Final answer:
Cloud-based ERP systems offer significant cost benefits over on-premise systems, including lower IT infrastructure expenses, lower maintenance costs, reduced IT labor expenses, and reduced vendor support costs, which collectively lower the total cost of ownership.
Step-by-step explanation:
When comparing cloud-based ERP systems to on-premise solutions, several cost benefits become apparent. Firstly, cloud-based ERP often results in lower IT infrastructure expenses as the need for physical servers and hardware is minimized or eliminated altogether. Companies do not need to invest in costly data centers or perform regular hardware upgrades. Secondly, these systems usually offer lower maintenance costs because the ERP vendor manages updates and upgrades, ensuring that the system is always running on the latest version without additional expenses or downtime.
Another significant advantage is the reduced IT labor expenses; with a cloud ERP, the requirement for a large in-house IT staff to handle server maintenance, data backups, and troubleshooting is substantially lessened. Finally, there is often a reduction in vendor support costs, since assistance and troubleshooting are part of the subscription service. This can lower the overall cost of ownership and operation for an organization.