What is a Cloud ERP?
Cloud … Hmmm … how is the Cloud related to ERP? You may ask.
Well, let’s first look into the meaning of Cloud here.
The Cloud is basically a group of servers that are networked together and store data. Each server has its respective function and role.
Then, what is so attractive about this that more and more systems are migrating to the Cloud? Just hold this thought, we will address this more as we progress … below.
Let’s move on to ERP then …
ERP stands for Enterprise Resource Planning, and is an industry term used mainly for the huge spectrum of activities that helps an organization manage different segments of its business, such as purchasing, inventory management and customer relationship management (CRM). This can also extend to finances and human capital management as well.
So, we have established the meaning of these two terms but when put together, what does Cloud ERP mean?
Cloud ERP is a type of ERP software that is hosted on a cloud computing platform, rather than the on premises/on-site one, which is within an organization’s own data center.
Cloud vs On-Premise ERP
Most are familiar with on-premises ERP – installed locally in your organization’s own hardware and servers. You have to install, maintain, and manage the software yourself.
However, with the Cloud, you do not have to maintain any software on your own servers, the same applies to any hardware as well. Thus reducing the hassles of maintenance.
Instead, you will be given access to the servers that are maintained by your solution provider, who in turn maintains the infrastructure and delivers the software to you as a service, which you can access via the internet.
That is why Cloud ERPs are usually referred to as SaaS (software-as-a-service).
Benefits of Cloud ERP
Software as a Service (SaaS)
Cloud ERP increases accessibility via the internet and enables users to share, transfer data across departments, and externally as well … in real time.
Because it is cloud-hosted, businesses are notified of any updates real time, immediately. Cloud-based ERP also comes with availability, backup and disaster recovery plans to reduce interruptions to the service.
Upfront Cost
The beauty with Cloud is that you pay for only used resources monthly, rather than a fixed price upfront and they usually need lower upfront investment. Deployment is faster.
You do not need to purchase the software, hardware and facilities necessary to run your ERP. You also do not need to train and maintain an IT team to be responsible for this infrastructure. All you need are computers that can access the internet. It will be the solution provider who will be responsible for maintaining the infrastructure.
Therefore, there is no need to guesstimate the upfront costs required for the hardware and maintenance to cater for any possible upgrade in future, as when you do need to scale up, you can do so as and when you need to, in the future with the solution provider. Operating costs will be reduced.
24/7 Proactive Monitoring
We have already established the fact that with Cloud ERP, you do not need an IT team to be responsible for the infrastructure and thus, you do not need someone constantly on the clock watching for any performance issues.
Instead, this is the job of the solution provider. They host and maintain your data, they monitor it day in and day out to ensure that your business is always running smoothly.
This type of service does make a huge difference in terms of cost, resources, and peace of mind.
Accessibility
Unlike on-premises ERP, the Cloud ERP can be accessed anywhere at any time, from any device, as long as there is an internet connection. This means you can do business anywhere and have access to your data, this boosts your flexibility.
This is not possible for on-premises because you need a computer hooked up to the local server connection.
Software Updates
All software will have to undergo updates. As for Cloud ERPs, they make updates quicker and much simpler. Your software can be automatically updated, without affecting your business. Any customization or integrations you had previously, will be retained.
Whereas on-premises software updates, can require rebooting systems and re-implementing software and applications, which means your customization will have to be re-built from scratch. This is time consuming, costly and prone to unforeseen errors.
Integration
Many other systems are already making the move to the Cloud. Eg: Your other retail systems such as your POS and eCommerce platform could also be in the Cloud.
To ensure full utilization and improve operational efficiency, integration is necessary as this allows for the auto-transfer of crucial data between your systems, seamlessly.
In order to ensure optimum performance and accuracy, you would require a tight integration, which is more feasible through cloud-based systems. It therefore becomes easier to connect, disconnect and reconnect systems as your business evolves over time.
Together, all these benefits make a cloud ERP a great system for many different types of merchants.
Challenges with cloud ERP
Of course, everything does come with challenges.
We have already established the fact that Cloud ERP comes with many benefits, but it also creates some management challenges, as Administrators do lose a certain amount of control when an organization moves off site, especially with solution providers taking on most of the responsibilities. Admittedly, while there are some customization abilities with Cloud ERPs, there are more with on-premises infrastructure.
Administrators have to implement new management processes and SOPs for a cloud-based ERP system, which can create some integration issues.
Another thing to note is that organizations in the Cloud need to depend on the solution provider’s security, which may or may not be as secure as on-premises ERP systems. Therefore, selecting the right solution provider is crucial.
Lastly, as an organization grows and evolves, its requirements and needs could change, and therefore such expansion may require additional modules from other vendors. Integration complexities can occur especially when an organization uses multiple services, since some Cloud applications might have to move across third-party products.
Summary
It is undeniable that this is the Cloud era and most systems are migrating to the Cloud.
Whatever challenges that Cloud ERPs may bring to the table, with proper management, the appropriate control and SOPs in place, the benefits of Cloud ERPs further outweigh them.
References made from and Credit given to the following:
Margaret Rouse – https://searcherp.techtarget.com/definition/cloud-ERP
Jillian Hufford – https://www.nchannel.com/blog/what-is-cloud-erp/
