Why are Cloud based ERP systems fast becoming the number one choice for businesses that need to change their back office systems, whether they are small, mid-sized businesses or multinationals? What is Cloud ERP? And what are the benefits of Cloud based ERP systems?
What is Cloud Enterprise Resource Planning (ERP)?
Traditionally, enterprise resource planning systems were installed 'on-premise', that is to say, at one of your own physical locations, necessitating your own hardware, office space and IT staff to get up and running. Over the last 15 years, Cloud ERP solutions have become much more popular which eradicate the need for these prerequisites. Cloud ERP solutions are hosted, maintained and upgraded by your software vendor or partner, removing the administrative burden and up front cost in getting started.
With Cloud ERP, you pay your software vendor a subscription fee and in return you can consume enterprise resource functionality in much the same way you consume electricity. This can help CFO's or finance leaders to create a compelling commercial case to change ERP as the upfront investment is much lower. If you need help with ERP budgeting or pricing, speak to our team.
There are several different types of Cloud ERP on the market and before you start your selection process, it's worth knowing what options are available and the impact of selecting one model versus another.
The two types of Cloud based ERP Systems: SaaS Vs IaaS
In essence there are two core categories of Cloud ERP software - software as a service and infrastructure as a service.
Software-as-a-Service is a pure consumption model way of delivering Cloud ERP tools and solutions. Your ERP vendor provides the end to end service including hosting, regular upgrades and more in a 'multi-tenanted environment'. Without getting too technical, a multi-tenanted environment means your application is housed alongside other customers applications and is maintained accordingly. It's like renting an apartment - you pay a flat maintenance fee and everything is taken care of. On the one hand, this is beneficial as it keeps costs low and processes standardised. On the other hand, you can't tear down the walls of a rented apartment, nor can you radically change the way a SaaS Cloud ERP solution operates. You can move the furniture around though - i.e. configure processes and customise them to some extent. This makes SaaS Cloud ERP solutions a good choice for simple organisations that want to standardise, but a bad choice for those with complex and specific processes that don't want to change.
Infrastructure as a service Cloud ERP solutions give you the same benefits of SaaS ERP solutions, but with the ability to modify and easily customise the code of your ERP solution. Whilst this has it's advantages, keeping your ERP system clean gives you the ability to upgrade it quickly and easily plus reduce professional services fees.
Not sure which is the right option for your business? Then schedule a free call with one of our team.
What are the benefits of Cloud ERP?
There are multiple benefits for Cloud ERP solutions, ranging from the cost and investment profile through to the operational business benefits it can bring:
Because Cloud ERP solutions are managed and maintained by your provider, as a business, you don't need to have the IT staff, physical space or headache of running your own infrastructure and applications. This has the benefit of enabling you to get your ERP project up and running quicker and once your Cloud ERP solution is implemented, you don't need to worry too much about keeping the lights on. Need to add more users or support different lines of business or functionality? All of this is handled by your provider and you can simply focus on growing your business.
The majority, if not all ERP vendors are pivoting to Cloud ERP software as their primary focus for sales and R&D. If your software vendor is putting all of its new features and innovation into it's Cloud ERP tools and slowing down its investment on it's On-Premise solutions, then your business could miss out on productivity enhancing new functionality and innovations. Aside from shiny new widgets, Cloud ERP solutions enable vendors to automatically push out new legislative or accounting changes, enabling you to stay compliant, easily.
Total Cost of Ownership
Cloud ERP software is not always cheaper than On-Premise, however for many companies making the change, it is. By outsourcing the hosting, maintenance and upgrades to your ERP software vendor, you don't have to hire IT staff or invest in hardware and office space. For many small to midsize businesses, this makes it a simple decision.
Op-Ex Versus Cap-Ex
Cloud ERP subscriptions are usually paid annually, quarterly or even monthly, allowing you to spread the cost accordingly and putting the setup fees such as purchasing infrastructure in the hands of your ERP software vendor. For many of our clients, this cost model has enabled them to invest in ERP solutions where previously they couldn't. You will still have to considerable first year costs to implement the software, but the barrier to entry is still significantly lower.
If you're still unsure whether Cloud or On-Premise enterprise resource planning is right for you, which ERP vendors to shortlist or how much your project may cost, then reach out to one of our team.