Drawbacks of antiquated on-premise ERP systems
Enterprise resource planning (ERP) systems as we know them have been around since the 1990s: the glory days when instead of iPhones we used PalmPilots. However, much like the now obsolete PDAs, on-premise ERPs are starting to show their age.
Independent research and advisory company Gartner recently published a report about the impact of the cloud on ERP systems. The research concluded with the bold statement that highly customised on-premise ERP systems will be relegated to legacy status by 2016. What this means is that they will cease to meet the needs of companies and consequently become a drain on resources.
But how can something so costly and crucial for business management actually hold companies back?
A lot has changed in the last five years as cloud ERP has become more prevalent, but the basics of what people want from ERP systems have remained the same. CEOs still want reliable and integrated ways to manage resources, but this is now a given, not a feature. Focus has now shifted to decreasing IT costs and achieving greater flexibility.
To keep up with the demand for more agile and responsive systems, IT managers have, in the past, had to highly customise their on-site ERP systems. This has left very little room for movement if further change is required.
For example, if you were to change your customer relationship management (CRM) or eCommerce software, you need to know that your ERP system can be easily integrated. If not, you risk fragmentation of data and a lack of overall visibility.
Flexibility is also hindered by access. Unlike cloud-based ERP solutions, on-premise systems can only be accessed on site. Human behaviour is changing with improved technology; we can no longer wait for answers and demand instant information at our fingertips. This is why many business leaders are finding their on-site ERP systems are no longer up for the job.
In fact, the flexibility that cloud-based ERP software offers users is one of the reasons why it is so popular. Information can be accessed remotely, from anywhere with an internet connection – even via smartphone or tablet. This gives business users peace of mind, knowing that a complete overview can be generated at the touch of a button.
In addition, the cloud was purposefully designed for easy interoperability, which adds the option for current or future usage of additional products. There are not likely to be interoperability worries if changes need to be implemented to hardware or software. More importantly, cloud ERP systems are completely scalable and can grow with the business.
There’s often a reluctance to upgrade outdated ERP systems because a great deal of investment has been sunk into their infrastructure and maintenance. In addition, upgrading highly customised on-premise ERP systems is a difficult and timely process, which often leads to them simply being left until they become completely outdated.
Initial investments required to implement an on-premise ERP system – hardware, facilities and staff training – are understandably large. These costs are exacerbated if a business doesn’t have the requisite in-house IT skills.
In contrast, cloud ERP systems are much more cost effective. Instead of large upfront costs for things like servers, related hardware and software licenses, budgets are spread out on a monthly or annual billing basis. Furthermore, cloud ERP solutions are managed and hosted by the vendor, which means you don’t need to set up or install any hardware or software – freeing up physical space in your building and reducing the electricity bill.
One of the biggest draws of cloud ERP is that upgrades and maintenance are taken care of by the vendor. There’s no need for a company’s IT team to spend weeks upgrading systems, to then have to go through the process again a few months down the line.
On-site ERP status: legacy
It seems that the days of the integrated on-site ERP system are numbered. A diminishing lack of flexibility, usability and cost effectiveness is making the monolithic on-site ERP systems go the way of the PalmPilot.
In its place, companies are turning to cloud ERP solutions that deliver the functionality and flexibility that the IT-controlled and centrally-mandated on-site ERP megasuite previously struggled to provide.
Have you had any experience with dealing with ‘legacy’ on-premise ERP? Let us know in the comments below.
If you’d like to discuss your ERP requirement, please don’t hesitate to get in touch.
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