Cloud based ERP systems are fast becoming the number one choice for small to mid-sized businesses
Why are Cloud based ERP systems fast becoming the number one choice for small to mid-sized businesses that need to change their back-office systems? What is Cloud ERP? And what are the benefits of Cloud based ERP systems?
What is Cloud Enterprise Resource Planning (ERP)?
Traditionally, ERP’s 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 ERP functionality in much the same way you consume electricity. This is beneficial for CFO’s or finance leaders to create a compelling commercial case to change to an 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 your selection will have.
The two types of Cloud based ERP Systems: SaaS Vs IaaS
There are generally 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’. A multi-tenanted environment means your application is housed alongside other customers, and is maintained accordingly.
Like renting an apartment – you pay a flat maintenance fee and everything is taken care of. On one hand, this is beneficial as it keeps costs low and processes standardized. On the other hand, you can’t tear down the walls, 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 customize them to some extent. This makes SaaS Cloud ERP solutions a good choice for simple organizations that want to standardize. A less than good choice for those with complex and specific processes that need consistency.
Infrastructure as a service Cloud ERP solution gives you the same benefits of SaaS ERP solutions, and the ability to modify and easily customize the code of your ERP solution. The advantages are, keeping your ERP system allows you to upgrade quickly, and 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 to operational business benefits:
Cloud ERP solutions are managed and maintained by your provider. This reduces your need for IT staff, physical space or the responsibility of running your own infrastructure and applications. The benefits enable you to get your ERP project up and running quicker. Need to add more users or support different lines of business or functionality? All of this is handled by your provider and you can focus on growing your business.
The majority of ERP vendors have pivoted to Cloud ERP software as their primary focus for sales and R&D. A good measuring stick is this, if your software vendor is putting new features and innovation into its Cloud ERP tools and slowing down its investment on its On-Premise solutions. If this is the case, 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. This will enable you to easily maintain compliance.
Total Cost of Ownership
Cloud ERP software is not always cheaper upfront than On-Premise, however it’s important to consider all the factors.
By including hosting, maintenance and upgrades in your Cloud ERP software cost, you reduce your cost and responsibility to hire and maintain IT staff, hardware and office space. For many small to midsize businesses, this makes it an overall cost effective decision.
Op-Ex Versus Cap-Ex
Cloud ERP subscriptions are paid annually, quarterly or even monthly. This allows you to defer the cost and infrastructure fees to 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.