The Benefits and Pitfalls of Cloud-Based ERP
When it comes to ERP systems, cloud-based options seem to have taken longer to gather mainstream support. After all, ERP is very large, complex software with a lot of sensitive data, so the typical model has been focused around on-premises solutions where control can be kept in-house.
However, for growing businesses perhaps considering ERP for the first time, or established businesses looking at hardware (and software) refresh cycles, it makes sense to include cloud in the consideration set. But what should you be considering as you make this journey?
The growth challenges that start you thinking about ERP
Every organisation is different, but there are a number recurring themes that typically start the ERP conversation:
- Data visibility challenges – Data silos in the organisation develop based on the needs of different departments, limiting information sharing and giving rise to incompatible applications.
- Control & governance challenges – Operations becoming more diverse, increasing disparity, less control and financial consistency.
- Business process challenges – Processes have become inconsistent, lacking best practice and corporate standards.
- Risk management challenges – Political uncertainty with changing governments, new laws, new languages, new customers, new employees.
- IT cost and speed of change - Limited resources, people ill-equipped to respond, time and cost to implement.
- Growing complexity within the business - New channels, new markets, complex supply chains.
Critical success factors to meet those challenges
Before you dive into ERP research, step back and consider the critical success factors to meet those business challenges in a digital world:
- Analytics available across all functional areas of the business for intelligent decision making
- Real-time connections to data, customers, partners, and suppliers
- Technology that scales with the business and provides a competitive advantage
- Software that is easy to learn, quick to implement, easy to use, simple to support
- A mobile-connected, empowered workforce that can make fast decisions.
Benefits of cloud-based ERP in delivering on these success factors
While an on-premises ERP is still an option, a cloud-based ERP solution typically has a much lower barrier to entry so it can:
- Be a transformative vehicle to consolidate, standardise and streamline
- Provide a logical next step for early adopters of other cloud platforms
- Be up and running very quickly
- Provide an OPEX model without the high CAPEX of on-premises systems
- Facilitate rapid adoption of best practice standardised processes
- Deliver integrated analytics to accelerate insight-driven management
- Be simple, easy to use, intuitive, and provide mobile interfaces: browser and apps
- Be always up to date via regular upgrades and maintenance
- Provide easier ongoing scalability as your business continues to grow
- Include multi-language and multi-currency for expanding markets
- Follow a proven and repeatable implementation methodology
- Include e-learning and training resources built into the platform
- Include integrated customer support and service functionality
Potential pitfalls of cloud-based ERP
The benefits of cloud-based ERP are considerable, but like any business decision you need to go in with your eyes open to assess what is right for your organisation. Drawbacks to take into consideration can include:
- Cloud-based ERP provides streamlining when you align to standard business processes wherever possible, but if you deviate from that it can be more challenging to customise than on-premises ERP
- Regular scheduled upgrades mean that any customisation you do make needs to be re-tested at each upgrade
- With constant innovation upgrades provided by the vendor, it often makes more sense to put yourself on that innovation curve and adopt a more standard configuration
- Deep industry-specific functionality may not be available as standard
- If you already have an on-premises ERP background, a considerable mind-shift is needed to adapt to more standardised cloud ERP
- Cloud-based ERP can be implemented very rapidly, which is great, but it needs your team needs to be ready before project kick-off
None of these pros or cons are definitive in isolation. The decision on what’s right for your organisation requires an honest assessment of your current state of play. You can always turn to a trusted IT advisor like NTT DATA Business Solutions to help you assess your ERP options.
Read more about cloud-based ERP here.