What Is Cloud ERP?
The term enterprise resource planning (ERP) was coined by the Gartner Group in the 1990s to describe software that automates business processes across a company – from financials to distribution, manufacturing, and HR. Initially, the vast majority of ERP systems were implemented on the clients’ own servers in their data centers.
Decades later, cloud technology was introduced, and software was increasingly delivered as a service through the Internet. ERP along with many other applications and tools moved to the cloud. Like any SaaS, cloud ERP is available on a monthly lease basis rather than through outright purchase. But there’s more to cloud ERP than different delivery and pricing models. And it’s no surprise that it’s gaining popularity so quickly, as it’s often considered essential to success in the digital age.
Why cloud ERP?
For 25 years, ERP systems have delivered value to organizations, helping them boost productivity and gain insights. But now, the entire world (and the competition) has changed.
Today, digitally savvy customers expect faster delivery of products and services, nonstop product and service improvements, greater reliability, and lower costs. Legacy ERP systems simply can’t keep up. Why? Older systems do not adapt easily to change, they rely on technology that’s expensive to maintain, and they are unlikely to help companies comply with evolving regulations.
The bottom line: most existing legacy ERP systems now fail to deliver the speed, flexibility, and business intelligence necessary for the new digital era.
How did SaaS ERP evolve?
In the early 2000s, the initial “hosted” or “cloud” applications were primarily standalone solutions, such as customer relationship management (CRM), marketing automation, and expense travel management.
In the mid-2000s, the first cloud ERP solutions were introduced. But, because they were new and had limited functionality, those solutions were slow to be accepted by midsize businesses.
In 2015, the adoption curve for cloud ERP changed dramatically – and acceptance has grown exponentially since then.
Why is cloud ERP so important to midsize companies?
Midsize companies have different needs than smaller and larger enterprises. Here’s why.
Medium-sized businesses tend to be specialists. They typically work in a small, related set of industry verticals, such as job shop metal fabrication for aerospace or distribution service to restaurants. To grow rapidly, companies need to, for example, add new locations, introduce new products and services, make acquisitions, and respond to competitor failures. Reacting to these changes in a timely manner is immensely important. An old system that is not flexible and easily expandable will constrain growth and change.
Cooperation between departments is essential, but independent reporting systems – many of which are based on Excel spreadsheets – make information exchange difficult. Sharing information efficiently is vital to making better, faster decisions.
Top management tends to be very cost conscious. Unlike larger companies that manage their business on quarterly budgets, the lifeblood of medium businesses is cash flow – and improving profit margin is priority number one. And while all midsize companies have some type of accounting or ERP system, many of these systems don’t meet current needs. Unfortunately, more and more of the legacy ERP systems are no longer being significantly enhanced, or even maintained and supported.
Midsize businesses are quick to embrace technology solutions that improve their business operations – so they invest in manufacturing execution systems (MES), field service systems, human resource management, call center software, revenue forecasting, and other isolated systems. However, most have been slow to change their backbone ERP system. Cloud ERP, with its new technologies and benefits, is changing all of that.
What are the top 10 benefits of cloud ERP?
Midsize companies that have made the move to cloud ERP reveal that they did so based on these benefits and capabilities:
- Lower costs: There is no upfront cost to purchase and install hardware and software. Plus, you’ll reduce ongoing IT and related staff costs since upgrade and maintenance costs are handled by the provider.
- Fast, flexible implementation: Ramp-up is much quicker when your SaaS supplier handles hardware and software installations. And the intuitive user interface of cloud applications lets you jump on opportunities by speeding the time to productivity – and the launch of new products.
- Business improvement: Many companies take advantage of a system upgrade to improve operations, changing outdated processes and introducing best business practices provided by the SaaS supplier. And, of course, cloud ERP improves and speeds finance and accounting practices across the company.
- Simplicity and automation: Companies can consolidate standalone legacy applications, standardize and integrate all existing and new applications, eliminate the use of Excel spreadsheets and manual workarounds, and so much more.
- New functionality: SaaS allows for more releases per year, with new functions and application improvements. And, since updates are delivered to everyone at once, you never fall behind competitors or miss an opportunity while waiting for a vendor to update your custom ERP system.
- Better insights: As you move from normal data to big data requirements, a modern, centralized database or ERP system with analytical tools can provide the business insights you need for better decision-making – and vastly improved customer service.
- Support for mobile ERP: Support for mobile devices and anywhere, anytime access to timely information by employees, subcontractors, vendors, and customers is built into SaaS products. These mobile apps have role-based, modern user interfaces (UI) with a responsive design to fit mobile screens.
- Access to new technologies: Advanced technologies are being built into modern SaaS ERP solutions to improve productivity. These technologies include artificial intelligence (AI), machine learning, and the Internet of Things (IoT), which allows devices such as machines or sensors to feed data back to applications via the cloud for up-to-date status information.
- Tighter security: Security and data backups are handled by full-time, professional security experts. Cloud vendors typically have the best security available; data security breaches in large and midsize companies occur primarily with on-premise systems.
- Scalability: As growth can be hard to forecast, scalability is important. With a SaaS solution, you can simply add additional computing power or data storage capacity if you experience rapid growth, rather than incurring a large capital expense.
BONUS: With cloud ERP, if user companies identify similar issues or unmet needs, they can push the vendor for changes. The will of the crowd often prevails. As a result, the overall pace of innovation is more responsive – and a lot faster.
Is there a difference in cloud ERP solutions?
Not all “cloud” products are the same. There are big differences, particularly in how ERP cloud systems are deployed. Here are the possible ways to implement a system.
Is cloud ERP secure?
With all the news about data breaches and viruses, it is valid to inquire if cloud ERP is secure. No system is impossible to break into; however, the degree of security that your system has depends on how it was deployed and who manages it.
Here are some key points to consider:
- Data theft: This is probably one of the hottest topics in the news where large companies have had their data files stolen and their customers’ private information compromised. Digging into the details of the data breaches, however, it’s more common to find that the data was stored on the company’s premises, not in the cloud.
- Data loss: Losing whole files is a terrible thing, but it can happen with natural disasters, when data is inadvertently erased, or when a system crashes. The only thing that can restore your data is having it backed up regularly and often. With cloud ERP, the infrastructure providers have off-site backups done regularly and redundantly. When you have a loss of data, it can be easily restored to get the system back up and running quickly.
- Security: Having the right level of security is of utmost importance. Midsize businesses typically have a limited IT staff and that staff typically takes care of the infrastructure, system updates, and user issues. Very few midsize businesses have a full-time IT security staff. With a reputable cloud ERP provider, midsize companies automatically have full-time professional security experts on call 24×7 to make sure all security updates and procedures are maintained.
Given the above, cloud ERP may be a more secure option than on-premise deployment for midsize businesses.
There’s no time like the present
Cloud ERP is not some far-off solution. It is being used today by thousands of midsize companies around the world (probably by many of your competitors).
For most midsize companies, this transition is an inevitable step in taking their businesses to the next level. The rewards of faster processes, better information, and rapid ROI can be verified by analyst reports (from Gartner, Aberdeen, Forester, and others) and through customer success stories in industries like yours.