What are Cloud-Based ERP Systems? Benefits, Limitations, and More

What is an ERP System?

ERP is an acronym for enterprise resource planning. Businesses use ERP systems to manage daily business operations, including accounting, project management, risk management, and supply chain operations.

Check out our extensive guide on building the best ERP software from the ground up.

What is a Cloud-Based ERP Solution?

A cloud-based ERP system is an enterprise resource and planning solution that is hosted and managed in the cloud by its provider. Users can access it on an on-demand basis.

Unlike traditional ERP systems that require a hefty upfront investment, cloud ERP systems has much lower initial costs.

Types of Cloud ERP

As cloud-based ERP systems depend on the underlying cloud technology, they are of different types depending on the cloud technology used. A cloud ERP can be:

1.Public Cloud ERP Systems

Such ERP solutions run on remote servers that are managed by the vendor. Cloud computing resources are shared between many users.

2.Private Cloud ERP Systems

A private cloud ERP system is deployed and managed in a private cloud. This means that the resources are dedicated to a single entity and not shared with anyone else.

3.Hybrid Cloud ERP Software

These ERP systems run on both private and public clouds. This imparts superior cost-efficiency, compliance, and security.

4.Multi-Tenant SaaS-Based ERP Systems

In multi-tenant SaaS-based ERP systems, multiple customers of a public cloud provider get access to the same instance of the software. Although data of different businesses are stored in shared resources, a business can only access their own data.

5.Single-Tenant SaaS-bAsed ERP Software

In such SaaS-based ERP solutions, the data is stored and processed with private resources.

Cloud ERP Market Stats and Facts

The rise of cloud computing has paved the way for the transformation of several industries, including the custom enterprise software development industry. You can comprehend the impact that the emergence of cloud ERP services has had from the following numbers:

• Cloud computing generated $400 billion in 2021.
• End-user spending in the public cloud is expected to cross $232 billion in 2024.
• The global IT spend reached $4.4 trillion in 2022. A total of $856 billion is spent on enterprise software development.
• The global ERP market will accumulate more than $100 billion in revenue by 2025.
• The ERP market growth is led by defense & aerospace, retail, and government utility sectors.
• 95% of businesses witnessed improvement after implementing ERP solutions.
• Cutting costs, better performance, and improved efficiency in business transactions are the three leading business goals of implementing cloud-based ERP solutions.

Advantages of Cloud ERP

Cloud-based ERP systems are becoming extremely popular among businesses due to their many benefits. These vary from lower barrier to entry and hassle-free implementation to instant scalability and superior vendor support. Let’s know one at a time:

1.Easy System Maintenance

Upgrade and maintenance for on-premises ERP solutions demand a significant amount of labour and resources. It can also temporarily interrupt business processes.

This is not the case with cloud-based ERP systems though, where service providers provide automatic updates. Installing software updates, functionality extensions, and security patches happen in the background and/or during inactive hours so that the disturbance caused is minimum.

2.Effortless Implementation

Businesses don’t need to involve themselves with choosing hardware and installation, onboarding and training IT staff, performing necessary security checkups, and more.

The cloud-based ERP service provider takes care of everything that is required for implementing the solution successfully so that you can start using it right away.

3.Flexible Integration

Usually, cloud ERP solutions integrate easily with other services, especially cloud-based. This is due to the abundance of prebuilt connectors, APIs, and interface protocols.

4.Full Visibility into Costing

Cloud ERP solutions are available under a fixed monthly or yearly subscription or usage-based pricing. In any case, there is no hidden or additional costs involved for anything. Hence, you get full visibility into the price that you’ll pay for the ERP software product.

5.Lower Upfront Costs

Server purchasing and maintenance fees accounts for a major part of the upfront investment that ERP systems require. Cloud ERP systems have comparatively lower entry expenses. This makes cloud-based ERP software lucrative even to startups and small-sized enterprises.

6.Rapid Scaling

One of the most lucrative perks of cloud-based ERP systems is instant scalability. This safeguards performance whether there is an instant surge in users or a drop in the same.

This enables you to scale down or scale up according to the change in needs and optimise operating costs dynamically.

7.Robust Disaster Recovery Options

Cloud-based ERP solutions have superior disaster recovery features. These are usually managed by experienced professionals so as to ensure you little to no data loss in case of extreme situations.

8.Round-the-Clock Vendor Support

Irrespective of your time zone, cloud ERP service providers are available 24 hours a day, 7 days a week with a downtime as little as 0.01% for maintenance and updates. This saves your in-house IT staff from additional strain.

Typical Cloud ERP Challenges

Like with any other technology, cloud ERP comes with its own set of challenges. These issues are usually dealt by cloud-based ERP service providers in innovative ways. These are:

1.Expensive Option

Companies growing at a fast rate might find cloud ERP software a costlier option because of the added up costs to meet growing user and business requirements.

2.Data Security

Businesses considering cloud ERP systems need to seriously consider data security. As a cloud-based offering, ERP software must feature high-end security features like dynamic data masking, end-to-end data encryption, system monitoring, multi-factor authentication, and more.

3.No Full-Scale Customisation

Some businesses have complex workflows, which necessitates having a personalised solution. Although there is a certain degree to which cloud-based ERP solutions can be customised, you can’t customise them to a greater extent.

4.Uneasy Switch from Legacy Solutions to Cloud Solutions

Switching from a legacy ERP system to cloud-based ERP software can be difficult. Deploying a new cloud ERP solution might also face some backlash from employees and stakeholders.

This is because adapting to the new environment will take time. Moreover, there might be the need for additional support.

How to Choose a Cloud ERP Software?

There are several things to factor in when you’re considering cloud-based ERP systems. These are:

1.Business Process Coverage

An organisation is a collection of many business processes. You need to choose a cloud-based ERP software that covers your specific business needs or as many business processes as possible when you don’t prioritise any.

An ideal cloud ERP tool fulfils all existing functional requirements of business users while offering the ability to extend functional scope instantly as a need arises.

2.Customer Support

Customer support is one of the most important aspects that you need to look for in any business service. It should be readily available and comprehensive.

3.Expertise

The cloud ERP solution must successfully address industry-specific pain points and needs. It should have customisable extensions and it should ensure compliance with industry standards. An option to connect popular third-party apps is also preferred.

4.Integration Options

The ERP software should have powerful integration options. May it be for integrating with the current IT systems of your organisation or third-party applications. The more you have, the better.

5.Pricing

This is the most important aspect when shuffling through your cloud-based ERP options. Usually there are no hidden costs involved in pricing plans of cloud-based ERP systems, but you should ensure that before opting for one. Also, you need to understand pricing for additional features.

6.System Upgrade and Maintenance

Cloud computing is more susceptible to cyberattacks. Hence, it requires superior security measures. To ensure a cloud ERP system stays safe and secure, regular updates and maintenance are absolutely required.

Conclusion

Cloud-based ERP systems bring several benefits to the table, and are required for achieving success by modern businesses. You need to consider all the advantages and issues before opting for a cloud ERP solution.

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