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HOW TO DETERMINE IFCLOUD ERP SOFTWARE ISRIGHT FOR YOU

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

ost businesses wait until the pain points grow too large before accepting the need for an ERP system. In this guide, expert IT strategist Adam Boyce helps you

determine if cloud ERP software can successfully future-proof your business and explores the differences between on-premise and cloud ERP software.

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

FACTORS TO HELP DETERMINE IF YOU NEED A CLOUD ERP SYSTEMAdam Boyce, Manager of IT strategy

Organizations tend to realize they need ERP when they begin outgrowing their business systems, whether those systems are homegrown or a disparate collec-tion of applications. Over time, pain points begin to emerge as the gap widens between software capabilities and business process needs. Businesses recog-nize that any goals for growth are stymied by a lack of system integration and low visibility to real-time data. The desire for increased functionality often leads to the search for new ERP software.

In the past, traditional on-premises ERP systems were the norm; however, cloud ERP -- and more specifically, software as a service (SaaS) models -- have cropped up and continue to grow. The expanded use of cloud has prompted or-ganizations around the globe to ponder whether or not cloud ERP is right for them. There are several potential factors that can be assessed to help guide the determination of when a cloud ERP system may be a better fit.

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

SIZE, RESOURCES AND MOBILITY DETERMINE IF CLOUD ERP IS RIGHT FOR YOU

Business size can play a role in whether or not cloud ERP fits. Cloud ERP can work well for small and medium-sized businesses generally due to the lesser degree of operational complexity when compared to their larger counterparts. Lower user counts and transaction rates may translate into lower subscrip-tion pricing for cloud-based services; bigger businesses will undoubtedly have more users and higher transactions. Companies with less data and transaction volume needs may see cloud ERP software as a viable, cost-effective solution.

Organizations with scalability needs that require agility for growth may recognize opportunities from software as a service and other cloud models that allow rapid deployment in competitive, ever-evolving environments.

While a cloud-based system can also be useful for established businesses, it's especially enticing for companies in high-growth mode. Businesses on the fast track for expansion into multiple locations may benefit from the relatively quick deployment of a cloud ERP system, assuming there is adequate Internet access.

A common challenge with implementing and maintaining traditional ERP systems is the higher need for IT resource availability. If your organization has constraints that prevent the ability to augment IT staffing, then a cloud ERP

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

model, such as SaaS, may be advantageous. Similarly, if your business is look-ing to reduce hardware or is unable to upgrade infrastructure, then SaaS ERP could prove to be even more beneficial.

If your team requires remote functionality on mobile and smart devices to view data, create approvals, and view and edit comments, then you could classify your organization as one that has critical business needs for mobility. Cloud ERP can help. Due to its Web-based nature, SaaS ERP tends to have na-tive access to mobile devices. And again, there's the caveat that sufficient access to the Internet will be required for the applications to run on mobile devices.

THINK ABOUT MONEY, TIME AND DATA

Budgeting is one of the biggest considerations when starting an ERP project. Executive leadership teams often must approve funding for selection,

implementation and ongoing support such as system maintenance. In the past, traditional ERPs generally required a higher initial investment. But today, software providers may also offer financing over a period of time. The smaller, regular payments of SaaS and other cloud systems appear attractive, but orga-nizations should be aware of the potential total accumulated costs for extended use of these subscription-based services.

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

Budgeting variances can rapidly occur when a business plans on keeping a system up to a certain point but fails to anticipate going beyond its expected lifetime. When this happens the subscription costs could easily begin to out-weigh the price of a traditional ERP. Given that some companies have kept their ERP systems for 20-plus years, it is possible for those fees to eventually end up exceeding an on-premises investment.

Budgeting money is a vital factor in deciding how companies will imple-ment ERP software, but budgeting time is just as important. Implementation times can be difficult to estimate, especially given variables such as levels of customization, access to resources and integrations. Arguably, the perception is that SaaS-based models can be implemented quicker due to reduced need for infrastructure and a more limited ability to customize, thereby reducing implementation variables and timeframes. After being implemented, SaaS ERP offerings do tend to have a distinct advantage with more rapid deployment for services that may require little more than a sufficient Internet connection and Web browser for end-user access.

In addition to time and money, data is another area to consider when look-ing at cloud ERP systems. Some organizations looking for an ERP system may have a great need to control the data or system. If that's the goal, then

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

on-premises ERP software may be the right route to take. For companies that have the flexibility to relinquish control, cloud ERP is a viable option. It does require a good amount of trust in the third party and good faith in their data security, protection and management functions.

Customization can be a challenge, especially for big, complex businesses or groups with special requirements. Companies with unique processes that must be translated into the system may require more control over their ERP system in order to develop specific solutions. Some businesses may find that SaaS ERP systems, especially those in a public cloud, are less than optimal for coding tailored customizations.

WHAT ELSE TO CONSIDER WHEN EVALUATING CLOUD ERP SYSTEMS

There are several other factors that organizations may need to consider when deciding whether or not cloud ERP systems are the way to go.

Enterprises with SaaS ERP systems may be required to frequently imple-ment updated versions, which could potentially result in more training costs or other operational disruptions such as kinks in the newer code. 

Along with being at the mercy of updates, another potential hang up that's cause for apprehension with newer or niche cloud platforms is the risk of

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

limited vendor viability. Sudden software end of life could turn into an unex-pected loss of access to company data and software. The adverse operational and financial consequences could seriously jeopardize the organization. 

Another challenge that may come with the cloud ERP territory is migrating big data files over the Internet, which can be time-consuming or increase the risk for potential data loss.

Performance is another consideration. Businesses with operations that require immediate transactional results may be reluctant to employ cloud systems because of slightly longer latencies.

THE TWO-TIER ERP APPROACH

If the drawbacks of cloud ERP systems are cause for concern, or your needs re-ally don't completely match up with the functions of cloud ERP, there is always the "two-tier" approach. A two-tier ERP deployment generally involves keep-ing an ERP system at a corporate level (tier one) while allowing each business unit to select a second ERP system (tier two). The tier-one, or corporate ERP, acts as the main standard for most administrative functions such as financials and human capital management. The tier-two ERP system supports the indi-vidual business needs of the divisions generally at the operational level such as

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

manufacturing, sales and warehousing. In this strategy an organization could run a hybrid combination of on-premises and cloud ERP software to meet spe-cific business requirements, but maintain increased flexibility and agility at a comparable cost.

IS CLOUD ERP THE RIGHT ANSWER?

Cloud ERP software could be a great fit for smaller firms with minimal IT infra-structure and business complexity. Small to midsize companies with frequent mobile access needs that are looking to lower their initial investment and drive standardization should consider cloud ERP as a legitimate option. Larger busi-nesses may also want to consider cloud ERP for hybrid or two-tier ERP con-figurations that help reduce costs and provide agility between business units. As cloud ERP system capabilities expand, companies should continue looking to resources that help them diligently evaluate this software for its ability to support their enterprise strategies.

Editor's note: This is part two of a four-part series covering cloud ERP software. Part one explained the

differences between on-premises and cloud ERP software. Stay tuned for part three which will show you

important features to look for in cloud ERP systems; and part four, which will help you select the right cloud

ERP system for your enterprise.

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

THE DIFFERENCES BETWEEN ON-PREMISES AND CLOUD ERP SOFTWAREAdam Boyce, Manager of IT strategy

ERP is a term used to reference software that, at its core, helps businesses and organizations operate. While the benefits have proven to be fruitful, due to its importance to organizations and its complex nature, ERP has been one of the most high-stakes, difficult software systems to implement in organizations.

Today there are a few different ways enterprise resource planning sys-tems are set up. Modern ERPs have expanded from their predecessors with capabilities encompassing more than just resource planning. In the past, ERP was viewed as a monolithic system that assisted with a limited set of business operations. But now, an ERP system can also be built "Best of Breed" as a col-lection of standalone or integrated applications -- or a combination thereof -- that help manage specific aspects of the enterprise.  

ERP systems are generally hosted in three ways: the traditional, on-prem-ises; in the cloud; or a combination of the two. For clarification, cloud ERP has been a term used to define when fully licensed, ERP software was hosted within

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

a cloud infrastructure. Today cloud ERP software is often used synonymously to describe software-as-a-service (SaaS) ERP; however, this is not entirely ac-curate. SaaS ERP is software that is owned and hosted off-site in the cloud by the provider, but paid for "on demand," as it is used. Basically, SaaS ERP is a type of cloud computing model, but not all cloud ERPs are necessarily SaaS. While the goals of ERP software essentially remain the same no matter where it's hosted, there are some core differences to on-premises and SaaS or cloud ERP software systems that organizations should consider before implementing.

DIFFERENCES OF SAAS OR CLOUD ERP SOFTWARE VS. TRADITIONAL

ON-PREMISES ERP

As with most things, cloud and SaaS ERP systems tend to have their own benefits and drawbacks. Here are some facets of cloud ERP software -- more specifically, SaaS models -- that may help when selecting the right software for your organization.

System & data control: In a SaaS scenario, a third-party typically manages software and data as opposed to an on-site ERP system. This additional sup-port of traditional ERP tends to require more IT staff, which can result in more

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

associated costs. On the other hand, there can be a higher degree of control over the systems and data for on-premises systems.

Most cloud ERP systems allow for some personalization, letting you con-figure the system to match your organization's look and feel, such as including use of company logos. However, controlling true customization in terms of rewriting code can be much more limited, especially in multi-tenant systems. Minimizing customization can be beneficial to reducing ERP expenses and implementation delays, but may also impact your competitive advantage if unique functionality is not accommodated.

Integration: At some level, most traditional and cloud ERP software systems offer integration due to the increasing needs of transferring data between appli-cations. Cloud ERP systems tend to use APIs that are tools to help ease integra-tion. If standard protocols or similar business ecosystems are used, the costs could be lower when compared to developing ad-hoc integration software.

Updates: Cloud ERP software generally receives more frequent updates than traditional systems. In some instances, updates occur as often as monthly or even weekly. This can carry the benefit of remaining compliant to changing

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

regulations. When deployed, cloud ERP systems can bring scalability to busi-nesses with high growth and rapid expansion. While it is beneficial for any ERP to keep pace, repeated updates are not without their drawbacks, especially for systems with higher degrees of customization.

Mobile access: It has become more common to see traditional ERP products offering users mobile access that can assist with remote approvals, notifica-tions and operational visibility. There can sometimes be added complications for on-premises ERP software if a third-party client is required to act as the link between mobile devices and the ERP system. Many cloud ERP systems, because of their Web-based nature, are natively mobile and come with standard mobile applications.

Security & reliability: When factoring critical data such as corporate finan-cials, employee details, customer account information and trade secrets, it is no wonder why security remains an essential requirement when considering ERP software. In the past, cloud ERP often carried the perception of being widely susceptible to breaches, hacks and exploitation, especially when compared to its traditional on-premises counterparts. To give peace of mind, many cloud

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

ERP vendors are touting encryption and use of additional safeguards built on platforms like Amazon Web Services, which have enhanced security protocols.

Another common concern with any ERP is the inability to operate due to software, hardware and infrastructure malfunctions. Operational disruption can translate into hefty losses. Additional thought should be put into a cloud ERP product's need for Internet access, especially for businesses with remote locations or areas with less reliable network connectivity. Equally as important is the overall performance dependability of the cloud ERP vendor who may have multiple redundancies and disaster recovery protocols in place to protect data.

Payment: On-premises ERP software is generally priced with a one-time perpetual license and ongoing support fees, some of which may be negotiable. Cloud ERP systems take on subscription-based pricing models that are usually monthly or yearly. SaaS vendors can price their applications based on a choice of multiple usage factors such as the number of users, transactions, amount of data or other units of measure.

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

General costs: An ERP system will have costs associated with it no matter how it's hosted. However, cloud or SaaS ERP software have unique costing situations like implementation costs, initial costs and ongoing costs that one wouldn't necessarily find with an on-premises system.

Arguably, cloud ERP systems can have relatively shorter implementation times, but again this can vary depending on multiple factors such as customiza-tion, number of end users and IT architecture, to name a few. Shorter imple-mentation times can equate to a reduction in spending on project expenses including, but not limited to, professional services and backfilling staff.

There is usually a higher, upfront investment with traditional on-premises ERP software. Cloud ERP leverages economies of scale and reduced need for customer infrastructure to quickly deploy their product and services, which in turn allows for attractive pricing.

Some organizations who select cloud ERPs may generate savings with a reduced need to upgrade hardware and infrastructure. There could also be sav-ings by transitioning IT support functions that can be managed by the cloud ERP provider. That said, cloud doesn't always mean savings. Depending on considerations such as pricing structure and service subscription duration, overall investment of cloud products may eventually incur similar or even

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Factors to Help Determine if You Need a Cloud ERP System

The Differences Between On-Premises and Cloud ERP software

HOW TO DETERMINE IF CLOUD ERP SOFTWARE IS RIGHT FOR YOU

higher long-term costs.When deciding on an ERP system, there is an assortment of aspects to

consider. While cloud/SaaS and on-premises systems may both offer their own business advantages there truly is no one size fits all ERP. Organizations should look to the resources and insights that can help them make an optimal selection when investing in an ERP system.

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Factors to Help Determine if You Need a Cloud ERP System

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