Pros and Cons of Cloud Based ERP

“The future market is driven by cloud ERP adoption among enterprises of all sizes.”
MarketWatch

In 2018, cloud-based ERP applications are booming. Enterprise resource planning (ERP) software applications are designed to help businesses create a unified, streamlined approach to all their critical functions, including:

• Finance
• Human Resources
• Inventory
• Marketing
• Planning
• Purchasing
• Sales

The primary benefit of ERP is that the software is interoperable, so redundant tasks are eliminated. There is one core database of company records that informs all of these business functions. In the past, these applications were housed on an internal server (or several servers) within an on-premise installation. Today, software-as-a-service ERP is offered by a number of major software companies, including Microsoft. Adoption of cloud-based ERP is skyrocketing, even with large enterprise organizations.

But some organizations are still deploying ERP on-premise. What’s different about these situations that would justify the traditional approach?

This article looks closely at the drivers of cloud-based ERP. What are the benefits of adopting your ERP in the cloud? What drawbacks should you be aware of? 

ERP Pros -- What are the Drivers of Cloud-Based ERP Adoption?

Right Scale recently completed their seventh annual State of the Cloud survey on attitudes and adoption of internet-based technologies. They said that adoption of cloud services has increased in 2018, with a bigger influx of companies using platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) offerings.

Even enterprise organizations have joined everyone else in the cloud, and on-premise installations have evolved into hybrid approaches or are being dismantled completely. In fact, 81% of the companies surveyed by Right Scale have a hybrid strategy of on-premise and cloud applications. A full 96% of these organizations use some form of cloud computing.

What is it that is driving these companies to move their applications to the cloud?

Cloud-based ERP is offered in a subscription package that almost anyone can afford. On-premise ERP is licensed and installed at the company site. An on-site deployment of ERP software requires big expenditures tied to IT hardware. These systems don’t run themselves, so overhead is also tied to having a technology team available to install and maintain it.

There are big economic advantages to using cloud-based ERP. When usage peaks, on-premise applications may experience server slow down, necessitating the unexpected purchase of more servers. The same thing can happen when a server crashes; either way, there is an unexpected capital expense tied to replacing or adding equipment and the time it takes for the staff to deploy it.

In contrast, cloud-based ERP allows companies a simple monthly budgeted expense. There are no unexpected financial spikes to contend with. This low up-front investment in the software has allowed even the smallest of companies to use the same software tools that larger competitors use to gain competitive advantage.

With no servers to purchase and install, cloud-based ERP offers a much faster rollout. This means organizations typically see a quicker return on their investment. While this is a great benefit, organizations should also strategize around how the will rollout ERP training in addition to the actual deployment of the software. Any ERP is complicated; these programs take an organization to a completely different level. It’s for this reason that we highly recommend ERP training as part of your cloud deployment strategy.

The benefit of any SaaS application, including cloud-based ERP, is that the data is accessible from any digital device. This is particularly important to remote teams, like traveling sales reps or operational field staff. Beyond accessing the information on any device, the data remains consistent between departments.

Why is this important? Say your sales rep is traveling to meet with a client at their business. When they arrive at the airport, they boot up their devices and find a new note in the customer record from your service and operations team saying that the client has been complaining that a product they ordered hasn’t arrived. This kind of information in advance will help inform the sales team that a situation has changed before they arrive on the client site. This should help them adjust their approach appropriately in order to stay responsive to the client – and perhaps give them a better chance of closing the deal.

While this is one example, it’s clear that cloud-based ERP can improve communication even on the fly and between remote teams.

Now let’s look at some of the cautions tied to ERP adoption. Why are some companies still dragging their feet on cloud deployments?

ERP Cons – What’s Holding Back Cloud Adoption?

Any time new technology is introduced; there are early adopters and late bloomers. In the case of the cloud, the largest of enterprise corporations have been cautious in their adoption of cloud technologies. Interestingly, a decade after the internet took off, these same organizations are now changing their strategies to adopt, at a minimum, hybrid models of cloud and on-premise computing. Enterprise organizations have been slower to jump on the bandwagon for a few reasons.

The irony of security in the cloud is that it can be viewed as both a pro and a con. On the one hand, companies like Microsoft have entire teams devoted exclusively to maintaining security in their sprawling server farms. Click here to see the extensive capabilities they have related to internet security.

In any software-as-a-service application, security upgrades are happening regularly behind the scenes. On-premise applications require a physical visit on-site to upgrade the software. According to Wired, the majority of data breaches come from corporate IT teams that lag behind in updating on-site software. Keeping on-premise legacy platforms up-to-date is a full-time job that some enterprise organizations just aren’t prepared for.

On the other hand, there are still holdouts that prefer keeping data internal. Security is one of the biggest concerns of these organizations, and that is especially important when you consider that an ERP houses the most critical data from any organization, including financial, corporate trade secrets, and client data.

There are also some companies that have compliance rules that also require their data to stay in-house. For them, cloud-based ERP may still not be the best choice – which is why may enterprise organizations have gone with a hybrid model.

Sometimes one-size-fits-all doesn’t work. Companies that are seeking a high-degree of customization often cannot work within the out-of-the-box frameworks that come with cloud-based ERP. With that said, Microsoft has been very responsive to customers and does allow some customization of their products.

The problem with highly customized platforms is that they are proprietary systems that require an internal IT team to update and maintain them. If they don’t have an internal team of software developers, then organizations must work with an external vendor to get them to make changes. Also, the training for these platforms is dependent upon the vendor or an internal training team to pass along their knowledge. However, big institutions like banking or mortgage lenders often prefer this level of customizations. In these cases, only a custom-built on-premise application will do.

Now that we’ve looked at the good, bad, and the ugly around cloud-based ERP, how will your organization may the choice about what is best for them?

Best Questions to Ask – Cloud-Based ERP

An ERP can help organizations streamline their business functions. Organizations that adopt the software believe it will give them a competitive advantage in the marketplace. Once the decision is made to deploy ERP, the next step is to figure out if a cloud-based ERP or an on-premise application would work best. Or perhaps, a mix of both solutions is the right decision.

Determining if your organization is ready to start their cloud journey is a big step. Understanding how you will migrate the data and train staff are also important considerations. IES can help with all of these discussions, certainly, but we’ve also compiled a few of the most commonly asked questions when considering cloud-based ERP as a solution for your business.

Typically, customers call us to discuss:

• How does the cloud-based ERP handle any compliance requirements unique to your specific industry?
• What kind of security does your cloud provider offer?
• Will your current bandwidth support the cloud application?
• What kind of disaster recovery planning does your vendor offer?
• What kind of upfront and ongoing training will your software vendor offer?
• What is your strategy for deploying data to the cloud?
• What level of customization is important to your organization?

If you don’t have the internal resources to support an on-premise ERP application, but want the features and benefits that the software can bring to your team, consider cloud-based ERP with Microsoft as an option for your business. IES is standing by to answer all your questions and to develop a strategic approach toward deployment of cloud-based ERP solutions. We can help you develop the plan and the roadmap to get there. Contact us today.