What is cloud ERP?
The term enterprise resource planning (ERP) was introduced in the 1990s to describe software that helps to manage and automate end-to-end business processes across a company – from financials to sales and manufacturing. In those early days, ERP systems were implemented on premise: on the clients’ own servers, in their own data centers. However, in the 2000s, cloud ERP was introduced – and it changed everything.
What is cloud ERP software?
Cloud ERP is enterprise resource planning software that is accessible over the Internet. As the IT backbone or “brains” of a company, cloud ERP software provides advanced functionality for all the core processes in an organization.
Hosted on a provider’s cloud computing platform, cloud ERP is typically delivered “as a service” (software-as-a-service or SaaS ERP). Customers don’t own the software, but instead lease it on an annual or monthly subscription basis. There are no upfront hardware costs – and the vendor takes care of application maintenance, upgrades and innovations, data storage, and security.
Cloud ERP vs. on-premise ERP
Cloud ERP, or SaaS ERP, is hosted on your provider’s cloud platform and managed by their IT team. On-premise ERP, on the other hand, is installed on your own hardware and servers and managed by your IT team or a partner.
Why choose a cloud-based ERP system?
Cloud ERP and its advanced features and flexibility make it an essential ingredient for success in the digital age. Historically, ERP systems have delivered tremendous value to organizations, helping them boost productivity and gain insights. But with digitalization the entire world – and the competition – has changed. On-premise ERP systems simply can’t keep up. They are difficult to adapt to permanent change. Designed for a simpler landscape, most legacy ERP systems fail to deliver the speed, flexibility, and insight that companies need to operate in new, more agile ways.
Today, customers expect faster delivery of products and services, nonstop product and service improvements, greater reliability, and lower costs. Businesses often need to 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 increasingly complex internal processes, but also helps them manage business networks all over the world. This is impossible without cloud ERP.
The importance of cloud ERP for midmarket companies
ERP is central to every area of a midsize business. A good cloud ERP system will intelligently automate processes, provide insights using AI and machine learning, help companies innovate business models, and so much more.
In addition to these benefits, there are three main reasons why so many midsize companies are turning to cloud-based ERP:
- Improved agility: Agility is particularly important to midsize companies with growth potential. These companies are often specialists in their industries, working in verticals such as professional services. They have deep customer 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 use workarounds and Excel spreadsheets to overcome lack of integration – 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. 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. And none of this can be done in a silo. Cloud ERP integrates accounting processes with business operations, both internal and external – so absolutely everything can be accounted for with accuracy.
While all midsize companies have some type of accounting 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.
- 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.
Is SaaS 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 ERP 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.
Get started with a cloud-based ERP system
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.
More in this series
SAP Insights Newsletter
Gain key insights by subscribing to our newsletter.