Cloud ERP software (also referred to as cloud-based ERP software) is a type of enterprise resource planning (ERP) software that is hosted on a remote server and accessed by users via the internet. Cloud ERP software is becoming increasingly popular among small and medium businesses (SMBs) as it offers a number of advantages over traditional, on-premise ERP software.
Broadly speaking, cloud ERP software offers all the same features as on-premise solutions while being much more accessible. In his article, we’ll explain what that can do for your business.
All major ERP software providers offer cloud-based solutions at this point. And, it’s fair to say that on-premises ERP will eventually be replaced almost entirely by cloud-based services — which is what we see happening with most software.
Similarly, SAP ERP for small businesses has moved to the cloud, providing all the benefits of implementing SAP at a significantly lower cost. The financial benefits of cloud ERP become apparent when one conducts a cloud versus on-premise cost comparison. Let’s dive deeper into the concept of cloud ERP and look at how these platforms can help small businesses achieve their goals.
How Does ERP on the Cloud Work?
The solution is usually offered as a subscription-based service, which means that businesses only need to pay for the features and functionality they need and use. This type of billing model is often referred to as “Software as a Service” (SaaS), and it’s become increasingly popular in the software industry over the past few years.
With on-premise ERP solutions, businesses need to purchase the software outright and then pay for any additional licenses, support, and maintenance costs. This can be a significant upfront investment, which may not be affordable for small businesses.
In contrast, a cloud ERP system is much more flexible and affordable. businesses only need to pay for the features and functionality they use, and they can scale up or down.
Why Should a Company Use Cloud ERP Solutions?
Historically, ERP system implementations have delivered tremendous value to organizations by helping them gain business insights that enhance productivity. As we have moved into the global digital age, businesses are required to keep up with the growing demands of the market.
As a business manager, you’re always on the lookout for products and services that are delivered faster, are improving their standards, and come at lower costs. On-premise ERP systems, designed for simpler landscapes, often struggle to keep up with these growing demands. Cloud-based ERP software allows companies to handle increasingly complex internal processing, while also helping them manage their business networks all over the world.
Benefits of Using Cloud ERP Software Solutions
There are three main reasons why cloud-based solutions are superior to on-premise software: flexibility, reliability, and security.
Cloud ERP Flexibility:
As your business grows, you want your ERP solution to grow with it. If you choose an on-premise solution, you’ll often have to decide whether you want to project for growth and spend more than you need to at the time or get a solution that fits now but will be costly to scale up later.
That’s not the case with a cloud-based solution.
One of the defining features of cloud-based solutions in any sector is the ability to accommodate users’ needs as they expand and contract. Cloud-based ERP software is typically segmented into plans that can be tailored to fit businesses of any size. As your company grows, you can move up to a larger plan.
Conversely, you can cut down on spending during periods of contraction by moving to a lighter plan. Competitors that fail to adapt this way often end up overpaying for software they don’t need or being forced to overspend on hardware to keep up with the growth.
Cloud ERP Reliability:
Another big selling point of cloud-based solutions is that they are typically much more reliable than on-premise solutions.
When an ERP solution is hosted on your own servers, you’re completely responsible for its maintenance. That also means you need to have an experienced administrator available to resolve problems as they crop up.
Cloud-based ERP doesn’t have this issue. The provider takes care of all the maintenance and upgrades. Now, that doesn’t mean a cloud ERP solution will never fail, but it does mean that you don’t need to spend resources and time coming up with a solution if it does.
Cloud ERP Security:
Another significant advantage of cloud-based solutions is that they are often more secure than on-premise solutions.
Cloud services providers rely on the security of their services to generate revenue and so must go to great lengths to ensure that they are practically infallible.
Servers for major players in the ERP space always reside in highly secure facilities with extremely limited human access. Additionally, the information on these servers is encrypted and the infrastructure is designed to limit access only to the users who own the information.
These servers also get constant security upgrades to keep up with cybersecurity threats. And, the data on these servers includes multiple redundancies to ensure that data is never at risk of being lost.
How Do Cloud ERP Systems Help Small Businesses?
In the introduction, we explained that one of the biggest benefits of cloud ERP for a small business is how accessible it is.
While the benefits of having an ERP system are the same regardless of company size, the fact that cloud ERP systems are so much more affordable and easier to implement and manage helps small businesses get more value out of them.
Where on-premise solutions often have prohibitively high implementation costs, there are cloud ERP solutions to fit any business size.
Additionally, small businesses often don’t have the in-house resources required to support on-premise solutions. Cloud ERP providers serve as an extension of your team, managing updates, maintenance, and monitoring for you.
This lets you focus on using the software to grow your business rather than worrying about whether the software is up and running.
Improved Agility for Your Business
Agility is of utmost importance to a growing business. Companies need to be able to seize opportunities by adding new locations, introducing new products and services, making acquisitions, or responding to competition in the market. By providing real-time access to data across departments, cloud ERP systems give companies the flexibility required to grow their business.
Cash Flow Visibility on the Cloud
Cash flow is the lifeblood of any growing business. By integrating accounting processes with business operations, cloud ERP software helps increase the availability of information such as working capital, operating expenses, and investments. This helps ensure that everything in the organization is accounted for accurately, ultimately fueling growth.
Seamless Integration on the Cloud
Small companies must frequently adjust to keep up with the growing demands of the market and consumers. Cloud-based ERP solutions–by simplifying the integration of new software, processes, and solutions–help with these frequent adjustments.
Some Challenges of Cloud-Based Systems
While a cloud-based ERP system is generally a good idea for most businesses, it can often present challenges as well.
Migration from on-premises ERP systems to a cloud system can be a trying process. This is especially the case for a company that has been using the same on-premise solution for many years.
It can often be challenging to incorporate legacy data and processes into a new system. One way to get around this is to implement a cloud-based ERP piecemeal, integrating new processes one at a time.
It’s also a good idea to involve as many stakeholders in the decision-making process as possible to get them on board with the transition.
That brings up another potential challenge in the process of integrating a cloud system — resistance to change. Getting stakeholder buy-in is vital to complete a cloud migration successfully.
This is an area that many cloud ERP vendors overlook. We work closely with our customers to equip them with the tools needed to make the process as painless as possible.
Lastly, migrating to a cloud ERP solution can expose you to regulatory compliance issues.
With more and more data in the cloud, businesses in certain industries like pharmaceuticals need to know where and how their data is being stored and protected.
This is one of the areas that we specialize in and we have a long track record of successful ERP implementations for pharmaceutical companies of all sizes. The key is in working with ERP software solutions providers that are ahead of the curve, such as SAP. These providers have solved the issues of regulation and offer the same level of compliance with their cloud solutions as they do for on-premises ERP software.
Conclusion - Enterprise Resource Planning on the Cloud
Cloud ERP solutions offer what many growing companies need to achieve their goals. Our dedicated team of experts at NBS is here to answer any of your queries regarding these ERP solutions–reach out to one of our experts today to learn how to take your business to the next level by utilizing these solutions to their full potential.