The Difference Between Hosted and Cloud Computing for ERP Software

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Everyone seems to have their own definition of cloud and hosted deployment options for business software.   Both options are accessed through the Internet.   To me they are very similar – hosted is off premise and is accessed through an Internet connection.  They are really both one in the same; Cloud applications are hosted off premise and accessed through an Internet connection.   However, as simple as this may sound there are many variables depending on whom you are talking to or what you are reading.  Here is my definition based on years of working for an IT services company that also sells business software.

Hosted applications are off site and are are typically something a business owns as an asset.  The software was purchased and installed on a remote server.  The software is accessed through a VPN (virtual private network), Remote Desktop/Terminal Services or Citrix.  Most line of business applications are still considered client/server.  This requires the software client to be installed on a workstation and is accessed through a client (workstation) link such as remote desktop, etc.  The client or workstation installation is done on the hosted server and is set up by person or profile.  These software applications are not typically web enabled and therefore require the network infrastructure needed to run the application such as a Terminal Server.

Cloud applications are in my mind any applications that are web-enabled, which means you do not need the client (workstation) installation.  Only a server installation is needed and of course a device with an Internet connection for the end-user.   No client installation is needed.  No need to log into a program like Remote Desktop first.   A lot of technology and work goes into taking an application relying on a workstation to a true web-enabled software that only needs an Internet browser to function.  Many line of business applications are adding this functionality to their offering.   Some products like Dynamics GP 2013 will be offering a web-based Internet accessed option and/or a client installed on the workstation.   What this means is that I could access my Dynamics GP through the Internet at home or if I am in the office I could use it on my workstation or conversely use GP through the Internet at the office, etc.  As a business owner I can decide which option is best for my business based on advice from a trusted IT vendor.

In the case of Dynamics GP 2013 this would be my interpretation of the deployment options:

SaaS, Cloud and Hosted Options for Dynamics GP 2013

To further complicate matters there are cloud options:  Public, Private or Hybrid.  I found this article from a Microsoft employee, Arun Rakwal  that explains the public vs private cloud in a single image.  If you have a combination of the two depending on the application then we would call it a Hybrid Cloud.  A good example of a hybrid environment would be running Outlook on your desktop with Microsoft CRM as a Saas and Office 365 for your productivity tools such as Word, Excel, etc.

public and private cloud descriptions

The biggest concern any business owner or decision maker should have is this:  Are you willing to run your business through an Internet connection?  What if your Internet goes down at the office?  If your backup plan for an outage is to send folks home to work, then please be sure that, whatever application you decide on, everyone that will need remote access is set up properly.   I would also have them test this connection and access from home prior to an emergency.    One way to get around an Internet outage is to have a redundant connection.  For example, we have a T1 with CBeyond.  We also have a backup connection with Time Warner.  You can get a much cheaper redundant option just to keep your critical staff working, but maybe not so great on the performance.  Of course, this all depends on the thresholds needed for your business.

The other concern I  would have as a business owner is validating at least once a week or a month that your off-site backup is happening at least daily and does contain a full server backup.   I would be asking my IT service provider for a backup review of my data just to be sure I am really getting a backup… this would be required regardless of my application location; hosted or cloud.  Don’t go cheap on your backup solution.

More resources:
The Economics of the Cloud by Microsoft
The Difference Between Virtualization and Cloud Computing by CIS

Custom Information Services (CIS) is a Microsoft Dynamics GP reseller in North Texas and has specialized in selling and implementing network services, manufacturing and accounting software to mid-sized companies for over 20 years. You can contact me at or at 817-640-0016.

1 thought on “The Difference Between Hosted and Cloud Computing for ERP Software”

  1. Thanks Nancy for the clear insight. I recently attended Oracle’s OpenWorld Conference in San Francisco this October. There was a huge volume of information on the Cloud. As I walked through the Exhibitor’s halls at the Moscone Center, I observed that every SI partner had ERP in the Cloud or could get customers to the Cloud seamlessly. What I did not see is any offering or advisory service to guide ERP customers through the storm clouds to find the right provider. In the next sections we will discuss the key competencies to consider as part of making an ERP Cloud provider selection.

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