What is Cloud ERP System & How Does It Work?

Our Cloud Based ERP System option offers a single, integrated platform for all aspects of your business. Accounting, Purchasing, Inventory and Order management, CRM, Warehousing, and more. Your company has access to data in real-time, at any time, from any location. Highly customizable and easily configurable to your business.

What is Cloud ERP Meaning?

Cloud ERP Meaning: Cloud ERP stands for Enterprise Resource Planning. In ERP, the software is installed on the server provided by the vendor. The vendor is responsible for installing, maintaining, upgrading, and securing the application and Customer’s data. The customer user accesses the ERP application through the internet. The distinguishing feature of ERP is the ‘Thin Client’, meaning no software is required to be installed on the user machine to access the ERP system.

cloud erp
Cloud ERP Meaning
Cloud Based ERP Systems
Meaning of Cloud Based ERP Systems

What are the different types of Cloud ERP?

Cloud ERP Solution is relatively new. The first pure-play Cloud ERP was “NetLedger,” since renamed Netsuite, which came into existence in 1998. However, the broader acceptance of Modern ERP is a relatively recent phenomenon of the current decade.

Future of Cloud ERP

The future of cloud ERP rests on  Artificial Intelligence, Remote Collaboration, Machine Learning, Robotics Process Automation, Industrial IoT, and Blockchain has demonstrated their value to the early adopters who made these technologies a part of their day-to-day activities. The information and intelligence provided by these technologies have added value to the adopters.  Modern ERP application development uses modern programming languages and architecture such as Angular, React, Restfull APIs, Microservices, and Java.

In the past, companies only had access to on-premise ERP solutions. Now they can run their business processes on the cloud, thanks to cloud computing technology. This alone shows that the industry is changing fast. Current ERP systems support both back-end and front-end functions. 

ERP is now easier to integrate with Internet of Things devices, Artificial Intelligence, and Machine Learning. Modern solutions include these capabilities to ensure the user does not incur the cost of adding them. 

There are different perspectives to looking at Cloud Based on ERP Systems

We can categorize Cloud Based ERP Systems into 3 groups, as shown in the diagram below.

Cloud Deployment :

In Cloud deployment, the ERP is fully deployed on Cloud. The Cloud vendor handles software maintenance, software upgrades and data security. Customer may have a lean IT Team.

Based on Tenancy :

In Single-tenancy, the organization’s data is available on a private server with a unique software instance. This could be a private instance or a shared instance. Private Cloud is a Single Tenant by nature. In Multi-tenancy, multiple customers can share the same version of the application and the associated infrastructure.

Between SaaS and PaaS:

SaaS means Software as a Service. This is what we traditionally know as Cloud Based ERP. One disadvantage of SaaS is that application/process customizations are not allowed. Customers have to modify their processes to meet the requirements of Cloud Based ERP Systems.

cloud erp uk
Best Cloud ERP

What is the Market Size of Cloud ERP?

The future belongs to Saas ERP. As per a study done by Markets and Markets, the global Cloud Based ERP System Market is expected to grow from USD 43 Billion in 2020 to USD 101 Billion in 2025 at a CAGR of 17.4%. As per the study, the significant factors driving the growth are growing demand among enterprises to improve operational efficiency and streamline business processes, the impact of COVID19, and increasing adoption of Cloud-based solutions.

What are the Deployment Options for Cloud ERP System?

Based on the deployment options ERP can be grouped as Cloud, On-premise, or Hybrid deployments.

erp cloud services

Cloud Deployment

advantages of erp cloud services

On-Premise Deployment

advantages of cloud erp

Hybrid Deployment

Cloud Deployment :

In Cloud deployment, the ERP is fully deployed on Cloud. The Cloud vendor handles software maintenance, software upgrades, and data security. Customers may have a lean IT Team.

On-Premise Deployment :

In On-premise deployment, the Customer owns the infrastructure and is responsible for issue resolutions, infrastructure, application upgrades, and data security. The Customer will have a larger team (than Cloud) to handle ERP. Large businesses with extensive customizations opt for this approach.

Hybrid Deployment :

A Hybrid deployment solution is a mix of the above two approaches. The Customer may have the core applications in one ERP (SAP HANA for example) in the On-premise instance and then will have a few satellite applications (could be from different vendors, Oracle HCM for example) that “talk to” the core application. This helps the Customer get a feel of Cloud deployment and gradually phase out of On-premise and transition to Cloud.

No Parameter Cloud ERP On-Premise
1 Infrastructure costs No Yes
2 Operational costs Low High
3 Database maintenance Cloud Vendor Customer
4 Application maintenance Cloud Vendor Customer
5 Process Stability Medium High
6 Customization Zero Possibly high
7 Integration with other applications Standardized Non-standardized
8 Upgrade frequency High Low
9 Availability and Reliability Very High High to Medium
10 Support Team Size Lean Team Large Team

Evolution of Cloud ERP Software

Despite the release of the first Cloud ERP Solution in the late 90s, it failed to catch up till the middle of the current decade (2011 – 20). With the broader adoption of SAP HANA and Oracle Fusion and excellent terms offered by these companies, a recent trend of companies is moving to Cloud Based ERP. Over the last couple of years, Microsoft has aggressively moved into the Cloud Based ERP space through its D365 applications. Other vendors are fast catching up. In addition to the apparent benefits of Cloud ERP System, the other drivers of Cloud Adoption include:

  • Legal Changes: Earlier, many countries were not allowing their data to reside in other countries. With the confidence of a top of line data security, governments are easing their legal restrictions, thus enabling customers to move their data to Cloud.
  • In-Country Location of Data Centers: Along with the above, most ERP vendors bring data centers nearer to or at the customer location.
  • Reduction in Hardware Costs: As the hardware costs have fallen over the years, Cloud ERP System has become less expensive and has broad-based acceptance.
  • Proven, Multi-layered Data Security: Data security was a stumbling block to ERP adoption earlier. The top vendors have worked on it and nowadays offer robust and multi-layered (User Layer, Application Layer, Database Layer) data security. This has alleviated many of the concerns of the Customer.
  • Adopting New Technologies like AI and ML: There are many niche applications on the Cloud that use the latest technologies. They integrate easily with Cloud based ERP Systems. There is no need to build expensive interfaces to get the benefit of these applications.

What are the Benefits of Cloud ERP Software?

  • Multi-layer data security
  • Quick implementations
  • Converting CAPEX to OPEX: This is the essential benefit of driving many existing customers to ERP. There is no need to invest in fancy infrastructure, which inflates the balance sheet. The ERP Costs become another P&L Item that can be budgeted and tracked just like any other expense head.
  • Cost reduction: Most of the maintenance activities are done by the ERP Vendor. Hence there is no need to maintain a large team to support ERP and the annual running costs of ERP are reduced.
  • Access to new technologies: The cloud vendor regularly upgrades the application to get the benefits of the latest technology solutions available. This immensely benefits the Customer.
  • Scalability: It is easy to adjust the infrastructure to handle the temporary and secular load.
  • Availability and Reliability: Since the Cloud Vendor maintains multiple backup data centers, ERP is reliably available almost 100% of the time. This ensures business continuity
  • Best in class analytics: Most of the ERP solutions come with the best analytics, including OLAP Cubes and outstanding reporting capabilities.

What are the main challenges with Cloud ERP?

  • Resistance to change: Moving to Cloud will see the IT Team losing control of ERP. This may lead to resistance to the transition. This is an Organizational Change Management challenge and should be handled sensitively.
  • Downsizing of IT Team: The fear of downsizing is another reason for resistance to change.
  • Regular upgrades could disrupt your operations: This is especially so if you have many third-party integrations Regular upgrades of your application that add features you don’t require could lead to your reconfiguring your integrations regularly.
  • Need for extensive testing: Since the vendor upgrades Cloud ERP regularly, it is imperative to test the end-to-end processes for every upgrade. This can be a daunting task.
  • Lack of standardization: Cloud ERP is feature-rich means It could offer four different ways of doing the same activity. This flexibility could be misused and, over time, become uncontrollable. Data loading is an example. There could be multiple ways to load data into a CloudERP application. If there is no standardization, both training and ongoing processes could become complicated.
  • Loss of control: In the On-premises world, you are the owner of your data. You can run analysis scripts on your database to identify the data issues and take corrective action. This is not so in the Cloud World. Once you are locked into ERP, you lose control over your data. You will have to depend on your ERP Vendor to rectify any data errors, which can be cumbersome.
  • A large company with years of experience in Legacy On-premise ERP may find the transition to CloudERP very challenging. The key reason is the non-availability of customizations. If your existing ERP is heavily customized (with many outdated customizations), the transition will be challenging.

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