Cloud-based vs. On-premises WMS software: Which is right for your business

The warehouse management system (WMS) has become a staple of modern logistics operations. Used for everything from warehouse layout optimization to omnichannel order fulfillment, these tools are indispensable for coordinating inventory management processes in today’s fast-moving world of ecommerce. Their importance means that it’s not a question of if your team will leverage WMS solutions to their advantage, but whether cloud or on-prem will work best. 

This guide examines the differences between on-prem and cloud-based WMS software. We’ll define the two and give some key characteristics of each, then we’ll compare on-prem and cloud-based WMS software to highlight their pros and cons. We’ll also look at recent trends in both solutions and some important factors to consider as you choose your mode of WMS implementation. 

 

Understanding cloud-based and on-premises WMS

Not all WMS solutions are created equal. Not only do different systems have unique functionalities, but the very type of deployment model has a significant impact on your tool’s strengths and weaknesses. The two main types of deployment models are:

• Cloud-based WMS: Hosted by the vendor and accessed via the internet, the data generated and managed by this type of WMS software is stored entirely in the cloud. Cloud-based WMS software employs a software as a service (SaaS) subscription-based pricing model, allowing customers to throttle their usage up or down as needs change. This creates greater adaptability as a company’s business conditions evolve, and is especially useful in times of abrupt market fluctuations such as peak season.
• On-premises WMS: While cloud-based WMS software is hosted by the vendor, on-premises software is installed and maintained entirely in-house. By being operated locally on a company’s own servers and infrastructure, on-prem solutions allow for greater customization, control, and data ownership, which can be useful for companies that must adhere to certain industry standards. However, they’re also typically less fluid and more resource-intensive to scale, requiring licensing fees, hardware purchases, and ongoing maintenance costs.

Third-party hosting vs on-site deployment, remote access vs data control—these differences are crucial when comparing cloud-based software and on-prem software. Companies must weigh the pros and cons of each model carefully to identify the best fit for them.

Key comparisons between cloud-based and on-premises WMS

While the hosting location is the main difference between on-prem and cloud-based WMS software, this difference impacts the performance of your solution in several ways. The main differences between cloud WMS vs on-premises WMS are:

• Implementation and cost: Cloud-based WMS requires lower initial costs with faster implementation, for a minimal infrastructure setup since the vendor’s environment is already in place. On-premises WMS, however, requires a higher upfront investment in hardware and software, since the IT infrastructure must still be developed. The result is longer deployment timelines and higher initial costs
• Scalability: Cloud-based WMS software is easily scalable, letting you accommodate business growth or seasonal fluctuations without significant changes to your infrastructure. On-premises WMS solutions may require additional hardware purchases and complex configurations when scaling up, making it more difficult to adapt.
• Maintenance and updates: When companies use cloud-based WMS software, all updates, patches, and maintenance are managed by the vendor. This ensures access to the latest features and security enhancements without additional effort from the user at all times. On-premises WMS software requires ongoing maintenance from in-house teams, potentially leading to security gaps and higher operational costs.
• Data control and security: With cloud-based WMS software, data is stored off-site and all security systems are managed by the vendor. This may raise concerns for businesses with strict data compliance requirements, causing them to prefer WMS software, which gives them complete control over data storage and security protocols.

In general, cloud-based WMS software offers greater scalability, automation, cost-effectiveness, and easier implementation, while on-premises warehouse management software can provide greater customization, data security, and control. However, these advantages come at the expense of more resource-intensive maintenance, so companies must weigh the pros and cons carefully before making their choice.

Recent trends and insights in WMS solutions

As you weigh the advantages and disadvantages of on-prem vs cloud-based WMS software, it’s important to keep the latest industry trends in mind. Here’s the latest in warehouse management software solutions:

• Growing cloud popularity: Benefits such as improved flexibility, easier integration, and reduced costs have led to increasing cloud-based adoption rates. This indicates a shift in preference away from on-prem deployment models, as savings and scalability are often valued over customization and control. 
• Access and analytics: Cloud-based WMS software offers real-time visibility into your warehouse operations and comes with many advanced analytics functionalities built in. The result is easier data-driven decision-making and greater business intelligence. 
• Multi-warehouse management: While WMS solutions help coordinate inventory management processes, the future of the technology lies in the ability to orchestrate all order fulfillment channels at once. Fulfillment management systems (FMS) like Logiwa IO let you manage multiple warehouse locations seamlessly through a centralized cloud platform, giving you a broader view of your supply chain. 

Another key trend in cloud-based WMS software is the increasing use of automation. Cloud-based tools integrate with automated systems and IoT devices more easily than on-prem solutions, simplifying pick-and-pack, storage and retrieval, and many other warehouse automation tasks, causing many businesses to implement them for improvements in process efficiency.

Factors to consider when choosing between cloud-based and on-premises WMS

Aside from industry trends, it’s important to evaluate your own resources and order fulfillment posture as you decide which WMS solutions align with your goals. Some factors to consider are:

• Business size and complexity: Cloud-based solutions are easier to maintain and have lower upfront costs, making them beneficial for smaller businesses. Larger enterprises with complex operations may be better equipped to handle the costs of maintaining their own systems and might prefer the control that they offer.
• IT infrastructure and resources: Companies with limited IT resources may choose to offload WMS maintenance to a cloud-based provider, while those with robust IT departments might have the staff, technology, and budget needed to manage an on-prem system efficiently.
• Regulatory compliance and data sensitivity: Industries with strict data requirements may prefer on-prem solutions, as it may help them maintain greater compliance and control over their data. However, the data security capabilities of many cloud-based WMS software solutions are rapidly expanding, employing advanced security metrics such as encryption at rest and in transit.
• Future growth and scalability: The scalability that cloud-based WMS software provides can be especially useful for businesses anticipating rapid growth or seasonal demand fluctuations. If you need flexibility and scalability, cloud-based tools may be the answer. 

The complexity, resources, and existing infrastructure of your business are all critical internal factors to evaluate, but external factors such as regulatory requirements and market demand are essential as well. Consider both as you choose the warehouse management software that best fits your operations.

The future is cloud-based WMS

While some prefer the enhanced customization and control that on-premises WMS software provides, the scalability, rapid deployment, and cost-effectiveness that cloud-based WMS software offers have caused many to migrate toward a SaaS-based solution. While some have hesitated to embrace cloud-based WMS software due to data security requirements, the encryption and network security functionalities that these solutions possess have addressed compliance concerns, sometimes rising above the security capabilities that in-house teams can provide. 

When deciding between on-prem vs cloud-based WMS software, companies should assess their own needs, resources, and business goals. Those with the resources and labor force needed to maintain their own infrastructure may benefit from on-prem solutions, while those requiring greater flexibility, cost savings, and support may prefer cloud-based systems. 

Logiwa’s flagship FMS, Logiwa IO, delivers all the benefits of cloud-based WMS software along with enhanced omnichannel order-fulfillment functionalities, driving optimization across a company’s entire supply chain. See how our cloud-based solution can elevate your warehouse processes by requesting a demo today.
 

FAQs on choosing cloud-based or on-premises WMS software