December 29, 2022
For over a year, cloud deployment has been topping the ERP trends. With the reliance on professional ERP implementation services, companies of all sizes are leveraging cloud infrastructure to expand their capabilities, maximize ROI on technology investments, and support digitalization.
Let’s see how cloud-based ERP software is distinct from on-premises solutions, explore cloud ERP types, their benefits and limitations, and overview a list of cloud ERP platforms worthy of your attention.
projected global cloud ERP revenue by 2025
of decision-makers consider cloud ERP their investment priority
organizations hastened their switch to cloud ERP solutions
cloud ERP software is deployed in a cloud using the software-as-a-service (SaaS) or platform-as-a-service (PaaS) model.
cloud ERP software exists and is managed in the cloud by an ERP vendor, which provides the software in an ‘as a service model’. The vendor is responsible for the servers, data storage, the underlying operating system, security, and feature upgrades.
an ERP platform may be deployed in a public multi-tenant cloud environment (computing resources are shared among multiple companies) or in a private single-tenant cloud environment (computing resources are dedicated to a single company).
a fixed amount of money a company pays annually or monthly for using the ERP software, which includes software upgrades, maintenance, and security. It is charged per user or per organization.
An ERP solution, regardless of where the software is deployed and who manages it, generally supports the same business processes. However, there are many core distinctions between the two options, which makes the cloud vs on-premises decision a major one.
Cloud ERP is provided on an ‘as a service’ basis, thus you pay a subscription fee defined by the ERP functional scope, number of users, storage and compute resources. Adjusting costs according to your needs makes budget planning easier.
On-premises ERP implies substantial upfront and continuous investments to purchase and manage the software and the hardware (servers, server room, cooling system, etc.).
Public cloud ERP software
runs on a remote server and is managed by a vendor, while cloud computing resources are shared among multiple customers.
Private cloud ERP software
is deployed and managed in a private cloud, which means compute resources are dedicated to a particular company and are not shared with other tenants.
Hybrid cloud ERP
runs in both private and public cloud environments for additional security, compliance, and cost-efficiency.
is a SaaS-based ERP, where multiple customers of a public cloud provider access the same software instance (e.g., data of multiple companies is stored in shared resources, but each company can only access its own data).
is a SaaS-based ERP where data is stored and processed with private resources.
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These days more than half of organizations prefer cloud-based ERP solutions to on-premises enterprise platforms, and there are significant reasons for this:
Cloud ERP software helps companies eliminate costly expenses associated with server purchasing and maintenance, IT staffing for initial solution implementation and ongoing maintenance, software license fee that is paid in full and upfront with on-premises solutions, security and backup costs. Having a low entrance barrier, cloud ERP solutions enable startups and small businesses to access the same ERP capabilities of large corporations.
With vendor-supported cloud ERP implementation, companies don’t have to worry about hardware choice and installation, IT staff onboarding and training, security setup, and enabling free data access for authorized employees. As soon as the cloud ERP platform is configured, companies may get down to business process automation.
Cloud ERP software allows for rapid up-scaling, which minimizes the risks of performance deterioration due to a sudden increase in the number of users or a drop in data volumes. You may then scale down and adjust software use according to fluctuating needs and cut operating costs dynamically.
Unlike the upgrade of on-premises ERP solutions, which consumes significant IT labor resources and evokes possible disruptions in business processes, most cloud ERP vendors supply updates in automatic mode. Software upgrades, functionality extensions, and security patches usually happen in the background or during off hours, so users experience no disturbance.
Cloud deployment implies your team can access ERP data whenever and wherever there is a stable internet connection. Corporate information flows in real time, which means siloed departments can access timely and accurate data, collaborate, and generate accurate financial reports and statements, optimize the supply chain, and identify process disruptions.
Cloud ERP solutions are offered under either usage-based (paying for the resources and functionality used) or fixed monthly/yearly subscription fees with no additional hidden expenses for security, system upgrades and maintenance.
Cloud-based ERP solutions may be supported 24/7 regardless of time zone and maintenance/upgrades required, which reduces the strain on the in-house IT department.
Cloud-based ERP software tends to integrate well with other cloud-based services and corporate applications due to a library of pre-built connectors, easy-to-use APIs, and standardized interface protocols.
Data backups and disaster recovery capabilities of cloud ERP solutions are handled by professional experts, while on-premises ERP solutions can never eliminate the risk of catastrophic data loss in the case of hardware or software failure or a natural disaster.
limited operational reporting and supply chain planning capabilities for organizations with complex structures
if the cloud ERP platform satisfies all current functional requirements of business users and if the functional scope may be extended as soon as the need arises.
if the ERP solution addresses industry-specific pain points and needs, has customized extensions, offers pre-built connectors to popular third-party applications, and ensures compliance with industry regulations.
what levels of support are available, whether the support is available for your location, if a third-party vendor is needed to assist with the implementation.
if a cloud ERP platform integrates well with the company’s IT systems, complementary third-party applications, industry-specific software, and analytics services.
if the ERP platform is frequently updated to meet the unique needs of the company, if the upgrades can improve business operations.
if the cost structure suits the company’s expectations and business mode (monthly or annual fees), if there are any extra or hidden costs for additional functionality, support level, and the number of users.
Cloud ERP solutions do not allow for heavy customization, which may not fit companies with complex workflows that need a personal approach.
Companies may enable customization of cloud-based ERP by developing additional integrations, changing software configurations, and adding extensions. However, if heavy customizations are required and there is a high risk of application errors due to unsupported code, cloud-based SaaS ERP solutions may not be the best fit.
Flexible periodic payments, which may increase in the long run, can make cloud ERP an expensive option.
For companies that grow rapidly, cloud subscription costs may exceed the costs of running a legacy solution. To avoid that, many companies resort to professional consultancy that helps them assess both options, educate them about the most common cloud-based ERP cost structures and models, and match them up with the company’s current and future needs.
Deploying a cloud ERP solution or switching to the cloud from legacy ERP may entail some resistance from stakeholders and end-users.
Even if the interface and the functionality of a newly-delivered cloud ERP solution are intuitive and easy to use, companies still need time and support to adapt it. An elaborated change management plan and extra support from the ERP partner will simplify and streamline the adaptation.
Integration with legacy systems may hinder the cloud ERP solution’s success due to varying interface protocols, private APIs, and system documentation loss.
Before implementing a cloud ERP, a company should start with a comprehensive technology audit and build an ERP integration strategy, which may imply using various integration approaches or even creating a hybrid ERP solution.
Data security is a top concern for most companies considering cloud-based ERP software.
All major cloud ERP vendors offer a holistic approach to data security. They offer 24/7 system monitoring, end-to-end data encryption, dynamic data masking, multi-factor authentication, controlling physical access to the equipment, and system vulnerability assessment.
The success of a cloud-based ERP project begins with choosing a reliable technology partner that assists with the cloud ERP software selection and guides you through a rocky implementation process. With 20+ years in delivering enterprise software solutions for companies across industries, Itransition offers a full range of ERP services to help you effectively manage your business processes.
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