Warehouse management system (WMS) software is the most utilized software by third-party logistics (3PL) warehouses at 84%. However, many different options for WMS software exist on the market, which boil down to two main categories: on-premises or cloud-based. Here’s a quick rundown of the main differences between on-premises and cloud-based systems:
On-Premises vs. Cloud WMS
Some 3PLs host and maintain on-premises software on-site on the warehouses’ own servers. As such, each 3PL would need a substantial IT department to maintain the software. However, on-premises solutions are typically more bespoke to each 3PL’s needs, so what they lack in ease of maintenance, they make up for in customizability. Alternatively, cloud-based software follows a software-as-a-service (SaaS) model where the software lives online in the cloud. This means that 3PLs can access the software from any device connected to the internet. Although they offer less configuration than on-premises WMS solutions, cloud-based WMS software can help align 3PLs to best practices.
According to the 2023 State of the Third-Party Logistics Industry Report, studies expect the WMS market to grow from $3 billion in 2021 to $8.1 billion by 2028, largely due to the adoption of cloud-based WMS solutions especially by small- to mid-sized businesses. Though nothing new, cloud-based WMS is quickly becoming the more popular option.
Given the two options, it may be confusing to know which one is right for your 3PL, so we have compiled the top three reasons to move to the cloud for your WMS.
The biggest advantage cloud-based systems have over on-premises software is cost. On-premises WMS software requires a large upfront investment, plus the more bespoke features and on-going support incur additional costs–not to mention the cost of employing a robust IT department to maintain the software. Plus, as new features or functionality get released, you will often need to buy or upgrade to access them.
By contrast, cloud-based WMS software offers a lower upfront investment that eliminates the cost barrier of initially adopting WMS software. Fixed on-going subscription costs in the SaaS model make it easier to calculate return on investment (ROI) and budget over time, and many WMS vendors include support, upgrades, and development costs in the fixed monthly price.
In any industry, time is money, and cloud-based WMS software will save you time as well because set-up and implementation are significantly shorter processes with this model. Cloud-based WMS software companies have lower training costs than their on-premises counterparts, so cloud-based systems save money in addition to time with regards to training your employees on the system.
WMS Upgrades and Support
As mentioned above, on-premises WMS software requires you to employ a substantial IT department in the warehouse for basic maintenance of the system to support the technology hosted on the warehouse’s servers. This means that you would have to manage any software upgrades by downloading them to your servers–oftentimes for an additional cost–requiring more downtime and oversight from your employees. These will often also require customization to work with any custom workflows. When your IT department must download and manage updates, implementation gets complicated, bugs and errors are harder to manage, and the system as a whole becomes inefficient to maintain.
Alternatively, cloud-based WMS software companies publish updates automatically, and since the software lives in the cloud, you get the updates instantly without significant downtime or having to download the upgrades yourself. This breaks the “buy, upgrade, maintain” software cycle that on-premises WMS solutions force you into because you do not have to pay for upgrades, which are included, or maintenance. Plus, implementation–both initially and after software updates–is shorter and more efficient than with on-premises WMS software. Additionally, the monthly subscription cost often includes on-going support, so cloud-based WMS software provides a team of experts to help with any software troubles essentially as a free perk. Your IT department no longer needs to worry about troubleshooting software issues.
Although on-premises WMS software offers customizability to accommodate warehouses’ specific workflows, it lacks scalability because of the complexity of making upgrades or changes to the system. Altering the software as your business grows costs a lot, often requiring additional development costs to scale the software to adjust to growth.
Cloud-based WMS software is extremely scalable because of the built-in flexibility to handle multiple warehouse workflows and align them to best practices. Though the infrastructure of the software is not under your control, cloud-based systems offer configurability with different packages and modules available to add on when your business grows to the point of needing them.
Interested in learning more about the benefits of cloud-based WMS? Contact us for a demo today!