Cloud computing is becoming more and more popular. It is used not only in business, but also privately. As a natural consequence of this trend, the cloud is also becoming a development opportunity for ERP systems. The software-as-a-service model has many advocates, but still remains very controversial. Is the solution flexible enough to accommodate the specific needs of all industries? This question and many other will be referred to in the following part of this article.
According to the ERP Report 2015 and Panorama Consulting Solutions Research Report, the trend to migrate ERP systems into the cloud is becoming more and more apparent. In 2013, 85% of companies chose ERP on-premise systems. The following year, this percentage value
started to decrease. In 2014, only 56 % organizations selected on-premise server deployment. Since then, a huge increase in purchases of the cloud-based software has been noticed. The market share of such solutions has jumped from 4% to 33%. The continually growing interest in cloud-based ERP systems is stimulated by more attractive and comprehensive product offerings available on the market.
However, insufficient access to product knowledge for customers is the main obstacle cloud solution providers have to face. The report shows that as much as 40% of companies do not make the decision to deploy the ERP system in the cloud because of the lack of necessary information. Educating the market is a long-term process, therefore this hesitancy is understandable. Respondents also highlight another reason, which is anxiety about the lack of sufficient security precautions (20%) and the probability of data loss (10%).
The cloud model is an especially interesting offering for small and medium-sized enterprises with no IT infrastructure. For many companies, purchasing servers and hardware as well as employing IT staff is the barrier they are not able to break. Contrary, cloud computing enables you to reduce initial costs to the minimum. The ERP system based on the cloud does not require huge initial investment.
In the case of large companies, the situation is different. Such organizations usually possess an advanced IT infrastructure, therefore on-premise deployment seems an obvious solution. However, even such companies more and more often decide to deploy ERP systems in the hybrid model. This means that a part of their processes is managed on local servers and the rest is moved to the cloud.
Scalability is one of the greatest benefits of cloud deployment. This enables users to optimize performance parameters at any time, depending on their present needs. It is also possible to set up performance parameters for specific days in each month. For manufacturing companies, it is possible to increase the performance capabilities of virtual machines for a specific time period based on the manufacturing cycle. Scalability also means that your company pays only for the resources it actually uses.
The savings your company can achieve by eliminating costs due to infrastructure maintenance, server and hardware purchases as well as IT staff employment is another benefit of deploying the ERP system in the cloud. In the case of a SaaS solution, the provider is responsible for security and reliability of the platform.
At present, there is a wide range of ERP systems that entrepreneurs can choose from. They can decide to install the software on own, local servers or the provider’s servers in the cloud computing model. The choice depends on the specific requirements of an organization or its business profile, business processes, scope of operations and size. When making this decision, business entrepreneurs should take into account a few important factors, including:
The cost of ERP system deployment and maintenance is much lower than in the case of the cloud. Companies do not incur any expenses related to the management of the infrastructure, creating technological solutions and purchasing advanced hardware. For small and
medium-sized companies, lower costs are a huge benefit. In the case of large organizations, the needs should be analyzed in detail, because it may turn out that traditional servers are a better solution in the longer term.
There are no significant differences between the traditional and cloud model in terms of extending the functionality of the system with add-on industry solutions. At present, most software vendors permit to integrate their products with an ERP system, both for on-premise and cloud deployments.
The cloud model ensures complete control over costs. Owing to full scalability, the company uses only the resources it needs at a given moment. Additionally, entrepreneurs can increase or decrease the usage and not to worry about server resources. They also appreciate the possibility to control data. However, there are some common doubts about the security of the cloud. These are unjustified. Presently, the Microsoft Azure cloud offers a range of mechanisms for the protection of sensitive data by e.g. replication with geo-redundant storage (GRS).
In the cloud model, the ERP system is maintained on external servers accessed via the Internet. You have complete control of all business processes in your company. However, you should bear in mind that the cloud model depends completely on web access, therefore potential connection failures are a real threat. In the case of traditional ERP system deployment, which only enables the use of the intranet, disruptions in the Internet access do not threaten your business operations substantially.
Most manufacturing companies decide to purchase the ERP system in the traditional model. On-premise servers ensure the stability of operations and processes. However, the cloud is also a solution that accommodates the specific needs of demanding industries. Continuous, uninterrupted access to the system is of primary significance to manufacturing companies. In the case of cloud software, it is necessary to ensure that the organization has a reliable access to the Internet and redundant Internet connection to secure the stable operation. The efficiency requirements for the connection are high, as this ensures that all processes are performed properly. In addition, it is worth ensuring that employees can switch to the offline mode, in case the Internet connection breaks.
Deploying ERP systems in the cloud is a natural trend which is becoming more and more visible. This innovative model is implemented by small and medium-sized companies, which appreciate the benefits of cloud solutions and subscription most. First of all, they remove the initial barrier to implementing business software for such businesses. The cost of implementation is not so high and does not require any additional investment in terms of hardware or infrastructure. Large companies are more and more eager to switch to the cloud, although they opt for using the ERP system in the hybrid model.
Selecting the most suitable model depends on many factors. Therefore, it is worth analyzing the benefits, taking into account the business profile, preferences and size of the organization. It is also advisable to discuss your needs with ERP consultants before you select a specific type of implementation and infrastructure.