Companies today invest in various areas, expecting Return On Investment (ROI), varying from cost reduction to profit maximization to decision support. Implementation of ERP systems is one of these aspects. The ERP software collects, records, integrates, manages, and provides data and information across the enterprise’s functional departments. It assists in separating data among stock, manufacturing, planning, materials, engineering, finance, human resources, sales, marketing, operations, etc. Implementing an ERP system may result in increased quality, shorter time-to-market, enhanced communications, decision support, streamlined lead times, increased productivity, and reduced costs.
The Software as a Service model (SaaS) is beneficial for delivering cloud ERP solutions. Numerous cloud-based ERP systems are available in the market. When an ERP system gets influenced by cloud computing characteristics, it is considered cloud-based. The cloud-based ERP system is accessible via the recipient’s browser over the internet, without the user installing or customizing the system.
Benefits of Cloud ERP
- Reduced upfront cost: As computing resources are isolated from enterprise locations, businesses do not have to pay for establishing the computing environment; instead, they pay for accessing the environment via the internet.
- Less operating cost: Cloud service providers (CSP) are accountable for managing and supplying cloud services that can result in the separation of enterprise operations processes and costs.
- Instant implementation: CSPs provide a wide variety of ERP software that can meet enterprise requirements. The enterprise business requires determining the selection of various solutions and products. This selection process accelerates the implementation process.
- Scalability: Cloud services are elastic. Businesses can scale up or scale down the resources they utilize based on their current necessities.
- Focusing on core strength: Cloud ERP systems enable businesses to handle their daily processes more effectively and allow them to focus on other issues of their core functions.
- Advanced technology: When you work in the cloud, it allows you to gain access to and use specialized technologies and innovative computing resources that are only cloud-based.
- Quick upgrades and updates: Cloud solutions get updated or upgraded more quickly than traditional ERP applications. All upgrade processes can be carried out by CSPs in compliance with enterprise demands.
- Easy usage, accessibility, and mobility: Cloud applications operate in an open environment, increasing accessibility options. It improves accessibility, which enhances the functionality of cloud ERP both inside and outside the firm.
- Convenient integration with cloud services: There are numerous cloud applications available to meet the needs of businesses. Since ERP systems connect different groups both inside and outside the organization, integrating with several other services becomes more effortless in the cloud.
- Enhancing system availability: CSPs offer well-defined plans and policies for backup, restoration, recovery, and other functions related to availability and disaster recovery.
- Cost visibility: Pay-per-use or subscription models follow the enterprise plan. Enterprises only pay for what they utilize and feel there is no need to pay for what they do not use or does not meet the enterprise’s requirements.
- Automating the sales: As to the distances between customers and CSPs, sales-related concerns could be handled automatically via the cloud.
- Establishing security standards: A few CSPs implement encryption and decryption standards, which shifts security concerns and effort away from clients and onto CSPs.
- Free trials: Numerous cloud ERP vendors allow prospective customers to test the ERP systems before purchasing them. These processes can increase the likelihood of cloud ERP usage.
Challenges with Cloud ERP
- Cost of subscription: For using cloud ERP, businesses must subscribe to the services they use. Companies pay subscription fees regularly as long as they utilize the services.
- Risks of security: As cloud services have become more accessible via the cloud, security risks have risen. Managing security issues for could ERP is a challenging and complicated process.
- Risks with performance: Customers and CSPs are geographically distant within the cloud and connected through an internet connection. Over the cloud, network breakdowns and other connection issues are possible. It is reflected directly in the cloud ERP effectiveness.
- Limitations in personalization and integration: ERP software provided by CPSs is in packages with fixed customization and integration options. Traditional ERP systems do not have these constraints.
- Strategic issues: Companies bear the strategic risk of relying on CSPs and have to adhere to their policies.
- Regulatory risks: Abiding with data, energy, and environmental standards are additional challenges for cloud-based ERP- and there are insufficient guidelines to address these issues.
- Loss of IT capabilities: Many activities get transferred from the IT department to the cloud ERP supplier for moving to cloud ERP. This relocation may result in IT competencies and objections from the IT department.
- Configuration limitations: As time passes, traditional ERP systems obtain more consistency and reach an advanced maturity level. Time is necessary to accomplish this level of cloud ERP stability and maturity.
- Service level agreements complications: Identifying SLAs for cloud ERP is a challenging and complex job. It must consider every aspect of the services provided, such as integration and customization.
- Information sensitivity: Many businesses regard their data and information as private property that is unable to store outside the organization.
- Controlling cloud ERP: Because cloud ERP systems are located physically outside the firm, the control process is more challenging than traditional ERP.
- Other costs in the contract: Contracts for cloud ERP systems may include hidden expenses such as transitional costs, expenditure on tracking, and compliance costs.
- Lack of technical knowledge: While incorporating cloud ERP systems, the IT employee may gradually lose technical understanding of the product.
- Mobility between CSPs: Since CSPs offer many equivalent ERP packages at varying costs, moving between CSPs is a significant challenge that Cloud ERP customers may face.
- Requirement of ERP as service standards: The cloud ERP market is still in its beginning stage. There are no definite guidelines or standards to govern the relationship between cloud ERP suppliers and users.
- Understanding of the cloud: Typically, its customers are afraid of new technologies and the implications of implementing them on their businesses. Cloud ERP vendors should pay close attention to defining cloud ERP services and facilities so that customers understand them.
- Startup assistance: While facilitating the transition from traditional ERP to cloud ERP, clients, and customers require aid from the cloud ERP provider.
- Managerial concerns: Rather than technical challenges, the implementation process of cloud ERP solutions may face organizational challenges, such as senior management involvement and weak cross-functional communication.
- Selecting between cloud ERP systems: There are numerous cloud ERP systems in the market today, each developed by a different vendor. Deciding between this solution is a challenging task. Moreover, selecting the people engaged in analyzing and selecting the best cloud ERP system is also a dilemma.
Ishant is an SEO expert with a rich and long history of helping companies across industries to rank high on multiple search engines. His expertise in identifying the best platforms for promoting different marketing collaterals, writing high-converting social media ads, and running stellar online ad campaigns is unmatched. In addition, he’s often invited to international conferences to share his growth marketing tactics with professionals from across the world. Currently, he’s working with Sage Software Solutions, a leading ERP, CRM, and HRMS provider in India.