Cloud ERP: Definition and Benefits

In the world of enterprise resource planning (ERP), the cloud has been a game-changer.

By allowing companies to access their ERP software and data from anywhere with an internet connection, the cloud has made it possible for businesses of all sizes to take advantage of advanced ERP features and functionality without the need for on-premise hardware or IT resources.

No longer are those benefits limited to massive international enterprises that can afford to invest in their own data centers – today, even small businesses can reap the rewards of cloud ERP.

But for some, the idea of cloud-based anything is imposing. That’s where we come in!

Below, we will examine:

What is cloud ERP?
The benefits of a cloud ERP system
How to select the right cloud ERP solution for your business

If you’re ready to change the way you manage resources and inventory, let’s dive in!

What is cloud ERP?

In the simplest terms, cloud-based ERP is a software-as-a-service (SaaS) delivery model for enterprise resource planning software. In other words, it refers to how an ERP system is hosted and accessed.

With on-premise ERP, which was the norm for decades, businesses host the software locally on their servers or computers. This means that they are responsible for maintaining the hardware, ensuring compatibility with other software, and keeping the system secure.

Cloud ERP, on the other hand, delivers ERP software via the internet - meaning that the provider takes care of hosting, maintenance, security, and upgrade issues. All users need is a web browser and an internet connection to access the system.

How it works

If you’re considering a cloud ERP solution for your business, it’s important to understand how it works. In general, there are two types of cloud ERP systems: public and private.

A public cloud ERP system is one in which the provider hosts the software on their own servers and makes it available to customers over the internet. The benefit of this type of system is that it’s typically more affordable since providers can spread the cost of hardware and maintenance across all of their customers.

A private cloud ERP system is one in which the provider hosts the software on a server that is dedicated to a single customer.

This type of system offers more flexibility and customization since the customer has more control over how the system is configured, however, it is also more expensive since the provider can’t spread the cost of hardware and maintenance across multiple customers.

The type of cloud ERP system you choose for your business will depend on your specific needs and budget.

Benefits of cloud ERP

There are many benefits of cloud ERP systems, but the three that are most often cited by users are:

Reduced costs
Increased flexibility
Improved security

Let’s take a closer look at each of these benefits:

Reduced costs

One of the biggest advantages of cloud ERP is that it can help businesses reduce their IT costs. With on-premise ERP, businesses have to invest in their own hardware and pay for ongoing maintenance and support.

With cloud ERP, those costs are shifted to the provider – meaning that businesses can save money on upfront hardware costs and IT staff salaries.

Additionally, since cloud ERP systems are updated automatically by the provider, businesses don’t have to worry about the cost of upgrading their software – another significant advantage over on-premise ERP.

It is possible to offer services like this because of the economy of scale that the provider accesses. When one provider delivers the same service to many businesses, they can spread the cost of development, support, and infrastructure over all their customers.

Increased flexibility

Another big benefit of cloud ERP is increased flexibility. Because cloud ERP systems are hosted off-site, businesses can access them from anywhere with an internet connection – giving employees the ability to work remotely, or from different locations.

This increased flexibility also comes with added scalability. With on-premise ERP, businesses have to plan for future growth by purchasing enough hardware to accommodate projected increases in users and data.

But with cloud ERP, businesses only pay for the resources they use – meaning that they can easily scale up or down as needed, without having to invest in new hardware.

For example, let’s say your business is expecting a surge in sales during the holiday season. With an on-premise ERP system, you would need to purchase additional hardware to accommodate the increased demand – and then find a place to store that hardware once the holiday rush is over.

But with cloud ERP, you can simply increase your subscription to add more users or storage as needed, and then scale back down when things slow down.

Improved security

Something that is too often overlooked is security. With on-premise ERP systems, businesses are responsible for ensuring the security of their data – which can be a big challenge, particularly for small businesses with limited IT resources.

A data breach or even a natural disaster like flooding or fires could have devastating consequences and threaten business continuity.

But with cloud ERP, businesses can rest assured that their data is in good hands. Cloud providers invest heavily in security, and often have much more robust security measures in place than most businesses could afford on their own.

In addition, cloud ERP systems are typically backed up automatically – so even if something does happen to the primary copy of your data, you will always have a backup to fall back on.

Choosing between cloud ERP solutions

Given that the global cloud ERP market is expected to grow to more than $100 million by 2025, new providers continue to pop up every day. So, how can you know which solution is right for your business?

Here are a few factors to consider when narrowing down your options.

Size: If you run a small or medium-sized business (SMB), it’s important to select a cloud ERP solution that is designed specifically for businesses like yours. These solutions tend to be more affordable and easier to implement than enterprise-grade systems.
Industry: Certain industries have specific compliance requirements that must be met. Make sure to select a cloud ERP solution that can help you meet those requirements.
Budget: One of the main benefits of cloud ERP is that it’s more affordable than on-premise ERP – but that doesn’t mean it’s free. When evaluating providers, be sure to get an estimate of total costs, including implementation, training, and support fees.
Culture: Any new software implementation is going to require some change management. But if your company is resistant to change, you may want to select a cloud ERP solution with a low-code or no-code platform that makes customization easy.
Goals: What are your specific goals for implementing an ERP system? Be sure to select a solution that will help you meet those goals – whether they’re related to improving customer service, reducing costs, or streamlining operations.
IT infrastructure: One of the benefits of cloud ERP is that it doesn’t require a lot of IT resources to get up and running. But if you do have on-premise software, you’ll want to select a solution that can integrate with it seamlessly.

Once you have a good idea of what each of these factors represents for your business, there are a few questions you should answer about a potential provider.

Is the provider reputable? Check out online reviews, case studies, and customer testimonials to get a sense of what other businesses have experienced with the provider.
How long have they been in business? A provider that’s been in business for a long time is likely to be more stable and have a better understanding of the needs of businesses like yours.
Is the solution scalable? As your business grows, you’ll want to make sure that your ERP system can grow with you. Find out if the provider offers enterprise-grade features for businesses that expand beyond the SMB stage.
Is the provider invested in its product? A good sign that a cloud ERP provider is committed to its product is if it offers a free trial or a money-back guarantee. This shows that the provider is confident in its ability to deliver on its promises.
What kind of customer support do they offer? When you’re dealing with mission-critical data and processes, you’ll want to make sure that you have access to 24/7 customer support in case something goes wrong.
Do they provide training? Once you’ve selected a provider, you’ll need to train your employees on how to use the system. Find out if the provider offers training services or materials so that you can hit the ground running.

When you have answered these questions, you should have a much better idea of which cloud ERP solution is right for your business.

Final Thoughts

It’s not an easy thing to transfer from an old way of doing things to a new one, especially when it comes to something as critical as your business’s ERP system. But the benefits of moving to the cloud are too great to ignore.

With a cloud ERP system, you can free up valuable IT resources, reduce costs, and gain the flexibility and scalability that you need to stay competitive in today’s market.

When selecting a cloud ERP solution for your business, be sure to do your homework and choose a provider that you can trust!