Understanding Cloud ERP: Cloud-Native, Cloud-Hosted, or Cloud-Migrated

What is Cloud-Based ERP?

As you’re trying to choose the best ERP solution, you end up wading through a lot of marketing material that uses technical terms loosely. When a software publisher tells you their ERP solution is “cloud-based,” it’s time to ask questions. What kind of cloud capability will you actually get? Is this ERP solution offering you a true cloud-native platform, or something else?

Having worked in the ERP industry for decades and with a variety of platforms, I know that the cloud capabilities of any ERP solution will greatly affect what it can do for your business. Every business owner should know about key differences in cloud ERP systems before making a choice.

Here’s a quick overview of the different types of ERP system often labeled “cloud.” By the end, you’ll know which type of ERP platform would be the best fit for your business.

• Cloud-Native ERP Solutions
• What Are the Benefits of Cloud-Based ERP?
• What Is a Cloud-Migrated ERP System?
• What Is a Cloud-Hosted ERP System?
• Cloud-Native ERP Software Is the Future

Cloud-Native ERP Solutions

Cloud-native ERP solutions are enterprise resource planning systems that developers have designed exclusively for cloud computing. They are made for the express purpose of fully utilizing cloud computing power.

The technology that came before cloud-native ERP systems now sometimes goes under the label “traditional” ERP systems. Traditional ERP systems originated from either on-premises or legacy systems that later made a transition to the cloud. These platforms feature some cloud capabilities including microservices delivery with multi-tenant SaaS access, real-time data access, and API-first integration capabilities, while providing continuous updates without service interruptions.

Cloud-native ERP platforms leverage additional, full cloud capabilities, including elastic scalability, continuous delivery pipelines, real-time data access, and also API-first integration. Businesses that use cloud-native technology maintain agility and can be responsive to rapid market changes.

What Are the Benefits of Cloud-Based ERP?

Here are the advantages that cloud-native ERP systems can bring to your business.

• Scalability & Performance: Auto-scaling capabilities ensure smooth performance as demand grows.
• Always Current: Automated updates with zero-to-minimal downtime mean you're always using the latest version without any effort needed from your own staff.
  
• Lower Total Cost of Ownership (TCO): Reduced IT overhead, no on-premises hardware, and shared infrastructure benefits.
• Rapid Innovation: Vendors can deploy functions and fixes frequently through Continuous Integration/Continuous Deployment (CI/CD).
• Integration Friendly: API-first designs simplify connectivity to other tools, AI, and automation.
• Security & Compliance: Built-in cloud security controls, encryption, and identity management.
• Anywhere Access: Browser-based UIs and mobile support for a distributed workforce.

Cloud-native ERP systems use their flexible, agile design to help businesses expand and grow without traditional system limitations.

What Is a Cloud-Migrated ERP System?

Cloud migration refers to the process of modifying traditional ERP systems to operate in cloud environments. Migrated solutions implement partial modernization through methods that include refactoring, re-platforming, and containerization.

These solutions offer some cloud benefits but still retain their common limitations.

5 Limitations of Cloud-Migrated ERP Platforms

1. Hybrid Architecture: Legacy code often persists, resulting in inconsistent experiences and performance.
2. Manual Upgrades: Many require downtime or IT involvement to apply patches and updates.
3. Integration Barriers: Older APIs make AI and real-time integration more difficult.
4. Costly Infrastructure: Non-optimized systems often run inefficiently in the cloud.
5. Slower Innovation: Feature rollouts are slower and less frequent than those of cloud-native peers.

Cloud-migrated ERP systems have capabilities beyond on-premises software. But they fall short of the complete flexibility and operational efficiency available in cloud-native platforms.

What Is a Cloud-Hosted ERP System?

Traditional on-premises ERP software installed on cloud servers (e.g., AWS or Azure) is classified as “cloud-hosted” ERP software. The system operates just as before, but it now uses remote data center infrastructure instead of local servers.

5 Limitations of Cloud-Hosted ERP

1. Single-Tenant: Each customer instance is separate, which reduces efficiency and increases costs.*
2. No Elasticity: Limited or no support for automatic scaling or resource optimization.
3. IT Heavy: Organizations still manage patches, backups, and server maintenance.
4. Legacy Architecture: Monolithic design makes modern upgrades and integration challenging.
5. Security Risks: Often lacks secure, up-to-date identity and compliance frameworks.

Cloud-hosted ERP solutions eliminate the need for physical hardware infrastructure, but they suffer from the core limitations that come with traditional ERP platforms.

* There are isolated exceptions – for example, cloud-hosted platform SAP Business One has provided a small number of multi-tenant options. This is very rare and usually provides only basic functionality for very small businesses.

Top 25 ERP Systems by Cloud Technology Type

Cloud-Native ERP Software Is the Future

The evolution of ERP systems is moving toward cloud-native platforms, which deliver flexibility and efficiency alongside innovative capabilities. Hosted or migrated systems provide incremental improvements, but they maintain legacy burdens rather than eliminating them.

A cloud-native ERP system provides your business with faster response times, more innovative integration capabilities, and freedom from outdated technological constraints. Today's high-speed business environment makes this agility and power essential for success and growth.

Our expert team here at Stellar One has deep experience with ERP implementation and support over our many years in the industry.

Learn more about Acumatica Cloud ERP, our cloud-native ERP solution. We are a Gold-Certifed Acumatica Partner, which means our team has met the highest levels of expertise and training.

Discover how a partnership with Stellar One helps your business grow and scale through our member success story with Modloft.