What is a Hosted ERP?

A hosted enterprise resource planning (ERP) program is an Internet-based tool that uses computer technology to help companies manage their business processes, from accounting to inventory to human resources. With a hosted ERP, the software is maintained by a third-party, the ERP vendor, rather than being installed on the client's computers. The client accesses the system via the Internet.

This type of ERP is considered by many people to be an ideal solution for small businesses that might lack the financial and human resources to support their own ERP system. With a hosted ERP, clients don't incur the added cost of hiring information technology (IT) professionals to maintain the system or the expense of purchasing a mainframe computer to run the system. They also don't have to pay software licensing fees.

A hosted ERP offers greater flexibility than installing the software on the company's own system, so customers don't have to worry about continually scaling the software as their business needs change. It's relatively easy to simply purchase more components if a company wants to add more features. Companies also save money because they can purchase only the features they need, rather than investing in complex and expensive systems that are more than they need or can handle. They also don't have to worry about replacing the system as they outgrow it or as better systems become available. Instead, the ERP vendor updates the system.

Clients can often customize a hosted ERP for more efficient viewing and use, specifying what features they want in each component. Some hosted ERP solutions can also be synced to email programs or to devices such as personal digital assistants (PDAs) and cell phones, making the program accessible anywhere, at any time. A hosted ERP allows users to manage their business processes from any computer, so they can do everything from monitor order requests to manage and track work flow.

Many vendors have long offered hosted ERP services as part of larger IT outsourcing packages, but offering a standalone ERP is a more recent trend. Some companies offer a free hosted ERP, and others charge a monthly fee for access. The monthly fee might be a flat rate or can vary based on the number of users.

The free versions of hosted ERPs might have limitations, however, such as being accessible by only one person at a time. Even paid versions might not be suitable for all businesses. Some providers simply offer a scaled-down version of their more comprehensive systems for smaller businesses, and other vendors offer solutions created specifically for small business.