The term enterprise resource planning (ERP) was introduced in the 1990s to describe software that automates business processes across a company – from financials to distribution, and manufacturing. Initially, many ERP systems were implemented on the clients’ own servers in their data centers. They were focused on the automation and orchestration of internal business activities and resources. Over time, they evolved to support changing needs of businesses responding to marketing conditions, and customer needs and demands.

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 software as a service (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 now considered an essential component for success in the digital age.

Why cloud ERP?

For more than 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’s businesses operate and create value for customers much differently than they did in the past. Organizations are under pressure to automate their operations, and if they are already digital – as many large organizations are – then they are looking for ways to optimize and change processes, as well as opportunities for further growth and expansion. Businesses are working virtually using partners for production, distribution of product, management of sales, service, support and even core business processes. This global virtual world has created the need for new technology and a system landscape that can manage internal and external operations, as well as business networks all over the world. And cloud ERP makes it possible – allowing businesses to take advantage of all the new developments and operate in more agile ways.

Meanwhile, 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 transformation and growth, and staying ahead of the competition.

How did SaaS ERP evolve?

In the early 2000s, “cloud” applications primarily focused on standalone solutions, such as customer relationship management (CRM), marketing automation, and travel and expense management. 

By the mid-2000s, cloud ERP solutions were introduced from leading business software providers. Many had limited functionality and often were the means to deliver a system that had not been fundamentally designed for the cloud (these systems are sometimes called “faux cloud”). Many of those solutions were slow to be accepted as they were inflexible and could not support the speed of change, nor the depth of function required. They also couldn’t integrate with or connect to different systems or data – limiting the scope of change and growth for businesses.

Today’s modern ERP systems have changed dramatically, as has the acceptance and adoption curve for cloud ERP. Yet, it’s still critical to separate those ERP systems designed for the cloud and those that simply operate on the cloud.

Why is cloud ERP so important to companies now?

Rapidly growing organizations have often matured as specialists in their industries, with deep customer and vendor relationships, more automated processes, and a need to drive optimum efficiency of their resources and break through to the next stage of growth. New environments have driven the need for faster innovation often creating a niche for these businesses, who become specialists working in a small, related set of industry verticals – such as job shop metal fabrication for aerospace, or distribution services to restaurants.

To grow more quickly, these companies need to, for example, add new locations, introduce new products and services, make acquisitions, and respond to competitor failures. Reacting to these changes or opportunities in a timely manner is immensely important. An old system that is not flexible and easily expandable will limit growth and positive change.

Try a modern cloud ERP solution

Test SAP S/4HANA Cloud and see the benefits of an intelligent ERP system firsthand.

Cooperation between departments is essential, but independent reporting systems – many of which are based on Excel spreadsheets, data extracts, or siloed systems – make information exchange difficult and cause delays and inaccuracy in operations. Efficient information sharing is vital to making better, faster decisions.

Executives tend to be very cost conscious – and building balance sheet reserves to grow the business requires a careful eye on working capital, operating expenses, and investments. Yet, many legacy accounting systems are limited in their ability to manage these details and connect to the broader accounting or ERP system. Legacy tools and systems don’t meet the current needs of the business or help drive operating efficiencies and are not structured or maintained to support new requirements.

Finally, while businesses are quick to embrace technology solutions that improve their business operations – many have invested in disconnected point solutions to solve specific department or industry challenges, for example, manufacturing execution systems (MES), field service systems, or call center software. This approach can often lead to great expense and complexity when these solutions don’t easily connect to their ERP system. Modern cloud ERP, with its new technologies and benefits, is changing all that, and allowing seamless for integration.

Modern cloud ERP systems improve workflow with streamlined business processes, helping businesses provide better customer service, identify upsell opportunities, and improve the order-to-cash cycle.

What are the top 10 benefits of cloud ERP?

Companies that have made the move to modern cloud ERP do so based on these benefits and capabilities:

  1. Lower costs:  As a subscription service, 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. Depending on the type of cloud ERP deployment model you adopt – private vs public cloud – the cost savings can be significant. Public cloud in particular drives significant cost and time savings of maintenance management and accelerates innovation.
  2. Fast, flexible implementation: Ramp-up for a cloud ERP system is much quicker as your SaaS supplier handles hardware and software installations and provides dedicated staff with subject matter expertise for managing datacenters. Just like the mobile apps we are all now familiar with, and which are available quickly with simple configuration – the same intuitive user interface and experience is available with cloud ERP business applications. This lets you seize opportunities by speeding the time to productivity. Learning how to use the apps and tools is fast, automation prevails, and the launch of new products into new industries and environments becomes easy.
  3. Business improvement: SaaS ERP suppliers manage and provide continuous system upgrades to improve operations, change outdated processes, introduce innovations, and new technologies and capabilities that support best business practices. Cloud ERP improves and speeds not only finance and accounting practices, but business operations across the company – and can even extend beyond to business partners and networks.
  4. Simplicity and automation: Companies can consolidate standalone legacy applications, standardize and integrate all existing and new applications, eliminate the use of disconnected systems and workarounds that exist on Excel spreadsheets. This synchronization helps reduce complexity.
  5. New functionality: SaaS providers manage the software that is shared by all companies that use it. This allows providers to develop new functions and application improvements quickly and deliver them to all companies through continuous upgrades, as well as several new larger releases per year. Since updates are delivered to everyone at once, you never miss an opportunity as you would while waiting for a vendor to update your custom ERP system.
  6. Better insights: Business insights require consistent enterprise data and tools to extract relevant information. Modern cloud ERP systems have been architected to unlock big data so you can access the intelligence hidden within large and complex data sets. Good cloud ERP systems are built on newer data models that support high speed, in-memory processing, with a simplified data architecture. And while legacy ERP systems provide reporting tools, the deep, integrated analytics available through the cloud are key to better decision making and driving calibration and benefits across the organization. Being able to see trends, predict changes, and automate processes improves resource usage and ultimately improves customer service.
  7. Support for mobile ERP: Businesses rely on operating where the action is. SaaS ERP products ensure that access to information for employees, subcontractors, vendors, and customers is available and secure on mobile devices from anywhere, and at any time. Mobility can’t be an afterthought – modern user interfaces (UI) with a responsive design to fit mobile screens are critical for users.
  8. Access to new technologies: Advanced, intelligent 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.
  9. Deeper security: With ERP cloud systems, security and data backups are handled by full-time, professional security experts. Cloud vendors typically have the best data security available; security breaches in large and midsize companies occur primarily with on-premise systems. However, a chain is only as strong as its weakest link and avoiding vulnerability in points of integration relies on cloud ERP systems being more complete, connected, and collaborative so that vulnerability of multi-vendor responsibilities is minimized.
  10. Scalability: Since 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 faster.

Key benefits of public cloud ERP

Public cloud ERP offers so much more than just consumption-based pricing. And while the benefits above are inherent in cloud ERP, businesses who choose public cloud ERP can fast track their transformation efforts by having immediate, ongoing access to the tools that can drive change and the flexibility and power to leverage them as opportunities arise.

At the end of the day, public cloud ERP benefits both the customer and the software vendor because there is always one consistent version of the software – making delivery, implementation, and addition of new requirements, including regulatory, security and built-in intelligence, faster, more reliable, and more readily available than in the past.

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:

Given the above, cloud ERP presents a more secure option than an on-premise deployment.

There’s no time like the present

Cloud ERP is a proven, mature solution being used today by thousands of companies around the world (probably by many of your competitors).

For most large and midsize companies, the transition to cloud 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, Forrester, and others) and through customer success stories in industries like yours.

Thinking about replacing your legacy ERP system?

Explore tips on replacing your legacy ERP and calculating your possible ROI.