What is Cloud ERP and Why You Need It for Your Business

Cloud ERP is an enterprise resource planning (ERP) system that runs on a vendor’s cloud platform as opposed to an on-premises network, allowing organizations to access over the internet. ERP software integrates and automates essential financial and operational business functions and provide a single source of data, including inventory, order and supply chain management and help with procurement, production, distribution and fulfillment.

In this article, you will learn what cloud ERP is, how it works, what are the benefits and challenges of cloud ERP, and how to choose the best cloud ERP solution for your business. By the end of this article, you will have a clear understanding of why cloud ERP is the future of enterprise resource planning and how it can help you grow your business and stay ahead of the competition.

Cloud ERP: The Future of Enterprise Resource Planning

Cloud ERP is not a new concept, but it has gained popularity and adoption in recent years due to the rapid advancement of cloud computing technology and the increasing demand for flexible, scalable, and cost-effective business solutions. According to a report by Gartner, the global cloud ERP market is expected to grow from $45.3 billion in 2020 to $101.1 billion in 2025, at a compound annual growth rate (CAGR) of 17.4%.

But what exactly is cloud ERP and how does it differ from traditional on-premises ERP systems? Let’s take a look at the main characteristics and features of cloud ERP.

On-premises vs cloud ERP: What are the differences?

The main difference between on-premises and cloud ERP is where the software and data are stored and accessed. On-premises ERP systems are installed and maintained on the company’s own servers and hardware, which means the company is responsible for the security, backup, updates, and maintenance of the system. Cloud ERP systems are hosted and managed by a third-party vendor on their own servers and data centers, which means the company can access the system and data over the internet, without having to worry about the technical aspects of the system.

There are pros and cons to both types of ERP systems, depending on the company’s needs, preferences, and budget. Here are some of the main advantages and disadvantages of on-premises and cloud ERP.

Advantages of on-premises ERP

More control and customization: On-premises ERP systems give the company more control and flexibility over the system and data, as they can customize the system to fit their specific requirements and preferences.
More security and compliance: On-premises ERP systems may offer more security and compliance for the company’s data, especially if the company operates in a highly regulated industry or has strict data privacy policies.
More stability and performance: On-premises ERP systems may provide more stability and performance for the company’s operations, as they are less dependent on the internet connection and the vendor’s service level agreements (SLAs).

Disadvantages of on-premises ERP

More cost and complexity: On-premises ERP systems require a large upfront investment and ongoing costs for the hardware, software, licenses, maintenance, and IT staff. They also involve more complexity and risk for the installation, integration, and upgrade of the system.
Less scalability and innovation: On-premises ERP systems may limit the company’s ability to scale and innovate, as they are constrained by the capacity and capability of the existing hardware and software. They may also lag behind the latest technology and industry trends, as they depend on the company’s own resources and expertise to update and improve the system.
Less mobility and collaboration: On-premises ERP systems may hinder the company’s mobility and collaboration, as they are tied to a specific location and device. They may also pose challenges for remote work, data sharing, and real-time communication, as they rely on the company’s own network and infrastructure.

Advantages of cloud ERP

Less cost and complexity: Cloud ERP systems have a lower upfront cost and a predictable monthly or annual fee, as the company only pays for what they use and need. They also reduce the complexity and risk for the company, as the vendor takes care of the security, backup, updates, and maintenance of the system.
More scalability and innovation: Cloud ERP systems offer more scalability and innovation for the company, as they can easily adjust the system and data to meet the changing needs and demands of the business. They also enable the company to access the latest technology and industry best practices, as the vendor continuously updates and improves the system.
More mobility and collaboration: Cloud ERP systems enhance the company’s mobility and collaboration, as they can access the system and data from anywhere, anytime, and any device. They also facilitate remote work, data sharing, and real-time communication, as they leverage the power and speed of the internet and the cloud.

Disadvantages of cloud ERP

Less control and customization: Cloud ERP systems may offer less control and customization for the company, as they have to rely on the vendor’s system and data standards and policies. They may also face limitations and challenges for the integration and migration of the system and data with other applications and platforms.
Less security and compliance: Cloud ERP systems may pose more security and compliance risks for the company, as they have to entrust the vendor with the protection and management of their data. They may also have to comply with the vendor’s and the host country’s data privacy and security regulations, which may differ from their own.
Less stability and performance: Cloud ERP systems may suffer from less stability and performance for the company, as they are dependent on the internet connection and the vendor’s SLAs. They may also experience downtime and delays, as they share the system and data resources with other customers.

As you can see, there is no one-size-fits-all solution for ERP systems. The best choice depends on the company’s specific needs, goals, and circumstances. However, in general, cloud ERP systems offer more benefits and opportunities for the company, especially in the long run, as they can help the company save costs, increase efficiency, and drive innovation.

Benefits of cloud ERP for your business

Now that you know what cloud ERP is and how it differs from on-premises ERP, you may be wondering how cloud ERP can benefit your business. Here are some of the main benefits of cloud ERP for your business, regardless of your size, industry, or location.

Improve productivity and profitability

Cloud ERP can help you improve your productivity and profitability by streamlining and automating your business processes, reducing errors and waste, and increasing accuracy and quality. With cloud ERP, you can eliminate manual tasks, duplicate data, and siloed information, and instead, have a single source of truth for your entire business. You can also access real-time data and insights, and make faster and smarter decisions based on facts and trends. By improving your productivity and profitability, you can enhance your customer satisfaction and loyalty, and gain a competitive edge in the market.

Support growth and expansion

Cloud ERP can help you support your growth and expansion by providing you with the flexibility and scalability you need to adapt to the changing needs and demands of your business. With cloud ERP, you can easily add or remove users, features, and modules, and adjust your system and data capacity and capability, without having to invest in new hardware or software. You can also access new markets and opportunities, and comply with local and global regulations, by leveraging the vendor’s cloud infrastructure and expertise. By supporting your growth and expansion, you can achieve your business goals and vision, and reach your full potential.

Enable innovation and transformation

Cloud ERP can help you enable innovation and transformation by giving you access to the latest technology and industry best practices, and empowering you to create new products, services, and business models. With cloud ERP, you can leverage advanced features and functionalities, such as artificial intelligence, machine learning, and analytics, and integrate them with other applications and platforms, such as CRM, e-commerce, and social media. You can also embrace digital transformation, and optimize your business performance and customer experience, by using cloud ERP as a platform for innovation and change. By enabling innovation and transformation, you can stay ahead of the curve and the competition, and future-proof your business.

Challenges of cloud ERP and how to overcome them

While cloud ERP offers many benefits for your business, it also comes with some challenges that you need to be aware of and prepared for. Here are some of the common challenges of cloud ERP and how you can overcome them.

Data security and privacy

One of the main concerns of cloud ERP is data security and privacy. Since your data is stored and processed on the vendor’s cloud servers, you need to ensure that the vendor has adequate measures and policies to protect your data from unauthorized access, theft, loss, or breach. You also need to comply with the data privacy and security regulations of the countries where you operate and where your data is hosted.

To overcome this challenge, you need to do your due diligence and research the vendor’s data security and privacy standards and certifications, such as ISO 27001, SOC 2, and GDPR. You also need to review the vendor’s SLAs and terms and conditions, and understand your rights and responsibilities regarding your data. You may also want to consider encrypting your data, using multi-factor authentication, and implementing backup and recovery plans.

System integration and migration

Another challenge of cloud ERP is system integration and migration. Since cloud ERP is a complex and comprehensive system, you need to ensure that it can integrate seamlessly with your existing applications and platforms, such as CRM, e-commerce, and social media. You also need to migrate your data from your legacy systems to the cloud ERP system, without compromising its quality, integrity, or availability.

To overcome this challenge, you need to choose a cloud ERP solution that offers open APIs and supports various integration methods, such as web services, middleware, and connectors. You also need to plan and execute your data migration carefully, and test and validate your data before and after the migration. You may also want to enlist the help of the vendor or a third-party consultant to assist you with the integration and migration process.

Change management and user adoption

A third challenge of cloud ERP is change management and user adoption. Since cloud ERP is a new and different system, you need to manage the change and transition that it brings to your business processes, workflows, and culture. You also need to ensure that your employees are trained and comfortable with using the cloud ERP system, and that they can leverage its features and functionalities to improve their productivity and performance.

To overcome this challenge, you need to communicate and involve your employees in the cloud ERP implementation process, and explain the benefits and expectations of the system. You also need to provide adequate and ongoing training and support for your employees, and solicit their feedback and suggestions for improvement. You may also want to create a change management team and a user adoption strategy to monitor and measure the success of the cloud ERP system.

How to choose the best cloud ERP solution for your business

With so many cloud ERP solutions available in the market, how do you choose the best one for your business? There is no easy answer to this question, as different cloud ERP solutions may suit different businesses depending on their size, industry, needs, and goals.

However, there are some general steps and criteria that you can follow to make an informed and confident decision. Here are some of the most important factors to consider when choosing the best cloud ERP solution for your business.

Evaluate your business needs

The first step in choosing the best cloud ERP solution is to identify what solutions your business requires. You need to analyze your current business processes, workflows, and challenges, and determine what areas you want to improve, optimize, or automate. You also need to define your business goals and expectations, and how you will measure the success of the cloud ERP solution.