Cloud vs On-premise Inventory Management for Online Retail

Cloud On-premise Inventory Management Logiwa WMS

Many people are now using cloud environment for personal needs such as photos, videos, documents such as on iCloud, Google Cloud. Hence, people have been using emails on the cloud for a very long time with the invention of the internet with Yahoo, Hotmail. Having most of our personal items on the cloud avoids risks and saves costs for us. So why not having our business systems on the cloud?

Cloud vs On-premise Inventory Management System

Companies can use inventory management software in 2 different models.

On-premise systems that they can host on their own servers and purchase licenses by making a huge initial investment. Also, the companies worry about the maintenance, accessibility, disaster recovery issues.

Cloud based systems that are hosted on the provider’s cloud environment and get software-as-a-service by paying for monthly subscriptions. They don’t require any initial investment and they provide all tools to support your operations throughout your growth process.

Therefore, cloud based inventory management systems offer many advantages that don’t consume any energy of the user company. They provide leverage without requiring any initial capital.

Cost Effectiveness

I prepared an example below to use an inventory management software with 5 users both in cloud-based and on-premise model. As seen in below chart, the total budget for a cloud based inventory management software is less than an on-premise inventory management software even after 7 years.

In below example; the total subscription fees for 5 users is $1,500/month and there is a $3,000 setup fee in the cloud-based model.

Whereas, the licenses for an on-premise model can be purchased for $50,000 and the budget for the implementation will be $50,000.

Below graph doesn’t include the hardware costs that should be covered in the on-premise model. Still cloud based model is much cost effective than the on-premise model.

ROI calculation - Cloud On-premise Inventory Management

Cloud Technology

Cloud based inventory management software is more advanced from a technology perspective. They are all web based applications and they offer the chance to work on any device anywhere on the planet. On the other hand, cloud-based inventory management software providers are more agile when it comes to improving the software, making developments and automatically updating the marketplaces, shopping carts and warehouses. Cloud-based inventory management software users always use the most recent versions of their systems.


Growing online retailers need systems that grow with them. They want to increase their use of the system as their warehouse operations grow. That’s why the subscription model and the option to add more users etc. is always more attractive.

Additionally, the technology of the inventory system should also allow scaling the business. Not all cloud-based inventory management system is capable of scaling all the way. Some of them can’t support operations eg. after 20 users. Even if you opt to go with a cloud based inventory software, the online retailers should be careful to select a system that will support their growth for the next 5 – 6 years at least.

Fast Onboarding

Cloud-based systems are more advanced from a technology perspective and they are more agile when it comes to setup and configuration of the systems. Because these systems offer standardized fulfillment business models and processes. Within a standardized fulfillment model, they are considering all business cases that they will face and they build more flexible systems. The flexibility brings fast onboarding such as in 1-2 weeks. Whereas on-premise systems take 4-6 months to implement and start using.

Risk Free

What happens when you make an investment in an on-premise inventory management software and you are not happy at the end of 12 months. Either you will keep investing for extra development to customize it or you will change it. There is high risk involved in the on-premise model.

However, when you start using a cloud-inventory management software and if you are not happy at the end of 12 months, you just unsubscribe from the provider’s services. There is no risk involved.


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