Historically, ERP systems have been expensive, complex and difficult to manage, but that is all changing. Cloud technology is improving ERP in more ways than one and on-premise systems simply can’t keep up.
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How it used to be
When you think of ERP (‘enterprise resource planning’), the first things that come to mind are probably a costly and lengthy implementation, complexity, and an inability to tailor the system to your business. And a few years ago, you would have been right.
In the past, ERP tended to be on-premise, i.e. installed and run on your on-site servers and computers. The implementation costs alone would use up the majority of the ERP budget, making it unaffordable for many small and medium businesses from the outset.
Going forward, you had to deal with expensive maintenance contracts. Typically a company with a complex on-premise ERP would have to pay an IT services provider to look after their server(s) and other hardware, and then they would also have to pay for the maintenance of the ERP itself, whether this was through the vendor or a partner/re-seller (unless they had a competent IT department that could take care of all this for them).
Little or no flexibility
Many ERP systems forced you to implement every component of the software, even if you didn’t need that functionality in your particular business. You were constrained by a set of processes selected by the vendor rather than by you; this restricted business growth and your ability to respond quickly to market demands.
Complexity was a problem – you couldn’t add functionality very easily or integrate it with other systems very successfully.
And if you did carry out some serious customisation work on-premise, legacy ERP platforms made this very difficult and time-consuming. It could take months of work and some serious spending. And then once you’d made all of these customisations to make it work for your business, software upgrades became the stuff of nightmares.
Legacy ERP systems like this and the inevitable manual processes that go with them simply aren’t cut out for today’s connected world.
How it is now
Today’s digital and mobile world requires ERP solutions that are more integrated, more agile and more accessible. The cloud is meeting these needs.
We are seeing a shift away from legacy on-premise ERP systems to ones featuring modern technology architectures with easily accessible data. Cloud ERP is easier to deploy, simpler to manage, and provides a good return on investment (ROI).
Cloud ERP vendors tend to have vast third-party development communities that create a range of useful add-on apps, workflow tools and integrations to extend the core functionality of the product. This means ERP has become much more feature-rich, and you can add functionality you probably couldn’t do with a complex on-premise ERP.
Reduced capital expenditure
With cloud-based solutions, you don’t need to invest in your own servers and storage, or buy licences upfront that you might not need straight away. Instead you can pay for what you use monthly or annually on a subscription basis. As a result, ERP is affordable to smaller businesses and deployment is faster.
No maintenance costs
You have no servers to maintain and the software is upgraded automatically as part of the package. This means no expensive maintenance contracts as it’s all included in the monthly/annual subscription fees. And no more laborious time-constrained upgrading to worry about.
Customisable, flexible and scalable
ERP applications built for the cloud use best practice web standards and visual tools to make customisation easier. So the likelihood is there is already a third-party app or integration that will make the software do what you want it to. And if there isn’t, finding someone to create it for you shouldn’t be a problem.
The flexibility of cloud ERP means you can pick and choose the functionality you need. And you can add it as you need it, rather than being forced to implement every component of the software.
The same goes for users – you add new users as and when you need them rather than paying upfront for users you might not need for a while. Choosing a solution that can grow with you in this way is a good way of future-proofing your business.
The cloud has allowed ERP to become more integrated with other business systems such as CRM and eCommerce. ERP is no longer just ERP – it must be integrated seamlessly with all of your key business processes and data.
By linking your finances and order management to your eCommerce, customer service, sales and marketing, you are able to provide the high level of service that customers now expect to receive.
These days, ERP must operate across all platforms and devices in order to meet changing business requirements. Employees now expect visibility when they are out of the office using their smart phones and tablets. Whether they are on the shop floor, in the factory, out at client or supplier sites, they need to be able to keep working.
And managers need to be alerted to situations in real time, whether this is business performance, sales, or even customer complaints. This accessibility allows you to react quickly and remain competitive.
The cloud is making all of this possible. Gone are the days of having to wait until you get back to the office to update the system. And gone are the days of VPN connections providing slow and limited remote access to your data.
Cloud ERP is available anytime, anywhere, provided you have an internet connection. And mobile-friendly apps mean that the data is presented in the appropriate format for whichever device is being used.
The cloud has changed ERP significantly over the last few years, and perhaps the most important effect of this is that it makes it accessible to smaller companies, finally putting them on a level playing field with their larger counterparts.
In a recent survey carried out by Epicor Software, 64% of respondents said they favour the cloud and just one in five indicated they plan to keep investing in on-premise ERP.
How about you? Are you looking at the cloud or sticking with on-premise ERP? Let me know in the comments below.
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