increase profits, it often requires new tools and technology. Growing companies need different types of enterprise resource planning software (ERP) solutions to help connect disparate business applications, automate back-office workflows, and bring greater visibility to operations across the organization.

Selecting the right ERP for your business will help you streamline business operations across departments and geographies, improve decision-making, and create greater value for your business and your customers. 

You can choose three types of ERP software options by deployment type: on-premise, cloud-based, or hybrid. Plus, there are ERP solutions for small and mid-market businesses, as well as enterprise-level corporations, making this a versatile option for all.

Jump to:

• On-premise ERP
• Cloud ERP
• Hybrid ERP
• Types of ERP systems by size
• Industry-specific ERP systems
• Navigate midsize business challenges and opportunities
• Types of ERP FAQ

On-premise ERP

Best for: Businesses that want full ownership and management of their data and systems, especially those dealing with highly sensitive data. 

This ERP type gives companies complete control of their software, hardware, and stored data by storing everything at the company’s location versus the cloud or an off-site location. This allows the business to manage all critical aspects of its day-to-day operations, like data security, product planning, sales, and marketing, in one place at its discretion. 

The pros of on-premise ERP include: 

• Complete control: Businesses have full autonomy over their software, hardware, and data. 
• Scalability: The system can be scaled up or down as needed to accommodate changes in business requirements.
• Customization: On-premise ERP can be highly customized to fit specific business processes and workflows.

The pros of on-premise ERP include: 

• High initial investment: Implementing an on-premise ERP system requires a significant upfront investment in infrastructure.
• Ongoing maintenance costs: Maintaining an on-premise system involves ongoing costs for upgrades and updates. 
• Limited accessibility: Access to the system is typically limited to employees within the company's physical location.

Note that since the entire infrastructure is hosted in-house, you’ll need to hire an IT team with extensive knowledge of how on-premise ERP implementation works. 

Many industries use this type of ERP infrastructure, including:

• Finance
• Healthcare
• Government entities
• Manufacturing

Cloud ERP

Best for: Small and medium-sized businesses prioritizing cost-effectiveness or needing rapid implementation. 

Quite the opposite of an on-premise ERP, a cloud ERP is not hosted on-site. It’s fully hosted and managed by a third-party vendor. This means companies access these ERP systems online rather than installing hardware on-site. Industries that favor utilizing cloud ERP include:

• Small and medium-sized businesses
• Startups
• Remote-work businesses

The pros of cloud ERP include: 

• Accessibility: Users can access data from anywhere with an internet connection.
• Maintenance-free: The vendor handles maintenance, storage, security, and upgrades.
• Cloud-based: No need for on-premise hardware or software.

The cons of cloud ERP include: 

• Internet dependency: Requires a reliable internet connection.
• Vendor control: Dependence on the vendor for updates and support.
• Data security concerns: Potential security risks associated with cloud storage. 

Note that with cloud ERP you’ll still have key accounting features in a cloud-based ERP.

Hybrid ERP

Best for: Businesses with an existing on-premise ERP looking to transition to a cloud ERP, or businesses needing a mix of control and flexibility. 

If you’re looking for the best parts of on-premise ERP and cloud infrastructures, why not pick both with a hybrid ERP option? These types of ERP systems combine on-premise and cloud-based infrastructures. Businesses that prefer a hybrid ERP include:

• Financial services
• Healthcare
• Manufacturing
• Government agencies 

The pros of hybrid ERP include: 

• Data control: Businesses maintain control over their most sensitive data and processes.
• Security: Data stored on-premises can have more stringent security measures.
• Existing infrastructure leverage: Businesses can utilize their existing on-premise infrastructure.

The cons of hybrid ERP include: 

• Complexity: Managing both on-premise and cloud components can introduce complexity.
• Integration challenges: Ensuring seamless data transmission and integration between the on-premise and cloud environments can be challenging.
• Vendor lock-in: Reliance on a third-party cloud provider can create vendor lock-in.

Note that if you have an existing on-premise ERP that you’d like to convert to a cloud-based service, using the hybrid model helps to bridge that gap for a smooth transition.

Types of ERP systems by size

There are three different types of ERP systems by size: small business, midmarket, or enterprise ERP. 

Small businesses don’t need the extensive offerings of other common ERP systems. Conversely, a large enterprise business wouldn’t benefit from the limited customization and reporting that a small business ERP offers.

Small business ERP

Best for: Small businesses that want seamless business function integration. 

While ERP was once considered a solution only for enterprise-level businesses, small businesses can benefit significantly from small-business ERP systems. This infrastructure allows you to manage functions like finance, HR, inventory management, and accounting in one system, undoubtedly making your day-to-day operations a breeze.

A small business ERP can help companies:

• Increase profitability by improving efficiency
• Enhance customer service by streamlining order processing
• Make better decisions by providing real-time data 

Since small businesses often don’t have a giant team of IT techies, these ERP systems generally have a user-friendly interface that is easy for non-technical users to operate daily. Small business solutions are often more affordable but less customizable than enterprise-level ERP system types. They offer streamlined modules that are simplistic but hyper-focused on small businesses. 

Midmarket ERP

Best for: Midsized businesses that require a more sophisticated version of a small business ERP. 

Midmarket ERP solutions are a step above their small business counterparts. They are best for companies with a workforce between 100 and 1,000 employees and contractors that need to integrate multiple business functions, such as sales, HR, and general operations. 

A midmarket ERP can help companies:

• Identify areas across the company for improvement
• Streamline order processing and inventory management
• Improve efficiency and reduce operating costs 

These common ERP systems can accommodate rapidly growing companies and can be customized for specific industries like retail or healthcare. And while they are more affordable than enterprise-level options, they still require a decent IT budget to operate correctly. They have more modules available than small business ERP offerings, but they are not as complex as those at the enterprise level.

Enterprise ERP

Best for: Large companies with complex operations and extensive IT resources. 

An enterprise-level ERP is the best option for large organizations with thousands of employees to manage their workforce. This option is more robust than small business or midmarket ERP systems and is built to tackle complex operations. 

Enterprise ERP can help companies:

• Integrate several high-level business functions like accounting, finance, sales, and operations. 
• Easily comply with industry standards. 
• Pinpoint opportunities for improvement by providing a birdseye view of the business.

What sets this ERP solution apart from other ERP choices is how extensively they operate. They can easily work across different geographic regions and handle complex supply chain operations. Because of this, enterprise ERP systems offer (and require) highly specific customization options, making them a premium option. These ERP solutions have a comprehensive offering of modules, some of which can be highly complex and technical.

Industry-specific ERP systems

An ERP comes loaded with end-to-end modules that include vital functions like accounting, payroll systems, human resources, customer relationship management, and more. A grocery store probably won’t have the same need for a supply chain management module as an auto manufacturer. But, a retailer will have a stronger appetite for an inventory management system than a construction firm.

• Manufacturing ERP systems should focus on purchase order management, production planning, subassemblies and parts management, and advanced inventory features.
• Retail ERP systems should have features for easy pricing management, integrated inventory management, customer relationship management, and customer and business intelligence. 
• Healthcare ERP systems must focus on patient management, clinical workflow management, human resources, and regulatory compliance. 
• Financial Services ERP systems should have features dedicated to accounting, risk management, data privacy, and wealth management services. 
• Nonprofit ERP systems should be calibrated for compliance, have advanced donor management, and have a high data security standard.

How to pick the right ERP system

Every organization's path to profitability differs. Different types of ERP systems have pros and cons, and not every ERP solution is best for every business. 

Before deciding on a new business management software, consider:

• The size of your business and the complexity of your business activities
• The investment required vs. expected time-to-ROI
• Internal enthusiasm and resources to migrate systems
• Potential impacts on the employee and customer experience
• Scalability factors for when your business grows or changes
• The level of customization needed to match your business’s needs
• Ongoing costs for maintenance, support, and upgrades
• The intricacy of the user interface concerning the team using it
• Vendor alignment with your business's core values

Carefully considering the pros and cons of ERP software solutions can help you choose an option that aligns with your current business needs and future growth potential.

Navigate midsize business challenges and opportunities

No one knows the intricacies of your business better than you and your team. Focus on the accounting software for medium-sized businesses that will help your company make more informed financial decisions and efficiently support your business growth. There are many benefits of ERP software—unlock your business’s full potential by exploring your options today. 

If your business is more complex, consider Intuit Enterprise Suite, which helps you manage multiple entities and project-based accounting—all with tailored support.

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