What Is Cloud ERP?
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. In those early days, ERP systems were typically implemented on the clients’ own servers in their data centers.
A couple of decades later, cloud technology was introduced, making it possible to deliver software through the Internet. ERP became available not only on premise but as a software-as-a-service (SaaS) application, accessed on a monthly lease basis rather than through outright purchase. However, there’s much more to cloud based ERP than the delivery and pricing model. Its advanced features and flexibility make it an essential ingredient 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, customers expect faster delivery of products and services, nonstop product and service improvements, greater reliability, and lower costs. Businesses often need look beyond their walls to ensure the best value for customers. They work virtually with a wide array of partners – for production, product distribution, sales management, service, support, and even core business processes. As a result, they need software that not only helps them handle internal processes but also manage business networks all over the world.
Legacy ERP systems can’t keep up with the complex requirements of businesses today. Older systems are difficult to adapt to change, are expensive to maintain, and are unlikely to help companies comply with evolving regulations. Designed for a simpler landscape, most legacy ERP systems fail to deliver the speed, flexibility, and intelligence that companies need to operate in new, more agile ways.
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 expense travel management.
By the mid-2000s, cloud based ERP solutions were introduced by leading business software providers. Many of these early cloud ERP systems had limited functionality and were not fundamentally designed for the cloud (these are sometimes called “faux cloud”). Cloud ERP solutions were slow to be accepted by midsize businesses 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 fast-growing companies?
There are three key reasons why cloud ERP is particularly critical for fast-growing, midsize businesses.
- Improved agility: Agility is particularly important to midsize companies with growth potential. These companies are often specialists in their industries, working in a small, related set of industry verticals such as aerospace job shop metal fabrication or distribution service to restaurants. They have deep customer and vendor relationships. To grow rapidly, they need to seize opportunities – adding new locations, introducing new products and services, making acquisitions, or responding to competitor failures.
An old system that is not flexible and easily expandable will constrain growth because it can’t provide information needed for decisions quickly enough. If a company relies on independent reporting systems – many of which are based on Excel spreadsheets – it’s difficult for departments to share information and work together to meet common, time-sensitive goals.
- Visibility into cash flow: In midsize companies, top management tends to be very cost conscious. Unlike larger companies that manage quarterly budgets, the lifeblood of medium businesses is cash flow – and improving profit margin is often a top priority. Building balance sheet reserves – and fueling growth – requires a careful eye on working capital, operating expenses, and investments.
While all midsize companies have some type of accounting or ERP system, many of these systems fail to deliver immediate cash flow and vital profitability information. They often don’t meet the current needs of the business or integrate with other systems. What’s more, these legacy systems are usually not enhanced with new features – or even maintained and supported – by vendors who have shifted their focus to the cloud.
- Ease of application integration: Midsize businesses have typically been quick to adopt point solutions for specific operational needs – such as call center software or field service systems – but slow to change their backbone ERP. However, adding these “bolt on” solutions has added great expense and complexity because these tools don’t easily connect to the ERP system. Now, modern cloud ERP is changing all of that – causing more and more growing companies to reevaluate their ERP choice. Increasingly, companies are opting for the easy integration, scalability, and agility that comes with cloud ERP.
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:
- Lower costs: With a subscription service, there’s no upfront purchase cost for hardware or ERP software. Ongoing IT and related staff costs are also lower as upgrade and maintenance expenses are handled by the provider. Cost savings can be significant – particularly with a public cloud deployment.
- 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 data center management expertise. Like consumer mobile apps, cloud ERP business applications can be configured easily. The intuitive user interface makes learning to use the app fast and easy – speeding time to productivity and allowing businesses to seize opportunity.
- Business improvement: Many businesses move to cloud ERP to improve operations, change outdated processes, and introduce new capabilities that support best business practices. Cloud ERP improves and speeds up not only finance and accounting practices, but business operations across the company – and can even extend beyond to business partners and networks.
- Simplicity and automation: With a modern cloud ERP, companies can consolidate standalone legacy applications, standardize and integrate all existing and new applications, and eliminate the use of disconnected systems with information spread across Excel spreadsheets.
- New functionality: SaaS providers deliver new functionality and application improvements to all companies that use their software 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 while waiting for a vendor to update your custom ERP system. Also, if user companies identify similar requirements, they can push the vendor for changes. As a result, the overall pace of innovation is more responsive – and a lot faster.
- Better insights: Modern cloud ERP systems have been architected to unlock Big Data so you can access information hidden within large and complex data sets. And while legacy ERP systems provide reporting tools, they do not offer the deep, integrated analytics available through the cloud – and these are the key to better decision-making. The ability to see trends, predict changes, and automate processes improves resource usage and vastly enhances customer service.
- Support for mobile ERP: Businesses must now provide information access to employees, subcontractors, vendors, and customers – anywhere, at any time. This requires secure mobile device support. Mobile capabilities are built into SaaS ERP products rather than added as an afterthought. Modern user interfaces (UI) with a responsive design to fit mobile screens are key for users.
- Access to new technologies: 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 through the cloud for up-to-date status information.
- 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. Because cloud ERP systems are more complete, connected, and collaborative, they avoid vulnerability at points of integration and reduce risks associated with a multi-vendor landscape.
- 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.
Types of cloud ERP
Are all cloud ERP solutions the same? No, there are big differences, particularly in how ERP cloud systems are deployed, managed, monitored, and maintained, as well as in their global reach and their security.
Choose the ERP deployment option that is best for your business by considering your current landscape and investments, your business complexity, and your capacity, as well as your desire for change.
There are three different types of cloud ERP:
- Public cloud
- Private cloud
- Hybrid cloud
Is cloud ERP secure?
With all the news about data breaches and viruses, it is valid to ask 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 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 presents a more secure option than on-premise deployment for midsize businesses.
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).
Businesses that choose 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.
For growing 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.